Liberation Day – Trump Tariffs Announced
- Navneel Lal
- Apr 8
- 4 min read
ASF TAKEAWAYS: On 2nd April the US President, Donald Trump, announced wide ranging tariffs which surprised investment markets due to both their magnitude and variability. These tariffs are in addition to previously announced tariffs impacting countries such as China, Canada and Mexico. The Trump administration’s motivation for tariffs include:
A move towards the re-industrialisation of the United States.
Addressing persistent deficits with trade partners and a move to make the United States more self-reliant.
A negotiating tool to extract wider ranging concessions from trading partners.
A revenue raising exercise to fund the continuation of “Trump tax cuts”.
Investment markets reacted negatively to the announcement as investors quickly moved to a “risk-off” stance whilst they attempted to quantify the risks of the Trump tariffs and implications for both investment markets and the economy.
MARKET REACTION
The table below incorporates market moves up until 4th April 2025. Whilst there has been a significant drop in equity markets in calendar year to date 2025, the medium to longer term numbers dating from end of 2022 provide some perspective noting that many commentators at the beginning of the year had noted markets, particularly the US, were somewhat fully valued.
Change since end of 2024 | Change since 2025 high | Change since end of 2022 | |
S&P 500 (US) | -13.73% | -17.07% | 32.2% |
NASDAQ Composite (US) | -19.28% | -22.28% | 48.9% |
FTSE 100 (UK) | -1.44% | -8.57% | 8.1% |
DAX (Germany) | 9.08% | -7.11% | 56.0% |
Nikke 225 (Japan) | -15.33% | -15.72% | 29.5% |
Hang Seng (Hong Kong) | 13.91% | -7.76% | 15.5% |
S&P/ASX 200 (Australia) | -6.02% | -10.38% | 8.9% |
Gold USD/Oz | 15.76% | -3.06% | 66.6% |
Bitcoin | -10.83% | -21.75% | 405.2% |
US Dollar Index | -5.04% | -6.31% | -0.5% |
Tesla | -40.71% | -44.09% | 94.4% |
*Source Bloomberg
Similarly, bond market movements have been significant as shown in the table below. Noting that as bond yields go up, bond prices come down and vice versa. The bond market is starting to price further rate cuts.
Yield as at end of 2022 | Yield as at end of 2024 | High in yield in 2025 | Yield as at 4th April 2025 | |
US 10 year bond yield | 3.87 | 4.57 | 4.79 | 3.99 |
US 2 year bond yield | 4.43 | 4.24 | 4.38 | 3.65 |
ECONOMIC IMPACT
The Trump tariffs have created significant uncertainty. This will impact on both consumer and business confidence. Consumers are likely to constrain spending in favour of building savings and businesses will be keen to ascertain what the new environment means for their industry before committing large amounts of capital in an uncertain policy environment.
Economic growth globally is likely to be curtailed by these moves as higher export prices (due to tariffs) to the United States are likely to see a softening of demand. Inflation in the United States is likely to rise due to “cost-push” influences. Importantly, these inflationary pressures are different from those that persisted post COVID-19 which were ostensibly “demand-pull”. The likelihood of stagflation in the United States has increased.
INVESTMENT MARKETS IMPACT
We have seen a rapid repricing of equities and bonds post the announcement of the Trump tariffs last week. The difficulty for investors in the current environment is accurately re-pricing stocks and bonds to reflect the changing risk environment. There is a high degree of uncertainty on the path forward for the world economy. Key areas of focus right now are:
What is the level of commitment by the Trump administration to implement the announced tariffs?
Will the announced levels of tariffs be softened after negotiations with the impacted countries?
What counter measures will be deployed by impacted countries in response to the announced tariffs?
Is there a level where financial markets reach which will be a catalyst for the Trump administration to re-think their tariff policy?
What is the appropriate price-to-earnings multiple to value companies given earnings uncertainty?
To what extent will company earnings be impacted by the change in policy?
Given the level of uncertainty, it is not surprising investors are de-risking via selling and reducing skews. Valuations are becoming more attractive for a number of companies, particularly those who aren’t directly impacted by changes to tariff policy. However, as we have entered a period of heightened uncertainty, companies are likely to be reluctant to give earnings guidance in the upcoming reporting season given prevailing volatility.
WHAT ELSE SHOULD YOU CONSIDER?
Emotional responses - driven by fear, loss aversion or the temptation to act - can often lead investors away from long-term value and into short-term missteps. Recognising these patterns is the first step toward overcoming them.
We consider it’s essential to pause, zoom out, and regain perspective:
This is a moment, not a complete breakdown. Structural foundations - market liquidity, employment and system integrity remain intact. Volatility reflects discomfort, not dysfunction.
Perspective tempers reaction. While uncertainty clouds the short term, investment strategies are anchored in long-term fundamentals, not forecasts. Don’t chase what’s popular or flee from what’s uncomfortable.
Discipline is a differentiator. History rewards those who can distinguish signal from noise. This is a time to revisit your investment principles, not abandon them.
The Trump tariffs are unprecedented, and the economic backdrop is uncertain. Investment markets are in the process of re-pricing risk to reflect this uncertainty. We are continuing to analyse the situation and its impact on asset valuations as well as assessing the likelihood of the tariffs remaining in place at the proposed level long term. As always, our affiliated financial advisors are paying close attention to the impact on your portfolio and will continue to monitor the situation and will keep you informed.
ANY ADVICE IN THIS ARTICLE IS GENERAL ADVICE ONLY AND DOES NOT TAKE INTO ACCOUNT THE OBJECTIVES, FINANCIAL SITUATION OR NEEDS OF ANY PARTICULAR PERSON.
Comments