The headlines are loud. Your portfolio doesn't have to be.
- Brendan Moody
- 23 hours ago
- 4 min read
If you've felt the urge to do something with your portfolio every time tariffs or the debt make the front page, you're not alone. We hear it from clients every week. Here's what has actually happened, and why the right move has mostly been to stay put.
Since new tariffs were introduced last year, trade policy has kept markets on edge. In February, the Supreme Court ruled the original "Liberation Day" tariffs illegal, and refunds are now flowing back to businesses.1 New tariffs have since gone in under different laws, including with major partners like Canada.
Those refunds have pushed the deficit higher, and the national debt has crossed $40 trillion for the first time. That raises real questions about what it costs the government to borrow.2 And yet broad market indexes have hit new all-time highs. Markets have a long record of doing well across trade and economic environments that looked ugly at the time.
Tariff refunds are being returned to businesses
A refund check is not a raise. That's the thing to keep in mind if you're tempted to chase the companies collecting tariff money right now, or if you're a business owner counting one yourself.
When the Supreme Court ruled in February that billions in tariffs had been collected unlawfully, markets liked it. Tariffs are a cost, so removing them was expected to help the economy. Companies that paid became eligible for refunds, and those are now going out. According to U.S. Customs and Border Protection, $129 billion in refund claims had been accepted for processing.3
June was the biggest refund month on record: $49.2 billion returned against $23.6 billion collected. With roughly 40% of refunds still in the pipeline, the government will likely pay out more in tariffs than it takes in for the next several months. That helps company balance sheets this year. It does not make those businesses better businesses. It's a one-time event, and the market will treat it that way.
Tariff refunds have added to the federal deficit and national debt
The $40 trillion number is real, and it's worth worrying about as a citizen. It's not worth trading on as an investor. Those are two different jobs, and mixing them up is one of the most expensive mistakes we see.
Tariff refunds have cut into government revenue. The deficit is already about $1.8 trillion with a month left in the fiscal year, and the Congressional Budget Office now projects it will finish at $2.1 trillion.5,6 That's what pushed the national debt past $40 trillion for the first time. Tariffs were never going to fix this. Social Security and Medicare are the real drivers of long-term spending, and no trade policy changes that.
Here's the part that matters for your plan. Since 1970, the federal government has run a deficit in all but five years. Balanced portfolios did fine through every one of them. People who pulled back because of the debt didn't avoid a crisis. They just missed the returns.
Rising debt is pushing up government borrowing costs
If you've got cash sitting in a money market because the headlines made you nervous, this section is for you. Higher rates are not just a problem. They're the first real paycheck bond investors have had in twenty years.
As the debt grows, long-term rates have climbed to multi-decade highs. When 10-year and 30-year Treasury yields rise, borrowing gets more expensive for businesses and households. To keep that in check, the Treasury Department has stepped up its buybacks of Treasury securities, which helps hold rates within a range.7
Today's rates look high next to the past two decades. Against the full record, they're ordinary. And for anyone who needs income from a portfolio, they're an opportunity that didn't exist for most of the 2010s.
Midterms are two months out, and the noise about tariffs, debt, and rates is going to get louder, not quieter. That's the season when short-term headlines do the most damage to long-term plans. Don't let them.
The bottom line: tariff refunds and a bigger deficit are real problems for Washington. They are not a reason to change your plan. Every headline in this note points to the same thing we tell clients in every review. The portfolio is built for this. Let it work.
If something in your life changed this summer, a sale, a bonus, a refund check, a job move, that's what should drive a conversation. Reach out and we'll walk through it.
References
4. https://fiscaldata.treasury.gov/datasets/monthly-treasury-statement/receipts-of-the-u-s-government
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