Why the Tariff Blast May Be Worse Than the Fallout

Well… “Liberation Day” finally arrived, and let’s not sugarcoat it: the tariff announcement was far worse than anyone expected. It wasn’t a punch. It was a crippling blow from a political sledgehammer.

What Wall Street hoped would be a calibrated and strategic trade move turned out to be an aggressive, multi-layered tariff assault. And it has broad, punitive implications for nearly every major U.S. trading partner.

The market expected a 10% to 20% universal tariff – bad but manageable. Instead, President Trump announced a 10% minimum universal tariff across nearly all imports, plus a long list of country-specific tariffs that are, frankly, jaw-dropping.

The numbers are brutal:

• China: 54% tariff
• Vietnam: 46% tariff
• European Union: 20% tariff
• Mexico: 18%
• Canada: 16%
• Japan: 17%
• South Korea: 19%
• India: 21%
• (Yes, really. And the list goes on…)

Evercore ISI estimates that this new tariff structure raises the average U.S. tariff rate to 29%. Deutsche Bank and Bloomberg Economics chimed in with similar estimates, all suggesting a move from just 2.5% in 2024 to somewhere between 22% and 30%.

To put that in perspective: this would be the highest average tariff rate in modern American history, exceeding even Smoot-Hawley levels from the 1930s. That tariff act raised the average tariff on dutiable imports to 47% from 40%. (And for what it’s worth, as The Hill noted, “economists think the Smoot-Hawley Tariff Act actually ‘provoked a wave of foreign retaliation that plunged the world deeper into the Great Depression.’”)

Today’s Trump-era move is not just symbolic. It has real teeth.

A Potential Turning Point

The Federal Reserve’s own research suggests that every one-point increase in the average U.S. tariff rate subtracts 0.14 percentage points from GDP. Do the math on a 20- to 30-point increase, and we’re looking at a 2.8% to 4.2% hit to GDP.

Now layer that on top of what we already know.

The Atlanta Fed’s real-time tracker has first-quarter GDP growth at -3.7%. If these new tariffs take full effect and economic activity takes another 3% to 4% hit, we could see GDP fall as much as 7% to 8% this year.

That’s not just “technical recession” territory. That’s crisis territory, on par with the 2008 financial crisis or the COVID lockdown crash.

Wall Street didn’t take this well – and rightfully so. S&P 500 futures plunged as much as 3%. Nasdaq futures dropped 4%, while Russell 2000 futures collapsed 5%.

It was a sharp and visceral reaction, a market screaming: “This is bad.”

And yes, it is.

But this may also be the turning point, not into a lasting downturn but toward a diplomatic resolution – one that triggers a rally unlike any we’ve seen since 2020.

Trump’s Tariff Announcement: An Opening Move

We get it; being bullish right now might seem like whistling past the graveyard. But there are real reasons to believe that this is not the beginning of a full-blown trade war but rather the high-stakes opening move in a negotiation strategy.

Let’s unpack this.

Immediately after Trump’s tariff announcement, Treasury Secretary Scott Bessent was back on the mic, repeating what has now become a key talking point:

“These tariffs are a cap—not a floor. Countries can negotiate down from them.”

To us, this confirms what we’ve suspected all along: these tariffs are leverage, not dogma. They are meant to force other countries to the table, get them to make concessions, and ultimately, allow Trump to declare victory and roll them back.

Bessent’s language was a signal: the White House wants deals. And these tariffs are the stick meant to get them.

Before yesterday’s announcement, there was chatter that tariffs would go into effect immediately. But that’s not what happened.

The 10% universal tariff takes effect on April 5, while the country-specific tariffs take effect on April 9.

That’s a seven-day window – in our view, a deliberate buffer zone designed for one thing: negotiation.