President Trump…You May Be Right
This week’s music inspiration comes from the 1980 smash hit “You May Be Right” by Billy Joel. There has been much debate about how President Trump’s tariffs will impact the economy. At first glance, one would say that they are inflationary, and I was one of those folks simply from a classical economic perspective. You raise the price/tariff/tax on items… the price goes up, and that is “inflationary.” It’s a simple concept. However, history gives us a different perspective. We have seen tariffs put in place several times, including The Tariff Act of 1828, which almost started the Civil War 30+ years earlier than when it did happen. The Tariff Act of 1890 and the Smoot-Hawley Tariff Act of 1930. In all cases, tariffs were levied at record levels, but in many cases, we saw inflation go down, and several times, we saw inflation post a negative number.
So, how could prices go down when the tariffs were added to prices? This must raise the prices, right? Well, the devil is in the details in this case. This assumption of rising prices due to higher tariffs assumes that demand for these goods and services remains unchanged. However, despite my previous articles describing how U.S. Consumers will continue to spend money that they don’t have by mastering the possibilities with credit cards, there will come a point where it is simply too expensive, and they will stop buying and/or find a cheaper alternative and this drop in demand will drop prices in the long term once demand slows. I would say a 20% to 50% hike in some goods and services just might be the ticket to curb U.S. Consumer demand, and thus, prices will fall, and inflation will then fall as well. If inflation goes down, rates will go down, which will also bring overall prices down.
It is certainly a different way to look at this tariff discussion,n and it has worked before to bring down inflation. In addition, it may have also been one of the items that drove us deeper into the Great Depression. But for now, the threat of tariffs has at least gotten the borders a little tighter, or so we are told, and if they do go in place and prices fall, that may be something that many did not think could happen. Time will only tell.
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
Thank you for reading this blog. I hope that the facts and insights I share provide value to you.
If you’d like to allow me to invade your inbox and receive a weekend update from me each week, please provide your name and email address, and I’ll start sending over more facts and insights like you just read, as well as current market rates and news. If you have a topic you would like me to consider covering, please feel free to send it over. Who knows… I may write about it!
Blog post date: Thursday, February 13, 2025
