Wait, What’s a Tariff? Let’s Break It Down 👇

Kreg and I typically spend Sundays formulating the newsletter for the week. As I sit to get to work, I checked the S&P futures markets and it’s already down over 4%. That’s on the heels of -4.8% on Thursday and -6.0% on Friday. Oil is below $60 a barrel.

What happened?

Tariffs.

This is a long one, folks. Let’s dive in!

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Read time: ~5 minutes

Rates ended DOWN compared to last week, and volatility was HIGH. Rates are in the mid 6% range for most loan types without paying discount points. Paying discount points can get you in the high 5’s, low 6's.

Wait, What’s a Tariff? Let’s Break It Down 👇

When a country places a tariff (tax) on imported goods, the importer (the company bringing the product into the country) has to pay that tax to the government at the border.

Napkin Finance has a fantastic infographic that helps explain :

Why do countries use tariffs?

• 📦Protect Domestic Industries : Tariffs make imported goods more expensive, which encourages consumers to buy locally made products.

• 💰Raise Government Revenue : Governments collect tariffs from importers which can be a source of income.

• 🛡️National Security : Some products (like steel, energy, and tech) are vital to national defense. Tariffs can reduce dependence on foreign nations for these crucial goods.

• 🤝Trade Negotiation/Leverage : Tariffs are often used as bargaining chips to gain better deals

Tariffs can be powerful tools—but they come with real consequences, both good and bad depending on how they’re used. Here's a breakdown of the potential consequences of tariffs:

📈 1. Higher Prices for Consumers, But… : Experts say when companies pay more to bring products into the country, they usually raise prices for customers, which can cause inflation. However, customers have to be able and willing to pay the higher price. For example, if beef prices spike due to tariffs, customers could switch to a cheaper protein alternative. Customers could decide not to buy all together, which could lead to importers absorbing the tariffs and losing profits.

🔁 2. Trade Wars : Other countries may respond with tariffs of their own, just like China did on Friday when they reciprocated the US tariff. This can damage global trade and strain international relationships.

🚧 3. Supply Chain Disruptions : More expensive or harder to get materials from other countries can cause delays, shortages or require companies to rebuild entire supply chains—which takes time and money.

💸 4. Slower Economic Growth : Less business = fewer jobs = slower economic growth. Businesses are hesitant to invest during the uncertainty created by tariffs.

In Summary, tariffs can:

• ✅ Protect jobs or industries

• ✅ Raise government revenue

• ❌ Raise prices

• ❌ Start trade wars

• ❌ Slow the economy

They’re like medicine—you need the right dose at the right time, or the side effects might outweigh the benefits.

Trump’s Tariffs—No Politics, Just Facts

President Trump introduced a “baseline” tariff of 10% on imports from other nations starting April 5th. Additionally, he imposed “reciprocal” rates (higher) on specific trading partners starting April 9th.

Some of the more egregious tariffs include a 34% rate on China (takes total to 54% total), 24% on Japan, 20% on the European Union and 31% on Switzerland. Canada and Mexico were exempt. Trump reiterated the 25% tariff on auto imports.

Copper, pharmaceuticals, semiconductors, bullion, lumber, energy and certain minerals were exempt (for now).

The President said he’s open to negotiating with other countries—but only if they lower their tariffs, ease trade restrictions, or invest more in the United States. His spoken objective is to increase revenue to reduce the deficit.

Tariffs: The Gamble That Could Pay Off—Or Backfire 🔥

What’s the best case scenario?

In pure Game of Thrones style, other countries quickly bend the knee to the United States, re-negotiate trade deals, manufacturing is re-shored, reliance on other countries for critical products is reduced and additional revenue is generated to tackle the gigantic deficit. Sounds like a pipe dream.

What’s the worst case scenario?

A full-blown trade war with zero negotiations. Prices go up, consumers get squeezed, producers can’t pass the extra cost to the customer, earnings get slashed, jobs are lost, business investment goes down, GDP goes down leading to a recession 😱

What’s currently happening?

Uncertainty is everywhere. Money is moving from risky assets to safer bonds. Companies are lost trying to navigate the risk. However, the silver lining is interest rates are improving. This is a short-term win for agents and loan officers, but the longer this trade war plays out, the likelihood of a recession grows which could reduce the buyer pool aggressively.

Things can reverse quickly. The moment news breaks of positive developments in US/China negotiations, for example, we should see a sharp reversal. Fingers-crossed global leaders find mutual resolution to avoid a global recession.

Rocket Got BIGGER - Here’s How You Stay Relevant 💥

Rocket bought Mr. Cooper Group for $9.4B. It was the second largest industry purchase ever. The goal : become a one-stop-shop for homeowners.

Together, 1 in 6 mortgages are now serviced by the combined entity. Additionally, they now own the end-to-end homebuying experience from search ➡️ realtor ➡️ financing ➡️ title ➡️ insurance ➡️ closing ➡️ servicing ➡️ refinance/next purchase.

With all these new loans comes A LOT of customer data. Artificial intelligence requires a MASSIVE amount of data. Rocket has that now. Expect stronger “automation, personalization and efficiency” says Rocket.

What can agents and lenders do? Rocket thrives on automation, YOU win on connection. Stay top of mind with past/future clients and build a local, personal brand. You won’t out-market Rocket or out-automate them, but you can out-care them, out-educate and out-relate them.

Surprising Strength in the March Jobs Numbers 👀

Buried in the tariff news this week was the Bureau of Labor Statistic’s March jobs report. The nonfarm payrolls beat the daylights out of estimates landing at 228,000 vs. 140,000 expected. 48,000 jobs were collectively revised OUT of the January and February data point.

DOGE cuts weren’t necessarily reflected in the data. Federal government jobs declined by 4,000. However, the BLS noted workers on severance or paid leave are counted as “employed”. Challenge, Gray & Christmas (consulting firm) estimates layoffs from DOGE are around 275,000 year-to-date.

While the household survey gave us news that unemployment actually ticked up from 4.1% to 4.2%, it also showed 459,000 full-time workers were added while 44,000 part-timers dropped. That’s a big diversion from previous trends where part-time jobs were significantly outpacing full-time gigs.

Instagram Reels from the Week

Two Ways We Can Help

1. Let’s collaborate – schedule a zoom meeting

2. Tough deal?  Let us help!

Don’t hesitate to reach out if you need anything at all. Have a wonderful week!