Markets around the world braced themselves for the impact of U.S. President Donald Trump’s “Liberation Day” announcements on April 2, with sweeping global tariffs taking effect — part of his strategy to reshape the global economy in America’s favor.
Last weekend, while speaking aboard Air Force One, Trump told reporters that the tariffs will impact every country on the planet, however some countries will feel the impact more due to their high trade imbalances with the United States. These countries include, but are not limited to, China, India, the European Union (EU), Canada, Mexico, the United Kingdom, Vietnam, Japan, and South Korea.
On March 31, Trump told reporters in the Oval Office that his tariffs are lower, and in some cases “substantially lower” than what many other countries have been placing on the United States.
“We are going to be very nice by comparison to what they were. We have a world obligation, perhaps, but we’re going to be very nice, relatively speaking. We’re going to be very kind,” the President said at the time, sentiments he repeated during his announcement on Wednesday, April 2.
According to an estimate by consulting firm PwC, Trump’s plan could see U.S. tariff revenues rise from $76 billion annually to as high as $697 billion.
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Detractors say that the tariffs would simply be passed on to American consumers, while supporters argue they will bring manufacturing back to the United States and strengthen the national economy in due time.
In mid-February, Trump introduced his tariff concept, dubbed the “fair and reciprocal plan” for trade that he says levies tariffs on other countries that match the tariffs they impose on the United States.
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By the numbers
The industries most impacted include motor vehicles, pharma and medicines, oil and gas, motor vehicle parts, and computer equipment, according to PwC.
In total, these industries represent over $200 billion in imports into the United States every month.
Trump says he is levying tariffs on these industries in order to address large trade deficits with a number of countries.
For instance, the trade deficit with China in 2024 was a massive $295.4 billion, while the trade deficit with the European Union stood at $235.6 billion.
America’s immediate neighbors, Mexico and Canada each had a trade deficit of $171.8 billion and $63.3 billion, respectively in 2024.
Economists expect that the industries that will face the most severe consequences of Trump’s strategy are ones that historically benefited by either very low tariffs or no tariffs whatsoever.
There are 20 countries around the world that have enjoyed little to no tariffs on their imports thanks to negotiated free trade agreements, including Canada, Mexico, South Korea, and Israel, however this is about to change.
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Sectors to be hit the hardest
It’s no secret that Trump’s strategy, in part, is to encourage more manufacturing of major goods stateside, with the goal of creating more manufacturing jobs for Americans.
He says that if goods are produced in America, then there is no need to be concerned with tariffs.
Consequently, one of the hardest hit sectors will be the automobile sector, particularly in Canada, Germany, Japan, and Mexico as they grapple with tariffs on a range of goods including steel, aluminum, complete vehicles and vehicle components.
Energy products, including oil and gas, coming into America did not escape Trump’s strategy, with the energy sector in Canada, particularly that of Alberta province, hit the hardest.
Currently, the United States imports more than four million barrels of crude oil per day from Canada, significantly more than it did 15 years ago.
For China, which Trump has previously targeted with tariffs due to the country’s significant responsibility for the fentanyl crisis in the United States, it may see major disruptions in its exports of smartphone and lithium-ion battery technologies.
The critical medicine and healthcare equipment sectors in India, Ireland, and Switzerland will also be impacted.
Trump said while announcing his strategy that there will be a minimum “baseline tariff” of 10 percent on all countries.
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Countries to be most impacted
Among the countries that will be impacted the most by Trump’s “Liberation Day” scheme are America’s immediate neighbors, Mexico and Canada, as well China.
According to a PwC Tariff Industry Analysis, Mexico was the source country for 15.8 percent of all U.S. imports in 2024. These imports were primarily digital processing units, motor vehicles, and crude oil.
A 25 percent tariff was placed on all imports from Mexico, a move that is anticipated to have significant economic implications for both Mexico and the United States. Shortly after Trump’s announcement, Mexican authorities came out and said they will not be engaging in a “tit-for-tat” tariff strategy.
Canada was also hit with a 25 percent tariff on most exports and a 10 percent tariff on its energy products.
Economists predict potential job losses on both sides of the border, increased consumer prices, and a heightened risk of recession in Canada.
In response, the Canadian government has indicated plans to impose retaliatory tariffs on American imports, aiming for a “dollar-for-dollar” approach to match U.S. tariffs.
During his tariff presentation in the Rose Garden, Trump held up a placard showing what “reciprocal tariffs” he was planning to impose, which included a 20 percent tariff on the EU, a 34 percent tariff on China, a 32 percent tariff on Taiwan, a 24 percent tariff on Japan and a 26 percent tariff on India.
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Markets in turmoil
Over the past several weeks financial markets have seen trillions of dollars in value wiped from their ledgers with investors fearing that tariffs will revive inflation at a time when it was finally getting under control.
There is also concern that Trump’s moves could result in slower economic growth leading to a nation wide recession.
The Nasdaq Composite index shed around five percent of its value in March and the blue-chip Dow Jones Industrial Average fell about one percent, while the S&P 500 lost three percent in the quarter.
A sign of the times, gold extended its gains from last year, hitting a record high of $3,100 per ounce, gaining 19 percent in the first quarter.
U.S. Treasury yields have fallen and the benchmark 10-year yield fell by about 65 basis points to below 4.16 percent.
The U.S. Dollar Index (DXY) also declined by four percent this year with tariffs and structural changes being blamed for its recent weakness.
It’s unclear exactly what impact Trump’s Liberation Day will have on markets, sectors and economies around the globe. The consequences however are expected to have far reaching effects, with impacts radiating out for months and even years as the global economy adjusts to the new regime.
