Navigating Trade Tariffs and Inflation | Weekly Business Briefs w/ Martin Perdomo

Unravel the economic intricacies of President Trump's recent tariffs on steel and aluminum imports with Martin Perdomo, your Elite Strategist, in the latest episode of the Wealthy AF Business Brief. Discover how these tariffs, set at 25% and 10% respectively, might disrupt the construction and automotive industries, while also shaking up international trade relations, particularly with key partners like Canada and the EU. Prepare to unpack the layers of economic consequences, from potential cost surges in crucial sectors to the looming threat of retaliatory measures that echo previous trade skirmishes.

As we continue, we turn our focus to the surging inflation rates in the US, with consumer prices climbing by 3% annually as of January. Listen in as Federal Reserve Chair Jerome Powell warns Congress about the ongoing battle against inflation, leaving investors recalibrating their portfolios in the face of rising US Treasury yields. Explore how these economic tremors impact everything from mortgage rates to entrepreneurial strategies, and why economic growth remains robust despite the challenges. Navigate these turbulent waters with insights and strategies designed to keep you informed and ahead in your investments and entrepreneurial pursuits.

Transcript

Speaker 1: 0:01

Welcome back to the Wealthy AF Business Brief, where we break down the latest business and economic trends that impact your investments and entrepreneurship journey. I'm your host, the Elite Strategist Martin Perdomo, and today we've got three major stories making headlines, so let's dive in. Our first major story this week is the new tariff announced by President Trump, which targets steel and aluminum imports. The tariff stands at 25% on all steel imports and 10% on aluminum imports. This decision will significantly impact the US economy, particularly industries like construction and automotive, which rely heavily on these materials. The US imports 80% of its aluminum and 70% of its steel from countries like Canada, mexico, japan, south Korea and Germany, with these imports valued at approximately $50 billion in 2024,. This move could have a wide-reaching effect on pricing. Canada, the US largest supplier of both steel and aluminum, is expected to feel the brunt of these tariffs. While domestic metals companies tend to gain from reduced competition, however, it's likely to raise costs for industries that rely on imported metals. Meanwhile, the EU is all ready to respond with retaliatory tariffs on iconic American brands such as Harley-Davidson and Levi's, echoing the trade skirmish that followed Trump's last round of tariffs in 2018. As the previous tariffs, there may be exemptions negotiated later, but for now, the tension rises. The question remains how will these tariffs affect the larger trade landscape and future negotiations with global partners?

Speaker 1: 1:55

Next up inflation rates continue to climb. The new data reveals that your consumer prices in the US surge by 3% annually in January, marking the fourth straight month of increases. This jump was largely driven by spikes in shelter, food and energy costs. Federal Reserve Jerome Powell testified before Congress, warning that the fight against inflation is far from over. Powell indicated that any further rate cuts would be delayed until inflation trends back toward the Fed's 2% target. Traders have now parred back expectations for rate cuts, with the Fed projected to hold steady until at least September of this year. So if the Feds keep the rates higher for longer which has been pretty long this will continue to have an impact on all asset classes. Right, it will continue to have put pressures on unemployment and it would continue to put pressure on lending. It will continue to put pressure on household. It will continue to put pressure on your credit card payments. If you have a home equity line of credit, this will continue to put upward pressure. Right, because none of on your payments, because none of these payments are fixed rate, that they follow the federal interest rate and when the feds go up, your credit card payments go up.

Speaker 1: 3:17

While paul stuck a cautious tone, atlanta fed president rafael bostic and chicago fed president austin Goldsby echoed that if inflation persists, more aggressive measures might be necessary. Investors, meanwhile, are adjusting their portfolios, with US Treasury yields spiking by 10 basis points to reach 4.65, a level not seen in almost three weeks. You got to remember that the interest rates on mortgages, and credit and mortgages specifically, is impacted directly by the 10-year treasury. So when the 10-year treasury goes up, the interest rates go up on mortgages. So if you're looking to buy a house and that 10-year treasury is pushing upward, this impacts your payment. What your payment will be on that house.

Speaker 1: 4:06

Rounding out our brief today, hotter than expected inflation in January since ripples through the markets. Investors who had hoped for easing interest rates are now faced with the reality of sustained price pressures. The consumer price index rose sharply, fueling concerns that the Federal Reserve may delay further rate cuts or even hike rates again if inflation doesn't cool down. Doesn't cool down. The benchmark 10-year US Treasury yields jumped to 4.65% and the S&P 500 saw losses as the markets digest the inflation data. Market sentiment took a further hit, as new tariffs on Chinese goods are expected to exuberate inflation. Trump imposes an additional 10% tariff on the Chinese imports, while temporarily suspending a 25% tariff on goods from Canada and Mexico. According to Erica Art's senior strategist at Touchstone Investments, inflations might be sticky at a higher level than expected, leading to uncertainty about when the Fed may actually cut rates again. Despite the challenging inflation outlook, economic growth remains strong, which complicates the overall strategy. Investors are adjusting their positions, with some favoring corporate bonds and treasuries.

Speaker 1: 5:22

As you may or may not know, I am a real estate guy, a real estate investor. We recently bought a small apartment building, a six-unit apartment building, and we are rehabbing building and we are rehabbing it and we're making it beautiful. We're going to then rent it out and then we are in short term debt in that property and we're going to be then going into long-term debt. The key here is for investors like myself this is a real life example I'm sharing with you is that the numbers need to make sense. So I'm calculating my exit number, in other words, my refinance number, when the property is completed, at a seven and a half, seven and three quarter interest rate for a commercial loan fixed for five or seven years and amortizing over 25 years. Okay, so the numbers still work. So you have to, as an investor, have to make sure and ensure that you understand your numbers and that your numbers work for you, regardless of where the market is. One thing's for sure that markets go up, they go down. The key is you need to understand how to buy when the markets are up and how to buy when the markets are down.

Speaker 1: 6:27

Wealth true, long, big time growth and wealth is made in the difficult times like they are right now. During times like this, people in my space tend to back out. They tend to get scared. I'm going to wait for the rates to come down. Well, that's what everyone else is doing. That's not what we're doing. We're continuing to play, we're finding good deals, we're buying right and that's how you make your money. As we wrap up today's business brief, it's clear that trade and inflation remain dominant themes in the economic landscape, with implications for everything from industrial production to the everyday consumer. We'll continue to monitor this, these issues evolving, and bring you the latest insights every single week. Until next time, stay informed, stay ahead and peace out.