President Trump will impose a universal baseline tariff of 10% on all
imports, effective April 5 at 12:01 a.m. Higher but discounted
reciprocal tariff rates will be implemented on countries making the
“worst offenders” list; those will go into effect on April 9 at 12:01
a.m. Soon after his speech, Trump signed an executive order to begin the
process of enacting tariffs. “Reciprocal. That means they do it to us,
and we do it to them. Very simple. Can’t get any simpler than that,” he
said.
The trade measures go beyond just tariffs. Trump and senior
administration officials emphasized that non-monetary trade barriers –
currency manipulation, government subsidies, import restrictions,
domestic tax policy, and other pillars restricting US goods – played a
significant role in assigning rates to countries worldwide.
China uses third-party countries like Cambodia and Vietnam to
avert tariffs. Brazil mandates licenses to import American agricultural
products. Israel, according to White House officials, steals
intellectual property for pharmaceutical manufacturing. Indonesia
maintains local content requirements. India has burdensome and
duplicative certification requirements for various sectors. The
administration says this harms US businesses and workers trying to
export American-made products.
The Trump team estimates that these barriers cost the US industry
tens of billions of dollars annually. “Monetary tariffs and non-monetary
tariffs are two distinct types of trade barriers that governments use
to regulate imports and exports,” the White House said in a fact sheet.
“President Trump is countering both through reciprocal tariffs to
protect American workers and industries from these unfair practices.”
So, while the rest of the world will endure an across-the-board levy,
major US trading partners will be hit with two-, three-, or four-times
higher rates. The most notable ones were Cambodia (49%), Vietnam (46%),
China (34%), India (26%), Japan (24%), and the European Union (20%). Of
course, several small countries were dinged on the head with enormous
reciprocal tariffs, including Lesotho (50%), Madagascar (47%), the
Falkland Islands (41%), and Liechtenstein (37%).
Trump did follow through on previous comments that he would be
“flexible” and “lenient” when designing this comprehensive tariff
strategy. “We will charge them approximately half of what they are and
have been charging us,” said the president at the press conference. “So, the tariffs will not be a full reciprocal.”
His latest round of tariffs was made possible by declaring a
national emergency through the International Emergency Economic Powers
Act (IEEPA). This 1977 law authorizes the chief executive to enact trade
restrictions on foreign countries, primarily through tariffs. Trump
invoked this act in February when he slapped import duties on Canada,
Mexico, and China based on drug and illegal immigration issues. The US
Senate passed a resolution to end the national emergency declared to
imposed these tariffs hours after the president’s speech, with one
Republican not voting and four others joining all the Democrats to
achieve a 51-48 majority. It was, however, essentially a symbolic vote,
as it’s unlikely the GOP-controlled House would follow suit.
Canada and Mexico were spared from the Liberation Day announcement.
However, the country’s North American neighbors will still be punished
under the previous 25% tariff regime
due to illicit drug and illegal immigration flows. In addition,
previous Section 232 measures, such as tariffs on foreign automobiles,
car parts, steel, and aluminum, will not be subjected to these latest
actions.
While the White House stopped short of providing revenue projections,
one official was bullish on his expectations. In a recent Fox News
interview, Peter Navarro, the president’s senior counselor for trade and
manufacturing, predicted the US government would collect $6 trillion in
tariff revenue over the next ten years. This assumes that current
global trade flows remain the same.
Wall Street Panics
US stocks finished the April 2 trading session in positive territory.
However, the leading benchmark averages started tanking minutes into
Trump’s press conference. Following his announcement, the tech-driven
Nasdaq Composite Index crashed as much as 4.5%. The blue-chip Dow Jones
Industrial Average tanked 1,100 points, and the broader S&P 500
erased 3%.
Government bond yields plummeted, with the benchmark ten-year falling
toward the 4% mark. The US Dollar Index (DXY) cratered 0.7%. US crude
oil prices fell below $70. Bitcoin dropped about 2%. Gold was the only
asset that extended its gains, as the precious metal inched toward
$3,200 per ounce. However, in the metals market, silver and copper fell.
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Investors were hoping for two things ahead of the blueprint’s
unveiling: a better-than-expected plan and clarity. One analyst
suggested that traders received neither. “What was delivered was as
haphazard as anything this administration has done to date, and the
level of complication on top of the ultimate level of new tariffs is
worse than had been feared and not yet priced into the market,” said Art
Hogan, the chief market strategist at B. Riley Wealth Management, to
CNBC.
Treasury Secretary Scott Bessent shrugged off the after-hours trading
results, uttering a terrific line that will grace the pages of business
publications for weeks to come. “The Nasdaq peaked on DeepSeek day, so
that’s a Mag 7 problem, not a MAGA problem,” he said. Nice.
The Reaction
Bessent delivered a message to the world: Don’t. In an interview with
CNN, the seasoned hedge fund billionaire urged countries not to
retaliate with countermeasures. “Let’s see where this goes because if
you retaliate, that’s how we get escalation,” he said. “Doing anything
rash would be unwise.”
It might be too early for nations to issue responses. Mexican
President Claudia Sheinbaum Pardo confirmed earlier in the day that she
would not reply with tit-for-tat retaliation. The Vietnamese government
pre-emptively slashed tariffs across a diverse array of US goods. India
said it is considering lowering tariffs on half of US products entering
the South Asian country. Israel vowed to abolish remaining levies on US
imports.
For Discerning News Hounds
Conversely, China threatened resolute countermeasures. In a statement
published by the Ministry of Commerce, officials said the government
“expressed strong dissatisfaction and clear opposition” and that “China
urges the U.S. to properly resolve differences with trading partners
through equal dialogue.”
The White House later clarified to reporters that the 34% tariff rate
on China is on top of the existing 20% import duties. So, if you do
your calculations and carry the one, Beijing will be slammed with a true
tariff rate of 54%.
Upending Global Trade
Canadian Prime Minister Mark Carney, who vowed countermeasures,
conveyed to reporters that Trump’s reciprocal tariffs will
“fundamentally change the global trading system.” This is what the 47th
president of the United States is banking on.
Liberation Day was about more than tariffs. The much-anticipated date
on the calendar was the US “declaring economic independence,” marking a
turning point for decades-long globalization. Perhaps historians will
examine the time as the start of transforming global trade and
rekindling the flame of free trade.
“For decades, our country has been looted, pillaged, raped, and
plundered by nations near and far, both friend and foe alike,” Trump
said. “Foreign cheaters have ransacked our factories, and foreign
scavengers have torn apart our once beautiful American dream. We had an
American Dream that you don’t hear so much about.”
A key part of his remarks was about how the public will hear
grievances from globalists, outsourcers, special interests, and the fake
news over the coming days. He urged the American people to ignore their
thoughts. Why? “They were wrong about NAFTA [North American Free Trade
Agreement],” he said. “[T]hey were wrong about China. They were wrong
about the Trans-Pacific Partnership, which would have been a disaster if
I didn’t terminate it.” Economists will debate the veracity of these
comments, but the Trump administration will point to towns destroyed by
shuttered factories, plants, and mills.
Trumponomics
Trump has championed the same pro-tariff message since an appearance
on Oprah Winfrey’s program nearly four decades ago, espousing that what
has been going on is not free trade. Well, years later, the real estate
billionaire mogul can declare victory against the elite. But will he
usher in an oft-spouted “new golden age” that will create prosperity for
all? It took many years for the United States to reach this point, so
it could take as many years to eradicate the odor of globalization.