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It doesn’t quite feel appropriate to say “Happy Liberation Day” when you consider the tariff-induced pain currently being shouldered by Main Street and Wall Street. But it’s here nonetheless, with the White House expected to announce the full extent of President Donald Trump’s latest tariff rollout later today from the Rose Garden.
Wonder if the president has already imported enough limestone for the concrete he plans to pave the Rose Garden with.
The latest murmurs are of a blanket 20 percent tariff on all imports. An analysis from the Yale Budget Lab finds that such a plan could bump consumer prices up further by 2.6 percent if countries retaliate. With inflation currently sitting at 2.8 percent, hovering at five percent will put it well beyond the Fed’s two percent target rate. The cost of food could go much higher – 3.7 percent – while goods such as apparel and electronics may see price hikes in the double-digits.
Don’t forget, there’s also the 25 percent automotive tariff kicking in tomorrow – and that’s for certain. Well, maybe. Don’t want to jinx anything here. But back to “Liberation Day”: Whatever number the White House lands on, the duties will go into effect immediately, according to White House press secretary Karoline Leavitt.
Trump has long touted his so-called “Liberation Day” as one that will level the U.S. economy with the rest of the world’s. “The president will be addressing the decades of unfair trade practices that have ripped our country off and American workers off,” Leavitt told reporters on Tuesday. (U.S. GDP expanded at an annual average of 3.16 percent from 1948 until 2024; entering this year, GDP stood at $29.7 trillion.)
But the main rips sustained thus far have largely been to stock market investors, who have just suffered their worst month in years. Post-election gains were eliminated by early March as the Dow, the Nasdaq, and the S&P all dropped, teetering closer to bear market territory. And the so-called Magnificent Seven are already there.
When peppered on 401(k) performances by a line of questioning from Fox’s Peter Doocy, Leavitt repeatedly pointed to Trump’s first term, which, yes, saw markets react quite well, and was generally a litmus test the president pointed to for his success. Not this time around.
Then there are average American small-business owners, who have either absorbed cost increases from their supply chains, stockpiled goods in advance, or scrambled to find new suppliers.
You have the self-proclaimed Tariff Man to thank for that. Fun fact: Trump took that page straight from the book of William McKinley, the 25th U.S. president, who coined that nickname. But a quick look at history shows that McKinley’s sweeping tariffs – which increased duties on imports to nearly 50 percent from 38 percent – saddled Americans with inflation as countries retaliated with tariffs of their own, and the costs of goods increased.
The stock market today says we will repeat that history; the president says he can beat it. Many countries aren’t waiting to find out what, exactly, “Liberation Day” entails: They are readying their own responses. As Politico reports, watch how the European Union responds, especially if it levels its aim against Silicon Valley and Wall Street.
“America’s tech giants, financial industry, and pharma companies have deep roots in Europe,” said Tobias Gehrke, a senior policy fellow at the European Council on Foreign Relations. “Push too far, and Brussels could tighten the screws: digital levies on Silicon Valley, regulatory clamps on Wall Street, or taxes on U.S. pharma exports.”
DOGE’s days appear to be numbered.
Elon Musk recently suggested that he will be done with his work shortly. President Donald Trump told reporters this week that “at some point, he’s going to be going back” to running his companies. As far as the Department of Government Efficiency, Trump said, “It will end.”
All of that talk was before Musk faced a setback Tuesday in Wisconsin, where voters rejected his choice for a state Supreme Court candidate despite more than $21 million in personal donations and his campaign appearance over the weekend. There are more problems for the billionaire entrepreneur at Tesla, his electric automaker, which saw a 13% drop in sales in the first three months of the year.
The White House has not disclosed any clear timeline for closing down DOGE, and the government cost-cutting organization was never supposed to become a permanent fixture in Washington. But it could be reaching a conclusion faster than anticipated. DOGE was originally intended to operate until July 4, 2026.
Now there are signs that it already is winding down. DOGE employees have been shifted to various federal agencies, which are supposed to take the lead on cutting costs. Government-wide layoffs are underway to accomplish some of the goals laid out by Musk and Trump.
“We think probably over the next two or three months, we’ll be pretty much satisfied with the people that are working hard and want to be members of the administration,” Trump said last week.
The potential end of DOGE does not mean Trump will stop shaking up Washington. But it appears the administration’s efforts will be entering a new phase that is less focused on Musk, whose chain saw-wielding work as a presidential adviser made him a political lightning rod.
DOGE was initially envisioned as an independent advisory panel, with Musk sharing leadership with Vivek Ramaswamy, a biotech entrepreneur. Ramaswamy dropped out and is running for Ohio governor, and DOGE became part of the government. It was stocked with Musk’s allies, who were dispatched throughout the bureaucracy to cancel contracts, access sensitive data, and push for cuts.
Musk presumably has a ticking clock on his tenure. He was hired as a special government employee, which means he can only work 130 days in 365 days.
