Tariffs, Tension, and the $432 Billion Question: Is the Annuity Market Headed for a Slowdown?

In 2024, the annuity industry pulled off a record-breaking feat: $432.4 billion in total U.S. sales, marking a 12% year-over-year surge. But just a few months later, the winds are shifting—and not because of product flaws or waning consumer interest.

This time, the threat is external: tariffs.

And while trade policy may feel like something best left to Washington wonks and Wall Street economists, it has direct, underappreciated consequences for retirement-focused professionals. Because if volatility returns, inflation spikes, or bond yields wobble in the wake of new tariff waves, our entire income planning playbook could start to fray.

Tariffs 101: Why Advisors Should Care

Tariffs aren’t just economic levers—they’re uncertainty triggers. Whether they’re aimed at Chinese tech, European steel, or Mexican agriculture, the ripple effects almost always hit the markets with:

• Increased equity volatility

• Unpredictable bond yields

• Accelerated or suppressed interest rate cycles

• Inflation pressure on consumer goods

Each of these affects how annuities are priced, sold, and perceived—especially fixed indexed annuities (FIAs), registered index-linked annuities (RILAs), and traditional fixed-rate deferred annuities (FRDs).

When the market swings, so does investor behavior. And historically, tariff-induced volatility has dampened annuity sales growth—even if temporarily.

What the Data Is Saying

• 2024: U.S. annuity sales hit $432.4B, fueled by interest rate tailwinds, Peak 65 demand, and economic uncertainty.

• 2025 (Q1): Preliminary data shows softening in FRD annuities, while FIAs and RILAs remain resilient.

• Trade Policy Shift: New rounds of tariffs—targeting semiconductors, solar, and EVs—are already pressuring markets. The S&P 500 slipped 3.2% on May 6 alone after the announcement.

• Inflation Risk: Multiple analysts warn that tariffs are inherently inflationary, potentially weakening the value of fixed annuity payouts over time.

These aren’t abstract threats. They shape how clients feel about guarantees, growth potential, and risk—and how products get built and priced in response.

The Real Risk? Misalignment Between Strategy and Emotion

Here’s the core tension: volatility often drives clients toward annuities (for safety and guarantees)…
…But that same volatility can drag down caps, disrupt pricing, and spook insurers into defensive positions.

So we’re left with an annuity market that appears healthy—but may be standing on shakier ground than it looks.

If tariffs continue to rattle investor confidence, we’ll need to do more than just explain “how annuities work.” We’ll need to defend why they still matter.

What Financial Professionals Should Do Now

1. Refocus on the why—not just the yield.

When markets are shaky, clients fixate on numbers. But their deepest concern isn’t about spreads or participation rates. It’s about security. Help them see annuities as emotional hedges—not just financial instruments.

2. Stress-test annuity allocations under inflation pressure.

Tariffs could reignite inflation. What happens to your client’s retirement income if real purchasing power drops 2–3% a year? Are COLA riders, hybrid structures, or laddered strategies on the table?

3. Educate clients on what “volatility-resilient” really means.

FIAs and RILAs offer downside protection, yes—but they’re not immune to economic whiplash. Set clear expectations around index caps, lock-ins, and timeline commitments before the next correction.

4. Advocate for product innovation, not panic.

Insurers must evolve—not retreat. Encourage carriers to rethink how annuity crediting strategies align with market regimes. Push for transparency, simplicity, and planning-centric design.

The Ethical Imperative: Lead with Truth, Not Fear

Let’s be honest—market panic sells. Tariffs can become a convenient scare tactic for advisors pushing “safety-first” narratives that prioritize product placement over planning.

But that’s not what our clients need.
They need clarity. They need a long view. They need us to be better.

Use this moment not to pounce—but to reaffirm your role as a steady hand in a volatile world.

The Real Risk Isn’t Tariffs—It’s Tuning Out

Trade policy changes. Tariffs rise and fall. Markets will always wobble.
But annuities—done right—should be built to outlast those fluctuations, not react to them.

Let’s not wait for a sales slump to start asking tough questions.
Let’s use this as a catalyst to rethink how we frame annuities in an uncertain world—so clients don’t just buy them, but believe in them.