DFW News App

Trade wars, those messy battles between countries over tariffs and trade rules, can feel like a storm brewing on the economic horizon. While predicting their exact outcomes is tough, understanding how to protect your money during these times is important…easier. Let’s dive into what trade wars are, their impact, and how you can safeguard your investments.

What Are Trade Wars?

Example: The Fraternity Rivalry “Trade War”

Imagine two big fraternities: one, the academically inclined (AI), and the other, the best all around (TBAA). Both are popular on campus. They used to have a pretty good system going. AI provided the party decorations, and TBAA supplied the sound systems for all the big events. Everyone was happy, and the parties were dope.

But then, a rivalry started brewing. The AI brothers felt like TBAA was getting too much credit for the awesome party vibes. They decided to “charge extra” for their decorations if TBAA wanted to use them for their events. Essentially, they put a “fee” on their party supplies.

The TBAA brothers, not to be outdone, retaliated. They decided to “charge extra” for the use of their sound systems if AI wanted them for their events. Now, both fraternities were making it more expensive for each other to throw parties.

This back-and-forth escalated. AI kept raising the “fee” on their decorations, and TBAA kept raising the “fee” on their sound systems. Other fraternities and sororities got involved, too, picking sides and adding their own “fees” to various party essentials.

What happened?

• Higher Costs: The cost of throwing parties went way up. Everything from balloons to speakers became more expensive for everyone.
• Less Fun: With the higher costs, fewer parties were thrown. The whole campus felt a bit duller.
• Tension and Uncertainty: Everyone was worried about what the next “fee” would be. Planning events became a headache.

This fraternity rivalry is similar to a trade war between countries. Instead of fraternities, you have governments. Instead of “fees,” you have tariffs. But the result is the same: higher costs, less activity, and a lot of tension.

Why do they do this? Countries often want to protect their own businesses, but these actions can lead to higher prices for everyday goods and slow down economic growth. When Country A puts a tariff on products from Country B, Country B often does the same. This back-and-forth can escalate, making it difficult for businesses to sell products across borders and potentially leading to job losses.

Focusing on What You Can Control

The effects of trade wars are complex and unpredictable. Instead of worrying about what you can’t control, let’s focus on how to protect and grow your money during these times.

Assets That Tend to Perform Well During Trade Wars

When the economy gets shaky, especially during trade wars, people look for safe places to put their money. Gold is a classic example. When people are worried, they buy gold, and its price often goes up. Companies that sell things we always need, like food and medicine, tend to stay steady even when the economy is rough. These are called defensive stocks. U.S. government bonds are also seen as very safe, especially the short-term ones. If a lot of people want them, their price can rise.

Companies that sell mostly to local customers aren’t as affected by international trade problems. So, smaller companies that focus on local markets can do well. If trade wars cause prices to rise, things like oil and farm products, and even real estate, can be good investments. Bitcoin is also being seen as a way to protect your money from inflation.

Historically, the country with the strongest money usually does better in trade wars. Investors want to put their money where it’s safe, and a country with a stable financial system attracts money from all over the world. A strong currency helps a country handle higher prices from tariffs. Also, when money flows into a country, it can make borrowing cheaper. Countries with money problems, like high debt, have a harder time during trade wars.

The world is becoming more digital, and money is changing too. Businesses and investors who work online need digital money that’s fast and easy to use. Bitcoin is becoming a trusted way to store value online because it’s scarce and not controlled by any one government. Governments are starting to notice this. Countries that accept Bitcoin early on can attract money and become stronger. Countries that ignore it risk falling behind. History shows that countries that stick to old ways lose power. The future belongs to those who embrace new technologies like Bitcoin.

Conclusion

Trade wars create uncertainty, but by understanding which assets tend to perform well and why strong countries come out ahead, you can protect and grow your money. Embracing digital money like Bitcoin is becoming increasingly important in today’s economy. Those who adapt to these changes will be best positioned for success.

More from the Money101 Series:

Part 1: A History of Money: From Goldsmiths to Bitcoin

Part 2: Understanding Money: The Three Core Jobs of Currency

Part 3: Balancing Savings, Credit, and the Economy

Part 4: Decoding the Economy: Supply, Demand, and the Money Game

Phillip Washington, Jr. is a registered investment advisor. The information presented is for educational purposes only and is not intended as 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. It is essential to consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future results.

The post Money 101: Navigating Trade Wars: Protecting Your Money in a Turbulent World appeared first on Dallas Weekly.