“I think we will have accomplished most of the work required to reduce the deficit by a trillion dollars within that time frame,” Musk told Bret Baier of Fox News on March 27. So far, DOGE is well short of that target, according to its own calculations, which have been criticized as inflated and inaccurate.
Musk did not commit to leaving the administration by any particular date, and it is unclear how the administration is tracking Musk’s time. On May 30, it will be 130 days since Trump’s inauguration on Jan. 20.
Trump told reporters on Monday in the Oval Office that “I’d keep him as long as I could keep him” and “he’s a very talented guy.”
The Republican president was known for explosive breakups with top advisers during his first term, but anyone hoping for such a split with Musk has been disappointed.
“I think he’s amazing, but I also think he’s got a big company to run,” Trump said. “And so, at some point, he’s going to be going back.”
Asked if DOGE would continue without Musk, Trump demurred. He said Cabinet officials have worked closely with Musk and may keep some of the DOGE people at their agencies.
“But at a certain point I think it will end,” Trump said.
Musk’s poll numbers lag behind Trump’s, which Democrats believe they were able to use to their advantage in Wisconsin.
Susan Crawford defeated Brad Schimel, who Musk supported, and ensured the state Supreme Court’s liberal majority.
In the closing days of that campaign, Musk described the race as “important for the future of civilization.” He struck a different tone afterward.
“I expected to lose, but there is value to losing a piece for a positional gain,” Musk wrote on X at 3:13 a.m.
WORLDWIDE TARIFFS
After weeks of anticipation and speculation, President Donald Trump followed through on his tariff threats by declaring on Wednesday a 10% baseline tax on imports from all countries and higher tariff rates on dozens of nations that run trade surpluses with the United States.
In announcing what he has called reciprocal tariffs, Trump was fulfilling a key campaign promise by raising U.S. taxes on foreign goods to narrow the gap with the tariffs the White House says other countries unfairly impose on U.S. products.
Trump’s higher rates would hit foreign entities that sell more goods to the United States than they buy. But economists don’t share Trump’s enthusiasm for tariffs since they’re a tax on importers that usually get passed on to consumers. It’s possible, however, that the reciprocal tariffs could bring other countries to the table and get them to lower their own import taxes.
The Associated Press asked for your questions about reciprocal tariffs. Here are a few of them, along with our answers:
Do US-collected tariffs go into the General Revenue Fund? Can Trump withdraw money from that fund without oversight?
Tariffs are taxes on imports, collected when foreign goods cross the U.S. border by the Customs and Border Protection agency. The money — about $80 billion last year — goes to the U.S. Treasury to help pay the federal government’s expenses. Congress has authority to say how the money will be spent.
Trump — largely supported by Republican lawmakers who control the U.S. Senate and House of Representatives — wants to use increased tariff revenue to finance tax cuts that analysts say would disproportionately benefit the wealthy. Specifically, they want to extend tax cuts passed in Trump’s first term and largely set to expire at the end of 2025. The Tax Foundation, a nonpartisan think tank in Washington, has found that extending Trump’s tax cuts would reduce federal revenue by $4.5 trillion from 2025 to 2034.
Trump wants higher tariffs to help offset the lower tax collections. Another think tank, the Tax Policy Center, has said that extending the 2017 tax cuts would deliver continued tax relief to Americans at all income levels, “but higher-income households would receive a larger benefit.’’
How soon will prices rise as a result of the tariff policy?
It depends on how businesses both in the United States and overseas respond, but consumers could see overall prices rising within a month or two of tariffs being imposed. For some products, such as produce from Mexico, prices could rise much more quickly after the tariffs take effect.
Some U.S. retailers and other importers may eat part of the cost of the tariff, and overseas exporters may reduce their prices to offset the extra duties. But for many businesses, the tariffs Trump announced Wednesday — such as 20% on imports from Europe — will be too large to swallow on their own.
Companies may also use the tariffs as an excuse to raise prices. When Trump slapped duties on washing machines in 2018, studies later showed that retailers raised prices on both washers and dryers, even though there were no new duties on dryers.
A key question in the coming months is whether something similar will happen again. Economists worry that consumers, having just lived through the biggest inflationary spike in four decades, are more accustomed to rising prices than they were before the pandemic.
Yet there are also signs that Americans, put off by the rise in the cost of living, are less willing to accept price increases and will simply cut back on their purchases. That could discourage businesses from raising prices by much.
What is the limit of the executive branch’s power to implement tariffs? Does Congress not play any role?
The U.S. Constitution grants the power to set tariffs to Congress. But over the years, Congress has delegated those powers to the president through several different laws. Those laws specify the circumstances under which the White House can impose tariffs, which are typically limited to cases where imports threaten national security or are severely harming a specific industry.
In the past, presidents generally imposed tariffs only after carrying out public hearings to determine if certain imports met those criteria. Trump followed those steps when imposing tariffs in his first term.
In his second term, however, Trump has sought to use emergency powers set out in a 1977 law to impose tariffs in a more ad hoc fashion. Trump has said, for example, that fentanyl flowing in from Canada and Mexico constitutes a national emergency and has used that pretext to impose 25% duties on goods from both countries.
