On April 2, the Trump administration formally announced reciprocal tariffs that will take effect on Saturday, April 5, 2025, with higher duties taking effect next Wednesday, April 9, 2025. These tariffs are larger and more far-reaching than most expected, reigniting growth and inflation concerns across capital markets.
The announcement imposed a minimum 10% tariff on all exporters to the U.S., with additional duties assessed on around 60 nations with the largest trade imbalances with the U.S. This announcement has upended global trade norms, and the uncertainty it causes will ripple through upcoming economic data and first-quarter earnings season commentary, likely keeping equity market volatility high.
What Does This All Mean?
Already, we are seeing significant reactions to the announcement, with a notable pullback for the U.S. dollar and U.S. equity markets seeing their largest one-day declines since March 2020.
Nations already facing tariffs like Canada and Mexico will not be subject to the new tariff regime, and exemptions covered by the existing United States-Mexico-Canada Agreement (USMCA trade agreement) will remain in place. Steel, aluminum, and automobiles—already subject to tariffs via Section 232 of the Trade Expansion Act—will not be subject to reciprocal tariffs. Copper, pharmaceuticals, semiconductors, and lumber products (which are expected to be included as part of Section 232) are also exempt from reciprocal tariffs.
If all the tariffs are enacted at these rates, the total effective tariff rate increases from the existing rate of 6.6% to 23%, according to Bloomberg.
Closing Thoughts
We are aligned with the growing consensus that volatility is likely to remain high, and the U.S. stock market’s recent slide could deepen as uncertainty prevails. The final impact of the tariffs will depend on whether other countries enact their own reciprocal tariffs (we could see a retaliatory tariff race to the top) and how much U.S. companies pass on additional costs to their customers.
We believe that investors in high-quality, globally diversified portfolios should stay the course despite the potential for further price deterioration. Timing the market is nearly impossible, and the market often swings wildly when uncertainty is this high. Missing just a few large “up days” can have a meaningful impact on long-term performance.
As more news becomes available, the market will likely react quickly and decisively. At this point, it is unclear as to the extent of how much other nations will either negotiate or retaliate, so investors should brace themselves for further volatility while maintaining a long-term perspective.
This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances.
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