Yesterday, April 2nd, 2025, was deemed “Liberation Day” by President Trump and his administration.

We had known the date for weeks, and it was nearly certain that any outcome would represent a significant increase from the low tariff levels we have experienced for the last several years. However, markets were negatively surprised by the magnitude and depth of what was rolled out yesterday afternoon.

Rather than implementing a blanket tariff level across all ex-US countries, President Trump and his team chose to go country-by-country and specifically impose tariffs in what they deem to be a “fair” way for each. There were admittedly some close allies (such as the UK) that were spared the worst of it. At a baseline level, every country was given a 10% tariff, and for many countries, that was the extent. For example, at this point, there were no further tariff considerations on Canada or Mexico.

Heaviest Impacts

Nonetheless, there were several countries, particularly in Asia, that were hit very hard with the announcement. China, for example, was given a rate of 34%, although there’s still some debate on whether that is additive to existing levels. Other places like Vietnam and Thailand were impacted particularly hard. It is worth noting that the Trump Administration (through their own calculations, which we neither argue for nor against), argues that the tariff level implemented on the foreign country is significantly less than tariffs that we pay on goods coming from those countries.

If all tariffs that were announced yesterday go into effect, this would represent the highest level of tariff rate on record at nearly 25% on a blended weight basis. That is above the previous high-water mark of the Smoot-Hawley Act of 1930, which was at 20%, and meaningfully above the low single-digit number that we have been operating under for the last several years.

Investor Response

This morning, markets have understandably reacted negatively to this surprise, as the obvious economically driven dominoes that would fall as a result of these actions include less trade, higher prices, and resulting lower demand and slower growth for the US economy. The Trump Administration would argue that those are relatively short-term phenomena that are warranted for a long-term policy reset of the manufacturing element of our economy and for a more fair trading position. The market is understandably viewing the sweeping tariffs through a short-term lens and reacting to the potential impact on both consumers and firms.

We would urge investors to take a breath before making hasty decisions. It is our belief that the administration started at the high-water mark with the intent of negotiating down. In fact, Treasury Secretary Scott Bessent is on record in recent days saying as much. And there are likely many conversations going on at this exact moment. The true test of what will happen is in the tone of those conversations. If countries choose to retaliate by increasing their own tariffs, then this has the potential to exacerbate the negative sentiment and the market sell-off. However, if there is ardent negotiation occurring—which could offset some of these tariff levels—market relief could be in order.

What’s Next?

Our strategic partners at Evercore ISI estimate that the best-case scenario would be a weighted average tariff level in the mid-teens once these negotiations are complete.  This could then be viewed through one of two lenses. On one hand, this would clearly still represent a significantly higher tariff level than what we have been accustomed to, and that should provide sludge to activity within the US economy.  On the other hand, such a level would be meaningfully less than the number facing the markets at this exact moment and could be seen as something of a “win.”

We urge investors to keep a sense of perspective. We have just come off two exceptional market years, and so, it is no surprise to see some selling off, particularly of the riskier parts of the market. Trump’s Liberation Day was seen as bad news in an already nervous market environment. And of course, this reaction is particularly pronounced in companies that have greater exposure to tariff action.

We also encourage investors and clients to remember that diversification is always important, but is not often recognized as such when everything is working well. For example, fixed income portfolios have seen very strong returns in recent days with a rampant decrease in yields as investors take flight to the safety of steady cash flows. And the international landscape (while certainly a mixed picture now given these recent actions) provides much-needed diversity from the stresses that the US economy is currently experiencing.

As a final note, I know there is much discussion over whether this will push the US economy into a recession or not. And we frankly think that it’s too early to tell. There is no doubt that the likelihood of a recession has increased in recent days with these actions. However, at this exact moment, we still have a base case of no recession… and even if so, we feel the US economy has the ability to bounce back quickly and financial markets should return to stability months before the final result is known.

Our investment team is closely monitoring the situation and continually briefing our advisors. We are available to answer your questions, whether by email, phone, or dropping by in-person.

On behalf of the investment team,
Dr. Mark Pyles
Director of Multi-Asset Strategies