Markets react to Trump’s upcoming “Liberation Day” with tariffs going into effect
In this DML Report…
President Donald Trump’s “Liberation Day” tariffs, set for April 2, aim to impose reciprocal duties on all U.S. trading partners, matching their tariffs on American goods, with a 25% levy on foreign-made cars and car parts already signed via executive order on March 26. The policy, intended to shrink the U.S.’s $1.2 trillion trade deficit from 2024, has sparked a sharp stock market reaction, with the S&P 500 dropping 5% year-to-date and entering correction territory—down 10% from its peak—amid a volatile March that saw back-to-back weekly losses. Trump insists the tariffs will boost domestic manufacturing, projecting a $2 trillion revenue boost for tax cuts, though he admits to NBC on March 30 that consumer prices may rise, potentially hitting car buyers hardest with an estimated $3,000 cost increase per vehicle.
Global markets are reeling as Trump’s trade war escalates, with Japan’s Nikkei falling 3.9% and South Korea’s Kospi shedding 2.9% on March 31, while U.S. banks like Goldman Sachs cut S&P 500 earnings growth forecasts from 7% to 3% for 2025, citing weaker economic growth and higher inflation—projected at 3.5% by year-end. Canada and Mexico face reinstated 25% tariffs on USMCA-covered goods like dairy and clothing after a brief pause, while a 25% secondary tariff on nations buying Venezuelan oil and gas kicks in April 2, targeting countries like India and China. Treasury Secretary Scott Bessent’s “Dirty 15” list—nations with high trade surpluses—will bear the brunt, though Trump hinted at flexibility, delaying duties on chips and lumber, per a March 23 statement.
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Economists warn of a looming U.S. recession, with Goldman Sachs raising the odds to 20% and JPMorgan to 40% within a year, driven by Trump’s tariffs threatening a global downturn as allies brace for retaliation—Canada and Mexico delayed counter-tariffs, and the EU postponed its April 1 response. The S&P 500’s tech giants, like Tesla (down 15% in a day) and Nvidia, dragged markets lower, erasing post-election gains, while Goldman predicts a 15% effective tariff rate hike after exemptions. Trump’s team, including Bessent and adviser Peter Navarro, defends the strategy as a manufacturing revival, but critics highlight immediate risks: higher costs, stalled growth, and a trade war set to reshape the economy.