Navigating Tariffs in 2025

President Trump’s 25% tariffs on goods from Canada and Mexico take effect today. As these policies take shape, one big question looms: What happens next?

Will prices surge, fueling inflation? Will businesses absorb the hit or pass costs to consumers?How will global markets respond?

It’s natural to see this as a solvable puzzle - plug in the right numbers, and the outcome becomes clear. But this is more like a shifting maze, where new obstacles keep appearing. The interplay between tariffs, interest rates, inflation, and market behavior is anything but straightforward.

Even the smartest economic models can’t predict every ripple effect:

• How will key trading partners retaliate?

• What unexpected disruptions will hit supply chains?

• How will currency markets and consumer behavior adjust?

  
  

These are just the known unknowns—the factors we can anticipate. But the real challenge lies in the unknown unknowns—the surprises no one sees coming.

Market Reactions: Short-Term Noise vs. Long-Term Vision

Markets react fast. The Nasdaq is approaching 10% correction territory as we release this note with the S&P 500 not far behind. Markets digest news, adjust prices, and move forward. But when major policy shifts introduce uncertainty, volatility spikes. The temptation to react quickly—buy, sell, pivot—can be overwhelming.

Historically, trying to outguess the market based on headlines has led to more regret than reward. Focus on policy over politics when making portfolio decisions. Short-term trading, “stock picking,” and market timing rarely result in lasting success because no one—not even the experts—can predict every twist and turn.

The best strategy? Ignore the noise and stay focused on what works.

Focus on Long-Term Investing

Successful investors know one thing: time in the market beats timing the market. Instead of chasing headlines, they focus on time-tested strategies. Here’s how:

1. Keep a Long-Term Perspective

Markets dip. Policies change. Economic uncertainty is inevitable. But history shows that patient investors tend to be rewarded. Short-term panic often leads to costly mistakes, while well-structured investment plans are built to withstand volatility.

2. Diversify, Diversify, Diversify

True diversification isn’t about avoiding risk—it’s about managing it. By spreading investments across asset classes, industries, and global markets, investors can prepare for a variety of possible outcomes. A well balanced portfolio ensures that no single economic event—like a tariff hike—derails financial progress.

3. Stay Disciplined and Avoid Emotional Reactions

Market swings test investor patience. But success comes from sticking to a solid plan, rebalancing when necessary, and resisting emotional decision-making. Fear-based investing can lead to costly missteps, while a disciplined approach fosters long-term resilience.

4. Look at the Bigger Picture

Tariffs are just one piece of a massive financial puzzle. Factors like interest rates, corporate earnings, and consumer spending have far greater influence on long-term market trends. By focusing on a well-diversified financial strategy, investors can ride out short-term fluctuations with confidence.

Final Thoughts: Focus on What You Can Control

Markets will always be unpredictable, and economic policies will continue to shift. But rather than chasing headlines or trying to predict the next big move, investors should focus on what they can control:

✅A well-diversified, long-term investment strategy✅ Disciplined decision-making that avoids emotional reactions✅ A financial plan designed for resilience in uncertain times

Tariffs may dominate today’s news cycle, but smart investing is about playing the long game. If you’re unsure how to position your portfolio for the future, consult a Watershed advisor who can help ensure your strategy aligns with your long-term goals.

Stay patient, stay diversified, and stay the course. That’s how real wealth is built.