Surprise: Tariffs Make Things Cheaper

 

Orange juice, wine, and dairy are all lining up to get cheaper in the coming weeks.

I know what you're thinking - this makes no sense.

After all, Jerome Powell, the Federal Reserve Chairman, just spent yesterday telling us that tariffs will make inflation worse.

The mainstream media is in a frenzy, warning that Trump's trade war will drive prices through the roof.

Even Wall Street's finest economists are predicting economic doom and gloom.

But here's the thing: they're all wrong.

Let me explain why.

The Law of Supply and Demand

Yesterday, the Federal Reserve kept interest rates steady between 4.25% and 4.5%, citing uncertainty around Trump's new tariffs.

They're worried that 25% tariffs on Canadian and Mexican goods will push inflation higher.

The Fed even raised their inflation forecast to 2.8% for the year, up from their previous 2.5% estimate.

But they're missing something big.

When Trump slaps tariffs on foreign goods, those countries don't just sit there and take it.

They fight back.

Canada just announced $155 billion in retaliatory tariffs on American goods.

That means Canadian consumers will pay more for American products.

Which means they'll buy less American stuff.

And when foreign buyers stop buying, guess what happens to all those products meant for export?

They stay right here in America.

More supply + same demand = lower prices.

It's basic economics.

Why Wall Street Hates Uncertainty

Take orange juice, for example.

Florida produces tons of it for export to Canada.

But with Canada's new 25% tariff, Canadians will probably switch to orange juice from Brazil or elsewhere.

Maybe they’ll start drinking Maple Syrup.

Whatever the case, that leaves a lot of Florida orange juice looking for new homes.

The same goes for American wine, dairy products, and countless other goods.

Wall Street hates this situation.

Not because prices will go up, but because they don't know what will happen next.

Markets despise uncertainty more than bad news.

The Best Buying Opportunities

That's why stocks of major retailers like Walmart are taking a beating.

But here's where it gets interesting for smart investors.

These moments of panic often create the best buying opportunities.

Think about it: Walmart isn't going anywhere.

In fact, they might benefit from lower wholesale prices as suppliers scramble to sell their excess inventory.

 J. Altucher