Breaking News: After the stock market tanked, Trump seemed unfazed by the news. Asked about tumbling stocks on Thursday as he boarded Air Force One to play golf in Miami — as the Dow Jones was down 1,400 points — Trump said: ‘I think it is going very well.’
Trump announced a comprehensive set of tariffs, which he referred to as “Liberation Day” tariffs, aiming to reshape U.S. trade relationships and bolster domestic manufacturing. These tariffs include a universal 10% levy on all imports, with significantly higher rates for specific countries: 34% on China, 20% on the European Union, 24% on Japan, and 46% on Vietnam.
The immediate aftermath of the announcement saw global financial markets react negatively. The S&P 500 and Nasdaq experienced sharp declines, erasing trillions in market capitalization. The FTSE 100 in the UK recorded its most significant one-day drop since August, underscoring the widespread investor concern.
Economists have expressed alarm over the potential economic ramifications of these tariffs. Michael Feroli of JPMorgan Chase warned that the tariffs could introduce nearly $400 billion in additional taxes, elevating inflation and increasing the risk of a U.S. recession by reducing consumer spending. George Saravelos of Deutsche Bank criticized the tariffs’ methodology, suggesting they lack comprehensive economic logic and could undermine policy credibility.
International reactions have been swift and pointed. The European Union and China have both threatened retaliatory measures, with EU chief Ursula von der Leyen stating that the tariffs are damaging and inflationary. China has called for an immediate reversal of the policy, warning of the detrimental impacts of escalating trade wars.
Specific industries are bracing for significant impacts. The fashion sector, heavily reliant on Asian supply chains, anticipates increased costs and operational disruptions due to the high tariffs on countries like China and Vietnam. Companies are now reevaluating sourcing strategies and facing margin pressures, particularly in footwear, where compounded tariffs can raise costs by over 15%.
In light of these developments, Goldman Sachs has adjusted its economic forecasts, increasing the probability of a U.S. recession to 35%. The firm also projects a rise in core inflation to 3.5% by the end of the year and a slowdown in GDP growth to 1%.
The US has escalated tariffs into a full-fledged trade war and we’re all bracing for the consequences.