How Trump's Tariffs Will Backfire In 2025

(MENAFN- Baystreet) Trump won the U.S. presidential elections when voters agreed with the aggressive tariff policies. However, voters may not know that tariffs are regressive. When the U.S. imposes tariffs on imports against Canada and Mexico, those countries may do the same. As a result, everyone ends up paying more taxes.

Automotive Stocks are falling sharply in anticipation of a devastating drop in demand. Tariffs affect not only car prices but also auto parts prices. Investors should be wary of holding Stellantis (STLA) and Ford Motor (F) stock at this time. Sales of GM (GM) vehicles may weaken, too.

On Thursday, both Trump and Tesla (TSLA) CEO Elon Musk prevented a prior funding proposal that would avert a government shutdown. Trump, however, wants the government to eliminate the debt ceiling. If Trump and Musk cannot get government support, it might remind markets that they still need bipartisan support. Republicans have a majority but by a few seats. The party needs strong support from both sides to make decisions.

These events may foreshadow the U.S. cannot easily pass tariffs against its trade partners. If Canada cuts off hydro supplies or adds tariffs to raw materials, prices will rise, fueling inflation in the U.S. Similarly, Mexico may add tariffs, further raising prices for American goods.

ETF investors may watch the S&P 500 (IVV), Mexico ETF (EWW), and MSCI Canada (EWC).

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