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Key Takeaways ➡️
1️⃣ President Trump announced a series of Reciprocal Tariffs with specific country rates based on the US trade imbalance with the given country – tariff rates were higher than anticipated2️⃣ Equity Markets are selling off dramatically around the globe, with U.S. markets being hit the hardest 📉
3️⃣ Growing economic concerns and risk of recession may push the Fed to cut rates sooner than previously expected, despite the inflationary pressure of tariffs.
Expansive reciprocal tariffs imposed by the U.S. on all of its trading partners on Wednesday are triggering concerns about what could be the third global recession in 20 years. On Wall Street, business leaders and analysts described having flashbacks to the onset of the COVID-19 pandemic and the ensuing flatlining of economies around the world. Meanwhile, experts say those nearing retirement age are concerned that their savings will be dealt a "devastating" blow by the brewing trade war and its fallouts.
President Donald Trump on Wednesday announced plans that would take the U.S. trade duties beyond their 1930s levels. Back then, the infamous anti-import Smoot-Hawley Tariff Act deepened a global economic slump and helped send the Dow Jones Industrial Average (DJI)
The plan to implement tariffs across almost every country, except Russia, caused a broad selloff today.
The uncertainty will freeze capital spending by business and lead to uncertain corporate guidance when earnings season begins next week.
Could this lead to a recession? It is certainly possible if this goes on for long enough. Those hoping for lower rates may get them, though, the hard way.
A sampling of what I've heard from economists today:
"You can throw most forecasts out the door," Fitch Ratings' Olu Sonola says.
"The Trump Administration’s tariff announcement was larger and more complex than we and most expected," says Nationwide's Kathy Bostjancic. She's now estimating that real GDP growth this year will be in a range of zero to 0.5%, down from a previous forecast of 1-1.5% growth. "Significant retaliation by our trading partners could tip GDP growth negative and result in a recession," she says.
Meanwhile, BMO's Sal Guatieri says Trump's announcement yesterday will raise the reciprocal tariff rate by about 23 points. "That’s more than double the rate we had assumed in our current forecast," he says.
Once these duties apply (on April 5 and April 9), the average weighted tariff rate is expected to be the highest in over a century, eclipsing that of the Smoot-Hawley Tariff Act of 1930.
The announcement is already ripping through the stock market. The S&P 500 is down about 4% today alone.
What we know so far:
-Trump instituted a universal baseline tariff of 10%. Meaning: All goods coming into the U.S. will be hit with something.
-Other countries — what the Trump administration refers to as "repeat offenders" who run trade deficits with the U.S. and levy our exports higher than we hit their imports — will see even higher tariff rates. The EU will see a 20% rate; Taiwan: 32%, Vietnam: 46%, and Japan: 24%.
-Treasury Secretary Scott Bessent clarified yesterday that China's 34% reciprocal tariff rate will be applied on top of an existing 20% duty, bringing its total tariff rate to 54%.
-For now, Canada and Mexico look to be exempt from higher reciprocal tariffs, meaning their baseline rates will stay at 25% (with some exemptions).
Officials look likely to keep these tariffs in place until other countries remove what Trump describes as "trade barriers." Trump administration officials have also implied that these tariff rates are the ceiling, provided that other countries don't retaliate.
All eyes are now on whether Trump will soon move forward with his "pro-growth" policies. In an interview with Bloomberg Television, Bessent said yesterday that Congress is on track to pass a bill that would extend the 2017 tax cuts by May or June.
But as someone who dips her toes in economics just as much as personal finance, I want to caution consumers and investors not to overreact. Moments like these are what the tried-and-true financial advice of staying the course with your investments, saving for a rainy day, and keeping a long-term perspective are made for.
President Donald Trump offered a rosy assessment after the stock market dropped sharply Thursday over his tariffs, saying, “I think it’s going very well.”
“The markets are going to boom, the stock is going to boom, the country is going to boom,” he said when asked about the market as he left the White House to fly to one of his Florida golf clubs.
The Dow Jones Industrial Average dropped more than 1,600 points on Thursday as U.S. stocks led a worldwide selloff after the Republican president’s announcement of tariffs against much of the world ignited a shock like none seen since the COVID-19 pandemic.
