President Donald Trump’s “Liberation Day” has come, and markets are feeling the effects in full force.
On Wednesday, Trump announced his long-awaited tariff plan on the rest of the world, imposing a baseline of 10% on all US imports, with harsher rates like 54% on China and 20% on the EU.
The goal of the strategy? To boost American manufacturing by incentivizing firms to move production to the US and aiming to produce $600 billion yearly through import taxes.
Markets reacted swiftly. Stocks have fallen, gold reached yet another record high, and the US dollar remains volatile with the new policies that have sparked global outrage, financial turbulence, and rising worries of a trade war.
The average tariff rate has increased to 22%, the highest level since 1910. ⁽¹⁾
Source: White House Post From X
Liberation Day Unveiled
Trump’s “Liberation Day” tariffs, announced on Wednesday in the White House Rose Garden, rolled out a minimum 10% duty on all imports, with China facing a total 54% rate, the EU and Japan 20%, and a 25% levy on autos. The policy offers exemptions for critical materials and a 90-day adjustment period for some sectors, alongside a promise of lower rates for nations easing US access.
Trump promoted it as a revival of American business, predicting enormous profits and job expansion. The 22% average tariff increase is a sharp departure from recent decades and is reminiscent of protectionism in the early 20th century. ⁽²⁾
Ursula von der Leyen of the EU described it as a “major blow” to trade and predicted that it would cause broad economic suffering. Asia is also expected to see the effects due to its reliance on US markets.
As the value of the yuan fell to a record low, China denounced the action as excessive and threatened a harsh response. The disparate rates of the policy—10% for Britain and 49% for Cambodia—indicate unequal effects, with the most difficult obstacles being faced by the most vulnerable economies. ⁽³⁾
Since January, Trump has ramped up trade actions: a 10% China tariff on February 4, doubled to 20% by March, and 25% on Canada and Mexico goods by early March.
These steps reflect the President’s “America First” campaign, hitting rivals and allies alike. The April escalation builds on this, targeting trade imbalances with reciprocal duties and secondary tariffs on Venezuelan oil buyers. ⁽⁴⁾
The world’s response has been sharp. Canada’s leadership vowed a forceful counter, South Korea rushed aid to its carmakers, and Japan formed a task force to tackle its 24% auto burden. The EU and Thailand lean toward talks but are preparing reprisals, hinting at a tense road to any grand US-China deal. ⁽⁵⁾
Market Shockwaves
Financial markets experienced major selloffs as Trump spoke on Wednesday and continued to fall throughout the next session. The S&P 500 fell 4.84% while the Dow dropped 1,600 points, fueled by fears of inflation and supply chain woes.
By Thursday, the Nasdaq 100 tanked almost 6%. Meanwhile, the German DAX sank about 3% to close at 21,700 on Thursday, its biggest daily decline since July 2024, mirroring sharp declines across European and global peers. Asian markets including Japan’s Nikkei dropped 7.36% since the start of the month.
Commodities took a hit too, with oil dropping to $65 per barrel, while gold jumped to $3,168 an ounce as investors sought safety. Volatility soared, with the VIX hitting levels unseen since late 2023.
The US dollar experienced heavy fluctuations. Analysts warn of a potential decline in the Dollar Index if tensions escalate, with recession odds now at 35%.
Sector-specific tariffs amplify the strain. The 24% tariffs shook Japan and South Korea, while US retailers brace for cost hikes.
Global Pushback and Economic Stakes
With the threat of “proportionate” retaliation that may target American companies in its market, China asked that the tariffs be lifted. South Korea supported its exporters, Japan considered daring actions against its auto tariffs, and Canada is preparing retaliatory measures.
Thailand planned short-term aid for its manufacturers, while the EU said that it is prepared to retaliate with levies on US exports if negotiations break down. Now, countries are searching for new markets in an expanding trade war. ⁽⁶⁾
The financial cost could be high. The export-driven economies of Asia are exposed to disproportionate risks, and predictions for global growth indicate that it may fall below 3.3%.
Prices could rise for consumers across the board, and businesses may see a drop in demand as uncertainty fosters protectionism. Ultimately, it’s the consumers who bear the brunt of these tariffs, feeling the pressure most through higher prices.
