Introduction
The Trump Administration has been in office almost 60 days as of this writing. To some, he’s accomplished more than any other president in modern history in those 60 days. To others, he’s accomplished little more than abandoning longstanding allies and turning a blind eye to many American’s plights. No Trump “accomplishment” draws more praise or ire than his tariffs (or threats of tariffs) on friend and foe alike.
This is a brief discussion on the effect tariff’s may or may not have an annuities.
What are Tariffs?
According to Investopedia, tariffs are, “a tax imposed by one country on the goods and services imported from another country to influence it, raise revenues, or protect competitive advantages.” It would seem the Trump Administration would be targeting the last motive, “protect competitive advantages.” Trump has stated that he believes the US is being “ripped off” in regard to international trade. He would argue that he is fighting for fair and reciprocal trade on international markets.
However, tariffs are not enacted in a political or economic vacuum. There are real costs associated with tariffs. The primary being the increased costs for consumers in the countries where tariffs are in place.
What does this mean for annuity providers?
The most direct issue for annuity providers would be the increased overhead. Any cost increases due to tariffs on goods or services an annuity provider may typically purchase, could be passed on to the consumer in the form of higher premiums.
The other more consequential change would be the possible adjustment of annuity product offerings and interest rates due to economic responses caused by the tariffs.
What does this mean for annuity buyers?
For annuity buyers who currently have fixed rate annuities, any new tariffs should have little effect. However, anyone in the market for an annuity should be aware that as the market rides the tariff roller coaster, interest rates on different products will change or be subject to change. This will mostly be the case for variable rate annuities. This type of volatility may call for a fixed or fixed index annuity to hedge against any negative tariff effects.
Long term considerations
All investments and insurance products (such as annuities) come with a certain level of risk. Tariffs are just one of many. This highlights the importance of maintaining a balanced portfolio to mitigate risks associated with volatile economic policies such as tariffs. As always, it is best to consult with a certified financial planner or retirement income planner prior to any purchase of an investment or insurance product.
Conclusion
It remains to be seen what the coming months have for tariff policy from the Trump Administration. Will long time trade partners such as Canada and Mexico give in to the president’s demands on imports/exports, stemming the tide of illegal drugs and illegal immigration? Will a full scale trade war begin with China and/or the EU? Only time will tell. However, for the average annuitant (or future annuitant) the emphasis should be on staying informed and proactive in managing their retirement investments and portfolio during periods of economic instability.
What Retirees Should Know
When headlines are dominated by trade wars and tariff threats, most people aren't thinking about annuities. But if you're nearing or in retirement, these global policy moves can have a direct impact on your financial future.
While the Trump administration's tariffs on imports were designed to strengthen American manufacturing, they also introduced inflationary pressures and economic uncertainty. And for annuities—which are deeply tied to interest rates, bond yields, and investor sentiment—those ripple effects can influence rates, product offerings, and even long-term retirement planning strategies.
Here's how it all connects—and what you need to consider.
The Tariff Chain Reaction
Tariffs raise the cost of imported goods. That increased cost often trickles down to consumers, which can trigger inflation. In response to rising inflation, the Federal Reserve may hike interest rates to keep the economy in check. Higher interest rates affect bond yields—and since insurance companies invest heavily in bonds, annuity rates and payout levels shift accordingly.
But there's a catch: tariffs don’t always lead to lasting inflation. If trade tensions escalate too far, they can slow down global growth, reduce corporate profits, and spook investors—potentially leading to lower interest rates and falling markets. Either way, annuities get caught in the crosscurrents.
How Interest Rate Volatility Impacts Annuities
Annuities rely heavily on the interest rate environment. Carriers use your premium to invest in fixed-income products, and those returns help determine how much they can offer you.
Here's the simplified chain: Tariffs → Higher Costs → Inflation Pressure → Fed Rate Adjustments → Interest Rate Swings → Annuity Rate Changes. The more uncertainty in the economy, the more frequently carriers may adjust their product designs—especially fixed annuities and those with guarantees.
How Different Annuity Types React to Trade and Market Volatility
MYGAs (Multi-Year Guaranteed Annuities) MYGAs act a lot like CDs issued by insurance companies. They offer a guaranteed fixed interest rate for a set number of years—commonly 3, 5, or 7.
What happens during tariff-related volatility?
If tariffs cause rates to spike, MYGA yields may become more attractive—for a limited time.
But if market fears rise and the Fed lowers rates to soften the blow, those MYGA rates could fall.
Example: In 2018, a 5-Year MYGA might have paid 3.4%. Post-tariff inflation pushed that to 3.8%, but a year later, with growth concerns mounting, the same product offered only 3.0%. On a $100,000 investment, that's a $4,000 difference in total earnings.
FIAs (Fixed Indexed Annuities) FIAs offer returns tied to stock indices like the S&P 500 while protecting your principal. Their returns are limited by caps, participation rates, or spreads, which are influenced by interest rates and market volatility.
Tariff Influence:
If interest rates rise due to inflation, carriers may offer higher participation rates or caps.
But if tariffs spook the market, carriers may lower those same caps to reduce their exposure.
Opportunity in Downturns:
If markets tank in fear due to trade war news, FIAs actually become more appealing. You lock in a low point—meaning any future rebound translates into positive crediting—with no risk of loss if the market keeps falling.
Example: Imagine buying an FIA just after the market dips 20% due to trade fears. If it rebounds 15% the following year, and your FIA has a 60% participation rate, you'd earn a 9% gain—with no downside exposure.
VAs (Variable Annuities) Variable annuities expose your premium to the actual performance of mutual-fund-like subaccounts.
Tariff Risk:
Trade tensions may hurt global stocks and sectors like tech or manufacturing.
If your VA is heavily exposed to those sectors, your account value can decline.
Additionally, many VAs have income riders, and if those guarantees become costly during volatility, carriers may change pricing or reduce benefit terms.
Case Study: Janet's Dilemma Janet, age 66, is planning to retire in 6 months. She has $250,000 to invest for safety and income and is comparing MYGAs and FIAs.
Scenario A: She buys now. A 5-Year MYGA offers 4.5%, and she locks in $12,600/year in interest. Scenario B: She waits, hoping for better rates. But trade wars escalate, the Fed cuts rates, and MYGAs drop to 3.75%. Her income drops to $9,400/year. Total difference over 5 years: $15,900.
If she chooses an FIA instead, she captures market upside if stocks rebound—yet her principal stays protected if they don't.
What Retirees Should Do Now
Don't ignore the headlines. Even if you're not trading stocks, the economy does affect the guarantees and rates you rely on.
Lock in when rates are favorable. Tariff-driven inflation may create windows of opportunity to get higher MYGA or FIA rates.
Use FIAs for rebound potential. If markets are rattled and you're nervous, a fixed indexed annuity offers the rare combo of safety and upside participation.
Diversify by purpose. Combine MYGAs for income certainty with FIAs for growth exposure. This blends protection with flexibility.
Final Thoughts
The Trump-era tariffs may have started as a geopolitical tool, but their effects echo through financial markets, interest rates, and yes—even retirement annuities. By understanding how these global issues affect domestic annuity pricing, retirees can make better timing decisions, avoid common traps, and protect their nest eggs in volatile times.