Tariffs are federal taxes on imported goods, usually imposed as a percentage, based on the cost of the product when it crosses the border. Used to protect domestic industries, tariffs can also be leveraged to:

• Raise revenue for the U.S. government.
• Safeguard American jobs and give domestic products a competitive edge.
• Respond to unfair trade practices abroad and strategically put pressure on foreign trade partners.²

Tariffs have been around for centuries, and they're no stranger to controversy. These days, tariffs can raise questions about how dated, effective, and risky they may actually be.³

In the News: In mid-2025, the U.S. announced plans to double certain import tariffs — such as those on steel and aluminum — from 25% to 50%. While the legal status of these tariffs remains under review, they continue to influence pricing and supply chain decisions for now.⁴

Example: Let's say 1,000 lbs. of imported aluminum used to cost $1,000. If a 50% tariff were applied, that same shipment would now cost $1,500. And since the U.S. imports about half of its aluminum supply — with most of it coming from countries like Canada — those cost increases can have real ripple effects across multiple industries.⁵

A supply chain is the full journey from raw material to final product, describing the path through suppliers, manufacturers, distributors, and retailers.⁶

When tariffs increase the prices of foreign goods, supply chains can be upended. That's because manufacturers and other businesses facing higher-priced foreign goods often look for new suppliers and cheaper alternatives.

That could mean:

• Looking to domestic suppliers.
• Bringing things in-house.
• Switching up products or methods.

With that, established trade routes and the players who run them can face delays, rising costs, or even full-scale reshuffling, forcing businesses to adapt quickly or risk falling behind.

Different industries react to tariffs in unique ways. Some, like domestic manufacturers, may benefit in the short term, with increasing demand that opens the door to price hikes. That could generate new supply chains, partnerships, and other opportunities.

On the other hand, companies that rely heavily on global materials can experience:

• Stalled production.
• Rising costs of doing business.
• Shrinking profit margins.

Those hurdles can send shockwaves through operations, growth plans, and investor confidence.

In the News: The 50% tariffs on aluminum and steel are projected to increase domestic output by 1.3%. At the same time, other sectors could be crowded out, with forecasts anticipating construction output to drop by 2.0% and agriculture production to decline by 0.9%.⁴

Example: With imported aluminum going from $10,000 to $16,500, U.S. makers of cars, electronics, mechanical machinery, and various consumer goods now have a decision to make. They can:

• Eat it and pay 65% more for the same materials.
• Find a domestic source of aluminum.
• Change or slow down production.

No matter what these companies choose:

1. They can be among the more challenged sectors when tariffs are levied.
2. The 'winners' here tend to be the domestic producers of aluminum (i.e., the subject of the tariffs).

As companies and supply chains react to tariffs, elevated materials costs can be passed on to consumers. With that:

• Retail prices can balloon.⁴
• Price hikes can spark inflationary pressures and concerns.⁴
• Consumers can become highly price-sensitive, altering their spending habits.⁴
• Companies with domestic sourcing may gain a competitive edge and/or enjoy higher profit margins.^2,3
• Those with global supply chains can fall behind and see profits plummet.^2,3
• Concerns about retaliatory tariffs can amplify uncertainty and fuel even more market volatility.⁹

All of that and more can influence portfolio performance and risk exposure.

In the News: The 2025 tariffs have hit clothing and textiles especially hard, driving short-term price hikes of 31% for shoes and 28% for apparel. Over the long term, the prices of clothing and shoes will reportedly stay 15% to 17% higher than pre-tariff times.⁴

Example: If you invested in a company that depends on international suppliers, you could feel the pinch if that company starts to underperform If you diversified your investments, you could be more insulated from the disruptions and reactions to tariffs.