Congress can seek to cancel an emergency that a president declares, and Sen. Tim Kaine, a Democrat from Virginia, has proposed to do just that regarding Canada. That legislation could pass the Senate but would likely die in the House. Other bills in Congress that would also limit the president’s authority to set tariffs face tough odds for passage as well.
What tariffs are other countries charging on US goods?
U.S. tariffs are generally lower than those charged by other countries. The average U.S. tariff, weighted to reflect goods that are actually traded, is just 2.2% for the United States, versus the European Union’s 2.7%, China’s 3%, and India’s 12%, according to the World Trade Organization.
Other countries also tend to do more than the United States to protect their farmers with high tariffs. The U.S. trade-weighted tariff on farm goods, for example, is 4%, compared to the EU’s 8.4%, Japan’s 12.6%, China’s 13.1%, and India’s 65%. (The WTO numbers don’t count Trump’s recent flurry of import taxes or tariffs between countries that have entered into their own free trade agreements, such as the U.S.-Mexico-Canada Agreement that allows many goods to cross North American borders duty-free.)
Yet the Trump administration has used its own calculations to come up with far greater tariffs that it says other economies impose on the U.S. For example, the White House said Wednesday that the European Union’s effective tariffs on the U.S. equal 39%, far higher than the WTO’s numbers. It says China’s equal 67%.
Previous U.S. administrations agreed to the tariffs that Trump now calls unjust. They were the result of a long negotiation between 1986 to 1994 — the so-called Uruguay Round — that ended in a trade pact signed by 123 countries and has formed the basis of the global trading system for nearly four decades.
Tesla sales fell 13% in the first three months of the year, another sign that Elon Musk’s once high-flying car company is struggling to attract buyers.
The leading electric vehicle maker has faced a growing backlash from Musk’s embrace of right-wing politics and his role in the Trump administration. Opponents have staged protests at Tesla showrooms in the U.S. and in Europe, where the sales declines have been steeper.
Tesla’s line-up is aging, and some consumers may have held off from buying its bestselling Model Y while waiting for an updated version. The Austin, Texas, company also faces fierce competition from other EV makers offering vastly improved models, including those of China’s BYD.
Tesla reported deliveries of 336,681 globally in the January to March quarter. The figure was down from sales of 387,000 in the same period a year ago. The decline came despite deep discounts, zero financing and other incentives, and could be a warning that the company’s first-quarter earnings report later this month could disappoint investors.
Dan Ives of Wedbush said Wall Street financial analysts knew the first quarter was likely bad, but it turned out even worse than expected. He called the sales results a “disaster on every metric.”
“The brand crisis issues are clearly hurting Tesla...there is no debate,” he said.
Musk has been President Donald Trump’s point man in his effort to cut government spending. As criticism of Musk mounted and Tesla’s sales and stock price slumped, Trump last month held an extraordinary press conference outside the White House in which he praised Tesla, blasted boycotts against the company, and bought a Tesla himself while TV cameras rolled.
Tesla investors have complained Musk’s work at the Department of Government Efficiency has diverted his focus from running Tesla. On Tuesday, New York City’s comptroller overseeing pension funds holding Tesla stock called for a lawsuit accusing a distracted Musk of “driving Tesla off a financial cliff.”
After falling as much as 6% in early Wednesday, Tesla stock shot up more than 5% on indications that Musk may soon return his attention to Tesla. Politico, citing anonymous sources, reported Trump has told Cabinet members that Musk will step back from his role at DOGE in the coming weeks.
Tesla’s stock has plunged by roughly half since hitting a mid-December record as expectations of a lighter regulatory touch and big profits with Donald Trump as president were replaced by fear that the boycott of Musk’s cars and other problems could hit the company hard. Analysts are still not sure exactly how much the fall in sales is due to the protests or other factors.
Still, even bullish financial analysts who earlier downplayed the backlash to Musk’s polarizing political stances are saying it is hurting the company, something that Musk also recently acknowledged.
“This is a very expensive job,” Musk said at a Wisconsin rally on Sunday, referring to his DOGE role. “My Tesla stock and the stock of everyone who holds Tesla has gone roughly in half.”
Tesla cars have been smashed and set on fire in recent weeks, and protests have been staged at hundreds of Tesla dealerships. Owners have put bumper stickers on their cars saying, “I bought this before Elon went crazy.”
Europeans have also balked at buying Tesla, especially Germans upset after Musk publicly supported a far-right party in national elections and gave what many say was a Nazi-like salute at a Trump inauguration rally in January.
Tesla is expected to report earnings of 48 cents per share for the first quarter later this month, up 7% from a year earlier, according to a survey of financial analysts by research firm FactSet.
Nearly all of Tesla’s sales in the quarter came from the smaller and less-expensive Models 3 and Y, with the company selling less than 13,000 more expensive models, which include X and S as well as the Cybertruck.