Trump on Wednesday announced a minimum tariff of 10% on imports, with the tax rate running much higher on products from certain countries like China and those from the European Union.
The announcement jolted markets worldwide, but Trump said that was to be expected. He compared the United States to a sick patient in need of surgery when asked by a reporter for his reaction to the worst stock market drop in years.
“I think it’s going very well. We have an operation, like when a patient gets operated on, and it’s a big thing. I said this would exactly be the way it is,” he said, an apparent reference to the selloff.
He talked about trillions of dollars in investment that is “coming into our country” from companies that want to make their products in the U.S. to avoid tariffs.
“The rest of the world wants to see if there's any way they can make a deal,” he said.
Later, speaking with the reporters on aboard Air Force One, Trump said that he’d be open to using tariffs to negotiate with other countries and that it would depend on whether they had something “phenomenal” to offer in return.
He maintains that other countries have been taking advantage of the U.S. for a long time, and he wants it to stop.
“For many years, we’ve been on the wrong side of the ball, and I’ll tell you what, I think it’s going to be unbelievable,” Trump said as he left the White House to attend a Saudi-backed golf tournament at his club in Doral, Florida.
President Donald Trump’s expansive new tariffs reverse a decades-long global trend of lower trade barriers and are likely, economists say, to raise prices for Americans by thousands of dollars each year while sharply slowing the U.S. economy.
The White House is gambling that other countries will also suffer enough pain that they will open up their economies to more American exports, leading to negotiations that would reduce the tariffs imposed Wednesday.
Or, the White House hopes, companies will reverse their moves toward global supply chains and bring more production to the United States to avoid higher import taxes.
But a key question for the Trump administration will be how Americans react to the tariffs. If prices rise noticeably and jobs are lost, voters could turn against the duties and make it harder to keep them in place for the time needed to encourage companies to return to the U.S.
The Yale Budget Lab estimates the Trump administration’s tariffs would cost the average household $3,800 in higher prices this year. That includes the 10% universal tariff plus much higher tariffs on about 60 countries announced Wednesday, as well as previous import taxes on steel, aluminum and cars. Inflation could top 4% this year, from 2.8% currently, while the economy may barely grow, according to estimates by Nationwide Financial.
Investors turned thumbs-down on the new duties Thursday, with the S&P 500 index dropping 4.8% at the close of trading, its worst day since the pandemic. The Dow Jones Industrial Average plunged more than 1,600 points.
Still, Trump was upbeat Thursday when asked about the stock market drop.
“I think it’s going very well,” he said. “We have an operation, like when a patient gets operated on, and it’s a big thing. I said this would exactly be the way it is.”
The average U.S. tariff could rise to nearly 25% when the tariffs are fully implemented April 9, economists estimate, higher than in more than a century, and higher than the 1930 Smoot-Hawley tariffs that are widely blamed for worsening the Great Depression.
“The president just announced the de facto separation of the U.S. economy from the global economy,” said Mary Lovely, senior fellow at the Peterson Institute for International Relations. “The stage is set for higher prices and slower growth over the long term.”
Commerce Secretary Howard Lutnick argued the policies will help open markets overseas for U.S. exports.
“I expect most countries to start to really examine their trade policy towards the United States of America, and stop picking on us,” he said on CNBC Thursday. ”This is the reordering of fair trade.”
Mixed feelings among Americans so far
Bob Lehmann, 73, who stopped by a Best Buy in Portland, Oregon, on Wednesday, opposed the tariffs. “They’re going to raise prices and cause people to pay more for daily living,” he said.
Mathew Hall, a 64-year-old paint contractor, called the tariffs a “great idea” and said potential price increases in the short term were worth it.
“I believe in the long term, it’s going to be good,” he said, adding that he felt the U.S. had been taken advantage of.
But a former trade official from Trump’s first term, speaking on condition of anonymity to talk candidly about the impact, suggested that Americans, including those who voted for Trump, may have difficulty accepting the stiff duties.
Americans “have never faced tariffs like this,” the former official said Thursday. “The downstream impact on clothing and shoe stores, it’s going to be pretty significant. So we’ll have to see how the Trump voters view this ... and how long their support for these policies goes.”
