Tariff Turmoil: “Liberation Day” Takes Effect, Stocks React
On Thursday, Donald Trump unveiled his “Liberation Day” tariffs on essentially all imported goods. Major trade partners like China, the EU, and Canada were hit with 34%, 20% and 25%, respectively. American markets fell by close to 10% on Thursday and Friday. On Sunday night, Asian markets saw their largest one-day decreases since 1997. Donald Trump, on Sunday night, took to social media to call the plan “a very beautiful thing.” What exactly is going on?
Let’s start with the basics. A tariff is a tax placed on imported goods, generally paid by the buyer of those goods to the country of import. President Trump has long been a proponent of placing tariffs on foreign nations, claiming as far back as 1988 that other countries were unfairly taking advantage of the American economy. During his 2024 campaign, tariffs were a cornerstone of the Trump platform, an appeal to workers in the manufacturing industry.
Industrial America has seen manufacturing jobs continue to decline in recent years, and many workers hope that these tariffs will provide enough incentive to convince countries to start producing their goods in the United States instead of overseas. The United States faces an inherent disadvantage to foreign competitors like Vietnam and China, which have less stringent labor and wage protections and can produce many goods at a lower cost.
Many economists, however, see this plan as disastrous for the United States economy, with Penn Wharton’s Jeremy Siegel calling the move “the biggest policy mistake in 95 years.” Many economists have taken issue with the formula the Trump administration used to dictate country-specific tariffs, arguing that it is drastically oversimplified.
Other conservatives have urged for calm and hinted that the plan might be one big negotiation bluff. The President’s son, Eric Trump, tweeted, “I wouldn't want to be the last country that tries to negotiate a trade deal with @realDonaldTrump.” This comes as reports from the White House have urged aides to avoid framing the move as a negotiation tactic at all costs.
It remains to be seen how this unprecedented situation will play out. Markets on Monday continued to feel the pain from retaliatory tariff measures, while some of those affected, like the EU, have called for negotiations. Only time will tell if Trump’s gamble is a success, returning wealth and jobs to America, or “the biggest policy mistake” in decades.
