The Hidden Impact of Tariffs on Your Investments (and Why It's Good News for Rule #1 Investors)

The Tariff Talk You’re Not Hearing

I want to talk about a problem that’s flying under the radar—but has huge implications for us as investors: tariffs.

Tariffs have been in the headlines, but most people don’t understand how they really work or what they actually mean for the stock market, inflation, or long-term investing. So let’s break it down Rule #1 style—and talk about how this creates potential opportunities for those of us paying attention.

What Is a Tariff, Really?

Let’s start with the basics. A tariff is essentially an import tax.

Say there’s a 10% tariff on goods from China. When a U.S. company imports those goods, they must pay the U.S. government 10% of the order's value. Usually, this cost gets passed on to the consumer.

So, why would any president raise prices on purpose? Sounds crazy, right? Well, it turns out there’s more to the story.

The Real Purpose of Tariffs: Protecting American Jobs

Historically, tariffs played a big role in protecting American wages. In the late 1800s and early 1900s, tariffs helped keep U.S. manufacturing competitive by making imported goods more expensive.

Here's an example:

• A U.S.-made t-shirt might cost $20 (including $5 in wages).

• A Chinese-made t-shirt might cost just $1 due to lower wages and working conditions.

• Without tariffs, U.S. companies can’t compete—and they fold.

• That means millions of high-paying American jobs disappear.

Between 1999 and 2011, cheap foreign imports wiped out 2.5 million U.S. manufacturing jobs.

So when Trump imposed tariffs, it wasn’t just about politics. It was about preserving American middle-class jobs—something the media rarely mentions.

How Tariffs Affect the Stock Market (and You)

1. Margin Compression

Industries that depend on imported parts—like autos, semiconductors, and consumer goods—are hit hardest. Companies like Ford or GM must either:

• Eat the extra cost (hurting profits), or

• Raise prices (hurting sales)

Either way, profit margins shrink—and PE ratios follow. This could drive markets down or flat for years.

But for Rule #1 investors? That’s great news. It means we may soon see wonderful companies priced with a margin of safety—a rare opportunity we haven’t had in a decade.

2. Inflation (At Least Temporarily)

Higher import prices mean consumers pay more. That’s inflation.

But here’s the kicker: Over time, we’ll likely buy more American-made goods—and that means higher wages and a stronger middle class.

So yes, prices may go up—but so will income. And that’s a long-term win for the economy.

3. Global Retaliation Risks

Other countries may strike back with tariffs of their own. That could hurt big multinational companies, especially those earning a lot overseas.

Example: 41% of S&P 500 earnings come from foreign markets. If American products get more expensive abroad, sales could drop.

So, watch for companies with:

• Strong domestic focus

• Pricing power

• Minimal reliance on global supply chains

4. Long-Term U.S. Resilience

Let me be clear: Don’t bet against America.

Yes, things might get bumpy. But that’s what creates volatility, and volatility is exactly what creates opportunity.

If a great company gets unfairly beaten down by headlines, it could be your chance to “load up the truck.”

What This Means for Rule #1 Investors

Tariffs are like a magnifying glass. They reveal which companies are anti-fragile—able to thrive even when things get tough.

Look for companies that:

• Have strong moats

• Possess pricing power

• Can adapt to market changes

• Are less reliant on imports

These are the businesses that will weather uncertainty and come out stronger.

Ready to Seize the Opportunity?

If you want to learn how to spot these opportunities, how to value companies, how to identify moats, and how to invest like Buffett, I’d love to invite you to join our 3-Day Rule #1 Investing Workshop.

Over 25,000 people have gone through the training—and the average Net Promoter Score is 82. That’s higher than Harvard or Yale MBA programs.

Final Thoughts

The media loves to scream doom and gloom—but we see opportunity in volatility.

So while everyone else is panicking about tariffs, you can be building your watchlist, sharpening your valuation skills, and preparing to buy wonderful businesses at wonderful prices.