On Thursday, automaker Stellantis, which owns the Jeep, Citroen and Ram brands, said it would temporarily halt production at plants in Canada and Mexico in response to Trump’s 25% tax on imported cars. The reduced output means the company is temporarily laying off 900 workers at plants in Michigan and Indiana.
Some exporters overseas may cut their prices to offset some of the tariffs, and U.S. retailers could eat some of the cost as well. But most economists expect much of the tariffs to bring higher prices.
Clothing, shoes, and furniture could get more expensive
The tariffs will hit many Asian countries hard, with duties on Vietnamese imports rising to 46% and on Indonesian to 32%. Tariffs on some Chinese imports will be as high as 79%. Those three countries are the top sources of U.S. shoe imports, with Nike making about half its shoes last year and one-third of its clothes in Vietnam.
The Yale Budget Lab estimates all Trump’s tariffs this year will push clothing prices 17% higher.
On Thursday, the Home Furnishings Association, which represents more than 13,000 U.S. furniture stores, predicted the tariffs would increase prices between 10% and 46%. Vietnam and China are the top furniture exporters to the U.S.
It said manufacturers in Asia are offsetting some of the costs by discounting their products and lowering ocean freight rates, but that won’t be enough to avoid price hikes. Even domestically made furniture often relies on imported components.
“While many in the industry support the long-term goal of reshoring manufacturing, the reality is that it will take at least a decade to scale domestic production,” Home Furnishings Association CEO Shannon Williams said in a statement. “Permitting, training a skilled workforce, and managing the higher costs of U.S. manufacturing are significant hurdles.”
At Gethsemane Garden Center in Chicago, there are Canadian-grown tulip, daffodil, and hyacinth bulbs, though only about 5% the f center plants are imported. Thousands of lemon cypress trees from Canada are sold year-round and Canadian mums are sold in the fall.
Regas Chefas, whose family has owned Gethsemane for decades, says all the tariffs won’t be passed onto customers.
“We’re going to absorb some of the increase. The growers will absorb some of the increases and then the customers will pay a little bit higher price,” he said.
The Consumer Brands Association, which represents Coca-Cola, General Mills, Nestle, Tyson and Del Monte as well as Procter & Gamble and Colgate-Palmolive, said its companies already make the majority of their goods in the U.S.
But there are critical ingredients and inputs — like wood pulp for toilet paper — that are imported because of scarce domestic availability. Cinnamon is harvested from trees that can’t survive in the U.S.. Domestic production of coffee and cocoa is also limited.
“We encourage President Trump and his trade advisers to fine-tune their approach and exempt key ingredients and inputs to protect manufacturing jobs and prevent unnecessary inflation at the grocery store,” said Tom Madrecki, the association’s vice president of supply chain resiliency.
Outside a Tractor Supply south of Denver, two family members on opposite sides of the political spectrum debated the tariffs.
Chris Theisen, a 62-year-old Republican, said: “I feel a good change coming on, I feel it’s going to be hard, but you don’t go to the gym and walk away and say, ’God, I feel great.”
Nayen Shakya, a Democrat and Theisen’s great nephew, said higher prices are already a hardship. At the restaurant where he works, menu prices have been raised to account for higher ingredient costs.
“It’s really easy sometimes to say some things in a vague way that everyone can agree with that is definitely more complex under the surface,” said Shakya. “The burden of the increased prices is already going to the consumer.”
Listening to his nephew, Theisen added: “I understand this side of it, too.”
“I ain’t got no crystal ball. I hope it works out good.”
Big Four accounting firm Deloitte is set to slash jobs in its consulting division as cutbacks to federal spending put its U.S. government contracts under the microscope, according to The Wall Street Journal. Deloitte declined to reveal how many consultants would be laid off, calling the cuts "modest." Deloitte's U.S. management consultancy business grew by less than 1% last year, following two straight years of double-digit growth.
Intel has reached a preliminary agreement with Taiwan Semiconductor Manufacturing Company to partner on a joint venture for chipmaking, according to The Information, citing anonymous sources. Per the report, TSMC would take a 20% stake in the new venture, which comes shortly after the company pledged to invest $100 billion in U.S. semiconductor manufacturing. Intel, which has been busy plotting a turnaround after a tumultuous year, saw its shares tick upward on the news.