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Trump Finally Announces Tariffs: Chaos Ensues

ElitePersonalFinance

Last Update: April 4, 2025 • Financial News •

On Wednesday, the Trump administration finally unveiled its tariffs, raising global chaos and reigniting fears of a US recession. These tariffs can result in further inflation and cut into economic growth. In addition, they almost promise to spark reciprocal tariffs from key trading partners, worrying economists and policymakers over the potential for slow economic growth and increased business costs.

Stock Implications of Tariffs

On Thursday, Wall Street dropped significantly in response to the Trump administration’s latest tariffs on U.S. imports, with the S&P 500 dropping more than 4%. Similar drops also appeared in the European and Asian markets, with the Nikkei dropping close to 3% and Hong Kong’s Hang Seng index dropping by roughly 1.5%. In total, the tariffs now stand to affect more than 100 countries.

In turn, safe havens have jumped (a common trend when stocks go down), with the price of gold hitting a record high of $3,167.57 an ounce and silver rising as well. The British pound has also risen roughly 5% against the dollar.

Most countries now see a 10% tariff for all imported goods, with higher rates for trading partners with greater deficits, such as the European Union, China, Japan, Vietnam, and South Korea.

Another area tariffs could affect is the potential interest rate and monetary policy. For example, climbing consumer prices may force the Federal Reserve to increase interest rates to keep inflation at a minimum, jumping APRs on credit lines by a few points. Historically, trade sanctions have caused mortgage rates to go above 4%.

Lastly, another notable concern is consumer confidence, which has hit 12-year lows. According to the Consumer Confidence Board, the consumer confidence index fell 7.2 points in March to 92.9, marking four straight months of decline. It is now at its lowest level since January 2021, marking signs of a potential recession in the short term.

“Consumers’ optimism about future income, which had held up quite strongly in the past few months, largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations,” said The Conference Board senior economist Stephanie Guichard.

How Were the Tariffs Calculated?

At first glance, tariffs are calculated based on existing tariffs. Formulas have been calculated by taking the United States trade deficit with a country divided by the total goods imports from that country, divided by two. As a result, trading partners like China (34% tariff) and Taiwan (with whom the U.S. purchases far more goods than vice versa) stand to see the highest tariffs.

Many have criticized the tariffs for not being reciprocal but based on trade deficits.

Varying Options of Tariffs

Millions of policymakers and economists have expressed concerns with hopes for a quick resolution, such as senior analyst Matteo Villa at Italy’s Institute for International Political Studies. “If Trump imposes high tariffs, Europe will have to respond, but the paradox is that the EU would be better off doing nothing,” said Villa.

“On the other hand, Trump seems to understand only the language of force, and this indicates the need for a strong and immediate response,” Villa continued. “Probably the hope, in Brussels, is that the response will be strong enough to induce Trump to negotiate and, soon, to backtrack.”

Others, like Vietnam Deputy Minister of Finance Nguyen Duc Chi, have already announced plans to review the tariffs as soon as possible. They question how the United States arrived at its calculations and call its tariff rate 9.4%.

“Vietnamese taxes are currently much lower than the 90% rate calculated by the US,” said Duc Chi in a recent interview. “We believe the rate announced by the U.S. government is a maximum estimate, and the specific rate will still be subject to review,” he said of the tariffs.

Tariff Effects on Tourism and Other Things

Naturally, many industries across the country have expressed concerns about the impact of the tariffs. States like Florida see tariffs as a significant threat, especially now with the combination of immigration initiatives and tight labor markets with overall cost pressures on the economy. Most notably, consumer buying power may decrease, as may the growth of emerging companies.

Real estate is also being impacted by an increased cost of construction materials such as glass, which is seeing rising numbers. Even furniture stands to take a substantial hit, with China as our leading trading partner.

What About Consumer Products and the Agricultural Sector?

As it stands, tariffs should have an immediate effect on consumer prices. For example, Apple has let consumers know that its products can now cost up to 15% more thanks to the increase in cost placed on all of its components, which are sourced overseas, like semiconductors and batteries. Likewise, big players like Walmart and Target anticipate higher costs for everyday items like refrigerators and T-shirts, with Asia as a primary source.

The agricultural sector also stands to be at risk. For example, American soybeans could be at risk with a 2018 initiative where China imposes duties, putting many farmers out of business. Plus, they can see other trading partners as China turns to Brazil shortly after. Other affected foods include pork and dairy products, many originating from Iowa and Wisconsin, so Iowa and Wisconsin farmers stand at risk. Even milk prices could be on the table for the Dairy Farmers of America, which are already priced nearly the lowest they’ve ever been.

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