Trump Tariffs Crater Stocks, Upend Geopolitics

These are not the tariffs you are looking for

Attack of the Tariffs

If the recent headlines about tense geopolitics and disputed trade seems familiar, it’s because George Lucas already covered it in the early 2000s.

President Trump’s much-feared “Liberation Day” - which some have dubbed Liquidation Day - has arrived, bringing significant changes to global trade. The U.S. has imposed a 10% universal tariff on almost all imports.

Sixty countries, accused of unfair trade practices, will now face what Washington calls ‘discounted reciprocal tariffs’. For China, this means a 34% reciprocal levy, while the EU will face 20%, Japan 24%, and India 26%.

As of April 3, 2025, the Trump administration has raised tariffs on Chinese imports to 54%. An increase that layers the additional 34% duty atop the existing 20% rate. These levies are not isolated maneuvers but rather additive measures compounding an already intricate web of trade restrictions.

Certain Chinese exports, previously hit with 25% Section 301 tariffs and a 20% fentanyl-related surcharge, will now face an effective 79% tariff burden under the new reciprocal framework.

For an economy like China’s, one structurally dependent on export-led growth, such punitive trade barriers threaten to erode competitiveness, constrict capital flows, and inflict damage on an already precarious global supply chain.

The reciprocal rates are based on observed trade deficits divided by two. For instance, the U.S. imports $600 billion from the EU while exporting only $236 billion to the bloc. This results in a 39% trade deficit, which is then halved to 20%.

Products already subjected to 232 tariffs (e.g. steel, aluminum, autos and parts, semiconductors, and pharmaceuticals) are exempt from the additional tariffs.

Additionally, products under the United States-Mexico-Canada (USMCA) agreement that were previously exempt from Trump’s 25% tariffs will also be spared from the reciprocal levies.

The World Reacts

The U.S. stock market has lost $2.5 trillion in market cap so far. As of 10:40 AM EDT, the Dow Jones was down 3.6%, the S&P fell 3.9%, and the Nasdaq Composite sank 4.8%.

Companies with global supply chains are hit especially hard, with Apple losing 10%, Nike 11%, and Tesla 4%. As the dollar weakens, gold is on the rise and currently sits at $3,135.50, already beating HSBC’ increased gold price forecast of $3,015.

National governments are scrambling to formulate responses to Trump’s move, weighing the economic benefits of avoiding a trade war versus retaliation in hopes of deterrence.

Beijing has threatened countermeasures, while the United Kingdom’s Starmer expressed a desire to strike a deal with its close ally in Washington. The EU has also threatened with retaliation but shared it wishes to negotiate first.