A Trump hurricane
- As expected, ’Liberation Day‘ has brought a raft of new tariffs.
- The policy/ sentiment shock is now likely to derail the US economy .
- We turn more defensive and downgrade equities across the board.
Since his return to the White House, Trump has announced a series of country or sectoral tariff increases. If we combine all the measures announced before 2 April (20% on China, 25% on Canada and Mexico with exemption for goods that comply with the USMCA[1], 25% on steel and aluminum and 25% on automobiles and parts), the average tariff rate on US imports was on course to reach 11%[2] from 2.5% end of 2024. Put in perspective, this would already have brought the average tariff rate of US imports back to the level of the early 1940s.
US Liberation Day
On 2 April, D. Trump announced sweeping new tariffs: a 10% minimum baseline tax will apply on imports from all countries while countries running trade surplus with the US will face much higher “reciprocal tariffs”: the EU for example will be charged 20%, Japan 24%, South Korea 25%, China 34%… Cambodia 49%! Note that in the case of China, those tariffs apply on top of the previous “fentanyl-related” 20%. While some tariffs might come down in the future, the direction taken by the Trump’s Administration is clear: the average tariff rate on US imports is now likely to be significantly above 15%[3] by year end the more so since the language in the executive order suggests that additional sectors tariffs are forthcoming.
