Tariff Certainty
July 26, 2025
Despite the political noise, the truth about tariffs is this: they’re not uncertain - they’re predictably harmful.
It seems like the first half of the year has been dominated by headlines about Trump’s proposed tariffs - plastered across financial media and political feeds. One thing is certain: tariffs do not lower prices. In fact, they almost always raise prices. What’s creating “uncertainty” is not if they’ll raise prices - but how much and when. That’s what’s keeping both investors and business operators on edge.
While markets often blame volatility on “tariff uncertainty,” a closer look reveals there’s nothing uncertain about the impact tariffs have on companies, consumers, and valuations. At Alpha Capital, we believe it's time to cut through the noise and examine the economic reality of tariffs with clarity.
Who Really Pays the Tariff?
Tariffs are taxes on imported goods, often introduced under the banner of protecting domestic jobs or industries. But in practice, they don’t punish foreign exporters - they penalize U.S. importers and ultimately, American consumers.
Here are the only three ways tariffs play out:
· Companies Absorb the Cost: This option avoids immediate price increases but leads to thinner profit margins. Less profit means lower earnings per share - reducing valuation and long-term investor returns.
· Cost Is Shared Between Companies and Consumers: Margins shrink and consumer prices rise. The result? Inflationary pressure coupled with lower corporate profitability - a double whammy for both consumers and shareholders.
· Consumers Bear the Full Cost: Companies fully pass the tariff on to customers, resulting in higher prices at the cash register. Over time, this erodes consumer demand, slows sales, and depresses earnings - once again dragging down stock valuations.
Real-World Example: Walmart & the Tariff Trap
In 2019, when tariffs were imposed on Chinese imports, Walmart - the largest retailer in America - publicly warned that prices on many everyday items would likely rise. The company faced a tough decision: absorb the costs and hurt profit margins or pass them on to consumers. That dilemma is playing out across the economy, from auto manufacturers to electronics producers.
Most recently, as Trump’s renewed tariff proposals resurfaced, Walmart again announced plans to raise prices in anticipation of increased import costs. This drew sharp criticism from Trump himself, who responded with a now-infamous line: “Eat the tariff.” In essence, the expectation was for companies to absorb the costs without complaint - ignoring the real-world impact on corporate profitability, shareholders, and ultimately, consumer wallets.
And here’s the bigger issue: realigning global supply chains isn’t simple or quick. U.S. businesses have spent decades building efficient, interconnected networks across Asia, Europe, and Latin America. Tariffs throw a wrench into that system, creating longer-term inefficiencies and costs that aren't easily reversed.
A Tax by Another Name
Some argue tariffs generate revenue for the federal government - and they do. But the scale is marginal. Roughly $100 billion was collected from tariffs recently, which equates to:
· Roughly 2% of total U.S. tax revenue, and
· About 1.4% of federal spending.
That’s hardly a meaningful offset given the broader damage tariffs cause. And here’s the ideological kicker:
Tariffs function as stealth taxes on Americans—directly contradicting the Republican party’s long-standing commitment to lower taxes and free-market principles.
You can’t champion tax cuts while endorsing a policy that raises consumer prices and punishes American businesses.
The Smarter Alternative: True Free Trade
Rather than escalate tariff threats, we should be negotiating bilateral and multilateral trade agreements that reduce or eliminate tariffs altogether. This approach would:
· Lower input costs
· Boost corporate margins
· Preserve consumer buying power
· Strengthen global cooperation
· Drive long-term shareholder value
Then we can build a truly free trade environment - promoting real capitalism, innovation, and global competitiveness.
At Alpha Capital, we don’t just watch headlines - we analyze the economic mechanics underneath them. As global trade and fiscal policy evolve, we continue to position client portfolios around durable earnings power, strategic diversification, and long-term value creation.
As always, if you’d like to discuss how we’re managing these risks in your portfolio, I’m just a phone call or email away.
Alpha Capital Wealth Advisors, LLC is a registered investment adviser. The information provided is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Please consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future results.mance.
