When we entered 2019 one year ago, businesses and consumers, alike, were concerned about the economy. During that time, trade relations between the US and China escalated. In addition, the Federal Reserve hiked interest rates several times in 2018, with more increases planned for 2019. Just as importantly, the stock market plummeted and reached alarming lows. However, one year later, as we brace for 2020, the picture looks entirely different. The US reached a partial trade deal with China, Congress passed the USMCA agreement, the Fed replaced the proposed rate hikes with cuts, and stocks are reaching new all-time highs on an almost weekly basis. To clarify, all of this benefits households and individuals. For example, you may now find very desirable student loan consolidation rates or have enough to afford the once expensive British cars.
Yet many consumers don’t know how these changes impact them. For a start, international trade and interest rate policies are out of people’s control. Moreover, it is difficult to keep up with all of the details and news events on a regular basis, let alone understand how they impact prices. In turn, some households become unpleasantly surprised when their expenses go up. Similarly, others may miss out on great savings opportunities.
Being aware, on the other hand, comes with plenty of advantages. Firstly, consumers can keep their lifestyles and spending levels as they are, regardless of what happens to inflation or the prices of specific items. Additionally, they may even save money, especially if households can find alternative products that are cheaper than the ones they purchased. In this article, we will outline the goods that will become more expensive, as well as the items that may allow you to save money.
2020: What Will Get Cheaper
Whether you are looking for desirable student loan consolidation rates or a low interest credit card, 2020 is going to be a good year. Between October 2015 and December 2018, the Fed’s interest rate benchmark went from 0.25% to 2.50%. However, it is now back down to 1.75% after the Fed cut interest in each of July, September, and October of this year.
As a result, all loan types are also going to come with a lower monthly payment. For example, after the Fed’s latest policy decisions, the current 30 year mortgage rates immediately dropped. Similarly, the interest on tuition debts is going to follow suit.
In other words, graduates who want to lock in lower student loan consolidation rates should do so in the near future. The same applies to aspiring homeowners and vehicle buyers.
Clothing and Shoes
The United States imports textiles and wearable items from China. These products are worth almost $120 billion per year. As the part of the latest partial trade agreement between the two countries, the US agreed to reduce the tariffs by half on these imports.
Needless to say, retailers will pass these savings on to consumers. In other words, sweatshirts, athletic clothing, and shoes are going to become cheaper in 2020.
Equally as important, China recently agreed to buy more agricultural products from American farmers. Previously, the Chinese government retaliated against the US’s protectionist trade policy. More specifically, China imposed its own tariffs on agricultural goods that came from across the Pacific Ocean.
Agricultural producers, who sell the China soybeans and other foods for billions of dollars per year, lost plenty of their revenues. To compensate for that, they increased the cost of their products for both American and Chinese consumers.
The new partial agreement, meanwhile, doesn’t just restore activity to its pre-trade war level, but it also requires China to buy even more soybeans and agriculture from the US. Therefore, farmers may start selling food at the cheapest prices in decades.
2020: What Will Become More Expensive
Dairy and the USMCA Agreement
While foods, in general, are going to be more affordable, dairy products might move in the opposite direction. This includes milk, butter, yogurt, and other items. More specifically, Canada imposes a limit on American dairy products that can enter the country.
This policy, alongside related factors, made it difficult for US farmers to do business with the country’s northern neighbors. Meanwhile, they still produced a larger than needed amount of milk and dairy during the last several years.
After that, there was an excess amount of products in the market. Farmers, therefore, lowered their prices dramatically and hoped that sales would increase.
The USMCA agreement changes the landscape, however. Canada will soon allow more American producers to sell dairy in the country. Not only does this reduce the excessive supply, but farmers will no longer need to sell at discounted prices.
In fact, Canadian producers already charge much more than their American counterparts. After the USMCA trade agreement is implemented, US farmers can increase their own prices and, at the same time, still offer products at a relatively low cost in Canada.
Automobiles and Expensive British Cars
Alongside dairy, the USMCA agreement also changes the way that manufactures produce vehicles. To clarify, the new framework requires carmakers to pay their workers a higher wage and expand their operations in North America.
When producers can make their products for a low cost, they also charge consumers cheaper prices. The opposite, however, is also true. Since the USMCA agreement raises workers’ salaries and manufacturing costs, cars will get more expensive in 2020.
More specifically, those that want to purchase a new vehicle might have to revise their plans and take the changes into account. Having said that, used autos may go down in value, especially previously expensive British cars.
If the US and the UK reach a trade deal during 2020, Britain-based manufacturers can access the American market more easily and at a lower cost.
As a result, expensive British cars may become affordable this year, even more so when the UK leaves the EU. Britain’s automakers will cut additional production costs when they don’t have to abide by Europe’s environmental regulations and manufacturing restrictions.
2020: How to Prepare
Every year, certain consumer products get more expensive while others drop in value. This scenario is inevitable. However, reviewing your household’s spending habits, identifying ways to save, and preparing a new budget is certainly in consumers’ hands.
In fact, whether prices go up or down, this strategy helps you cope and minimizes the negative effects of inflation. After all, when expensive British cars become cheaper, a lot of other products will, too.
To clarify, putting together a detailed plan allows you to save money while everyone else incurs larger expenses.