Trump’s ‘Liberation Day’: What to Expect From The Upcoming US Tariff Plan

The United States is preparing to unveil a new tariff plan on April 2nd, a move that former President Donald Trump has called "Liberation Day." While the current administration has already applied several tariffs, Trump claims that this upcoming initiative will be the most significant yet.

Details about the plan are still limited, but it is anticipated that it will emphasize reciprocal tariffs. This means that the U.S. will target countries that apply higher tariffs on American goods than those imposed on their imports to the U.S. Additionally, there are indications that this new strategy might include value-added taxes (VATs) and other non-tariff barriers in its retaliation measures.

If implemented, this approach would mean that a trading partner's VAT would be applied to U.S. imports while simultaneously providing a rebate for U.S. exports to that country. This could have a much larger impact on global trade than reciprocal tariffs alone. Countries such as Mexico, Ireland, and Vietnam, where VATs are significant in their tax systems, may face substantial economic challenges. In contrast to standard tariffs, which can often be negotiated, this strategy could create long-lasting trade barriers that are more complex and rigid.

Despite these expected changes, the chances of a U.S. recession remain moderate. Economic growth is predicted to slow down further, which may lead to increased pressure on consumer prices. However, experts believe that inflation rates will decline over time, thanks to tighter fiscal and monetary policies.

Impact on Investors

The new tariffs are likely to create greater uncertainty for businesses that depend on global supply chains and imported goods. On the other hand, the services sector, which is less affected by tariffs, might provide safer investment opportunities during this time.

Lale Akoner, a Global Markets Analyst at eToro, noted, "Companies that are well-equipped to handle or even benefit from changes in border taxes include major financial firms like Bank of America (BAC), JPMorgan (JPM), Mastercard (MA), and Prudential (PRU.L), as well as industrial giants like Boeing (BA), Caterpillar (CAT), and General Electric (GE). Conversely, businesses that heavily rely on imports, including leading retailers and automakers such as Walmart (WMT), Nike (NKE), Gap (GAP), and Toyota (TM), might face significant pressure on their profit margins. Generally, service-oriented U.S. companies may offer more stability compared to global goods producers.

As the date for the official announcement approaches, investors and market participants will closely watch how this new tariff structure could affect international trade and investment strategies.

tariffs, trade, economy