Liberation Day has historically been known to mark a day of freedom from conflict. However, on April 2nd, President Trump gave ‘Liberation Day’ a new meaning, the day America enacted heavy tariffs.
President Trump has been planning to enact stiff tariffs on many countries, especially China, even while he was on the campaign trail. He says that these tariffs are reciprocal since many of the countries he’s imposed tariffs on have higher tariffs on America already. Placing his own tariffs is his way to get “money, and respect back” from those countries.
Tariffs are a tax that US importers must pay to the US government. Thus, importers are going to take on the extra cost, or the price of imported goods will increase to offset the tax.
A 10% baseline tariff on almost all imported goods was imposed, along with a 25% tariff on all imported automobiles, steel and aluminum. If we include the initial taxes from the beginning of the year, the imposed 125% tariff on all Chinese imports increased the total tariff on China to 145%. China then matched 125% with reciprocal tariffs on the United States. The Trade War continues between the US and China. On the additional reciprocal tariffs on 75 different countries, Trump has said he’s postponing those for 90 days due to the crashing stock market.
All of this has caused much controversy. While President Trump has kept his promise, America has faced economic hardships since he enacted the tariffs. The stock market has suffered as a result. President Trump is hopeful these tariffs will bring wealth back to America, claiming that these other countries have been ‘ripping us off for 50 years.’ President Trump is unpredictable, and the markets hate that. Investors and allies are losing trust.
The value of the US Dollar and bonds are declining. If foreign investors stop buying US bonds, it will hurt the American economy substantially. For example, China owns $750 billion worth of US bonds, and up until this point, it was a safe investment to make and both countries benefited. If China were to stop buying bonds, America loses all that money we’ve been utilizing. As America keeps burning bridges with other countries with these tariffs, it will take longer to regain everyone's trust.