In the classic 1924 Giacomo Puccini opera Turandot, the famous “Nessun Dorma” aria concludes, “At dawn, I will win! I will win! I will win!” It was not at dawn, but President Donald Trump did declare victory against the globalist machine when he unveiled the contours of his sweeping tariffs. At an April 2 White House Rose Garden event, the president released details of his long-awaited pursuit of reciprocity. Whether the announcement was tarrifying or tarrific is in the eye of the beholder.
New Tariffs Are in Town
President Trump will impose a universal baseline tariff of 10% on all imports, effective April 5 at 12:01 a.m. Higher but discounted reciprocal tariff rates will be implemented on countries making the “worst offenders” list; those will go into effect on April 9 at 12:01 a.m. Soon after his speech, Trump signed an executive order to begin the process of enacting tariffs. “Reciprocal. That means they do it to us, and we do it to them. Very simple. Can’t get any simpler than that,” he said.
The trade measures go beyond just tariffs. Trump and senior administration officials emphasized that non-monetary trade barriers – currency manipulation, government subsidies, import restrictions, domestic tax policy, and other pillars restricting US goods – played a significant role in assigning rates to countries worldwide.
China uses third-party countries like Cambodia and Vietnam to avert tariffs. Brazil mandates licenses to import American agricultural products. Israel, according to White House officials, steals intellectual property for pharmaceutical manufacturing. Indonesia maintains local content requirements. India has burdensome and duplicative certification requirements for various sectors. The administration says this harms US businesses and workers trying to export American-made products.
The Trump team estimates that these barriers cost the US industry tens of billions of dollars annually. “Monetary tariffs and non-monetary tariffs are two distinct types of trade barriers that governments use to regulate imports and exports,” the White House said in a fact sheet. “President Trump is countering both through reciprocal tariffs to protect American workers and industries from these unfair practices.”
So, while the rest of the world will endure an across-the-board levy, major US trading partners will be hit with two-, three-, or four-times higher rates. The most notable ones were Cambodia (49%), Vietnam (46%), China (34%), India (26%), Japan (24%), and the European Union (20%). Of course, several small countries were dinged on the head with enormous reciprocal tariffs, including Lesotho (50%), Madagascar (47%), the Falkland Islands (41%), and Liechtenstein (37%).
Trump did follow through on previous comments that he would be “flexible” and “lenient” when designing this comprehensive tariff strategy. “We will charge them approximately half of what they are and have been charging us,” said the president at the press conference. “So, the tariffs will not be a full reciprocal.”
His latest round of tariffs was made possible by declaring a national emergency through the International Emergency Economic Powers Act (IEEPA). This 1977 law authorizes the chief executive to enact trade restrictions on foreign countries, primarily through tariffs. Trump invoked this act in February when he slapped import duties on Canada, Mexico, and China based on drug and illegal immigration issues. The US Senate voted to scrap the IEEPA hours after the president’s speech, though it was essentially a symbolic vote since the legislation will not make its way to the House or the commander-in-chief’s desk.
Canada and Mexico were spared from the Liberation Day announcement. However, the country’s North American neighbors will still be punished under the previous 25% tariff regime due to illicit drug and illegal immigration flows. In addition, previous Section 232 measures, such as tariffs on foreign automobiles, car parts, steel, and aluminum, will not be subjected to these latest actions.
While the White House stopped short of providing revenue projections, one official was bullish on his expectations. In a recent Fox News interview, Peter Navarro, the president’s senior counselor for trade and manufacturing, predicted the US government would collect $6 trillion in tariff revenue over the next ten years. This assumes that current global trade flows remain the same.
Wall Street Panics
US stocks finished the April 2 trading session in positive territory. However, the leading benchmark averages started tanking minutes into Trump’s press conference. Following his announcement, the tech-driven Nasdaq Composite Index crashed as much as 4.5%. The blue-chip Dow Jones Industrial Average tanked 1,100 points, and the broader S&P 500 erased 3%.
Government bond yields plummeted, with the benchmark ten-year falling toward the 4% mark. The US Dollar Index (DXY) cratered 0.7%. US crude oil prices fell below $70. Bitcoin dropped about 2%. Gold was the only asset that extended its gains, as the precious metal inched toward $3,200 per ounce. However, in the metals market, silver and copper puked.
Investors were hoping for two things ahead of the blueprint’s unveiling: a better-than-expected plan and clarity. One analyst suggested that traders received neither. “What was delivered was as haphazard as anything this administration has done to date, and the level of complication on top of the ultimate level of new tariffs is worse than had been feared and not yet priced into the market,” said Art Hogan, the chief market strategist at B. Riley Wealth Management, to CNBC.
Treasury Secretary Scott Bessent shrugged off the after-hours trading results, uttering a terrific line that will grace the pages of business publications for weeks to come. “The Nasdaq peaked on DeepSeek day, so that’s a Mag 7 problem, not a MAGA problem,” he said. Nice.
The Reaction
Bessent delivered a message to the world: Don’t. In an interview with CNN, the seasoned hedge fund billionaire urged countries not to retaliate with countermeasures. “Let’s see where this goes because if you retaliate, that’s how we get escalation,” he said. “Doing anything rash would be unwise.”
It might be too early for nations to issue responses. Mexican President Claudia Sheinbaum Pardo confirmed earlier in the day that she would not reply with tit-for-tat retaliation. The Vietnamese government pre-emptively slashed tariffs across a diverse array of US goods. India said it is considering lowering tariffs on half of US products entering the South Asian country. Israel vowed to abolish remaining levies on US imports.
Conversely, China threatened resolute countermeasures. In a statement published by the Ministry of Commerce, officials said the government “expressed strong dissatisfaction and clear opposition” and that “China urges the U.S. to properly resolve differences with trading partners through equal dialogue.”
The White House later clarified to reporters that the 34% tariff rate on China is on top of the existing 20% import duties. So, if you do your calculations and carry the one, Beijing will be slammed with a true tariff rate of 54%.
Upending Global Trade
Canadian Prime Minister Mark Carney, who vowed countermeasures, conveyed to reporters that Trump’s reciprocal tariffs will “fundamentally change the global trading system.” This is what the 47th president of the United States is banking on.
Liberation Day was about more than tariffs. The much-anticipated date on the calendar was the US “declaring economic independence,” marking a turning point for decades-long globalization. Perhaps historians will examine the time as the start of transforming global trade and rekindling the flame of free trade.
“For decades, our country has been looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike,” Trump said. “Foreign cheaters have ransacked our factories, and foreign scavengers have torn apart our once beautiful American dream. We had an American Dream that you don’t hear so much about.”
A key part of his remarks was about how the public will hear grievances from globalists, outsourcers, special interests, and the fake news over the coming days. He urged the American people to ignore their thoughts. Why? “They were wrong about NAFTA [North American Free Trade Agreement],” he said. “[T]hey were wrong about China. They were wrong about the Trans-Pacific Partnership, which would have been a disaster if I didn’t terminate it.” Economists will debate the veracity of these comments, but the Trump administration will point to towns destroyed by shuttered factories, plants, and mills.
Trumponomics
Trump has championed the same pro-tariff message since an appearance on Oprah Winfrey’s program nearly four decades ago, espousing that what has been going on is not free trade. Well, years later, the real estate billionaire mogul can declare victory against the elite. But will he usher in an oft-spouted “new golden age” that will create prosperity for all? It took many years for the United States to reach this point, so it could take as many years to eradicate the odor of globalization.
