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‘Liberation Day” and Trump Tariff News

ElitePersonalFinance
Last Update: April 2, 2025 • Financial News •

Today marks the Trump administration’s “Liberation Day,” when reciprocal tariffs are anticipated to go into effect. This is arguably the administration’s most aggressive move yet as they move towards evening the playing field on all of their imports.

For example, the Trump Administration has proposed 25% tariffs on imported automobiles and auto parts, except parts covered under the United States-Mexico-Canada Agreement (USMCA). Everyday goods, such as clothing and groceries, are also expected to be impacted. This is especially concerning since roughly 50% of imports are used by domestic manufacturers, with the potential to increase production costs significantly.

According to Federal Trade data from last year, there is a promise to apply to nearly $3.5T dollars of imported goods. This number is far greater than Trump’s effect during his first term.

Economic Impact of Tariffs

According to a recent Moody simulation, increased tariffs could cut as many as 5.5 million jobs and increase the unemployment rate to 7%. In addition, US GDP can drop by as much as 1.7%, creating a recession-like atmosphere with raised odds of inflation. Many banks have formed their own opinions. Goldman Sachs now sees a 35% chance of a US recession within the next 12 months, marking a high from its previous anticipated 20%. As a result, many economists have expressed concern.

“We’ve never seen anything like this. It’s unprecedented and radical,” said Erica York, vice president of federal tax policy at the Tax Federation.

“If that happens, we get a serious recession. It’s a wipeout for the economy,” said Moody’s Analytics chief economist Mark Zandi in an interview with CNN.

Deutsche Bank analysts have also covered the potential impacts of tariffs, including the likelihood of a trade war, which can dampen consumer spending and increase inflation. At the same time, they predicted a 500,000-unit drop in US auto sales, forecasting it at 15.4 million units with vehicle costs rising to $9,000 per unit.

Even domestic automakers like Tesla, Ford, and General Motors can increase vehicle prices as they rely on imports to strengthen their supply chains. However, with ongoing discussions with the Department of Commerce and the US Trade Representative Office, they’ve made a concerted effort to prevent low-cost car parts from being included in Trump’s 25% tariffs.

New tariffs on Canadian imports are also imminent (barring any successful negotiations), and many Senate Democrats are trying to prevent them by introducing resolutions designed to overturn emergency declarations.

It also raises countless small to large companies’ concerns about how it will impact payrolls. However, others, like Gulf Coast shrimpers, have supported Trump’s tariffs, calling for change after seeing a flood of cheap imports in recent years. They argue that it will increase the price of foreign shrimp, comprising roughly 90% of shrimp consumed in the United States, making it better for their business.

Support for Tariffs

Naturally, the Trump Administration is looking to advocate for American workers, calling the tariff plan fair based on decades of past confrontations with other countries.

“The president will be announcing a tariff plan that will roll back the unfair trade practices that have been ripping off our country for decades. He’s doing this in the best interest of the American worker,” said White House press secretary Karoline Leavitt in a briefing with reporters this week.

Trump claims tariffs are especially useful due to Canada’s lack of action in curbing the flow of fentanyl into the United States. Despite many critics saying that only a tiny amount of fentanyl is passed on from the Northern border every year, they’re using that as the basis for not applying tariffs at all, citing higher costs on essential goods like building materials used for auto manufacturing.

Resistance from Republican Lawmakers

Some Republican lawmakers have not been on board with Trump’s tariffs, citing the hurt to companies that depend on Canadian exports like agriculture or manufacturing.

“I am concerned that these tariffs could hurt industries that rely on imports, like agriculture and manufacturing, which are vital to our economy,” said Senator Susan Collins in a March 2025 note. “While I understand the need for a fair trade system, we must also consider the unintended consequences on American businesses and consumers.”

They’ve also expressed concerns about making global markets more unstable. However, most Republicans agree, offering the opinion that tariffs will even level the playing field and make it easier to negotiate with other countries in meetings with them.

How Has Consumer Spending Been?

According to the Commerce Department, inflation-adjusted consumer spending increased just 1% in February, while consumer sentiment decreased by 12%. As a result, Americans have been increasingly jittery and cutting back on spending while propping up savings accounts. However, wages continued to outpace inflation with relatively strong overall income growth due to a healthy labor market.

The Conference Board’s Consumer Confidence Index dropped to 92.9 last month, marking the lowest since 2021. The consumer short-term outlook (Expectations Index) fell to its lowest point in 12 years, further supporting consumers’ increasing concerns about macroeconomic conditions and the likelihood of recession.

What About the Stock Market?

The incoming tariff news has rocked financial markets over the past few sessions. For example, the Dow Jones Industrial Average saw its worst single-day decline since 2020, and the S&P 500 dropped close to 3% on the tariff announcement.

As a result, many Americans have turned to safe havens like gold and US Treasury bonds to store away money until the next upcycle. Hedge funds and institutional investors also watch corporate earnings reports closely to see how businesses navigate these tariffs. In short, we expect volatility to continue throughout the coming months, with the inevitability for trade retaliation from key US trading partners, especially China, which has already signaled plans to target our agricultural products.

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