April Economic Update

Market Summary

Volatility increased in March in anticipation of the Trump Administration’s tariff announcements scheduled for April 2nd, which, in turn, sparked more volatility after the announcement at the beginning of April. The S&P 500 retreated -5.75%, the Nasdaq 100 fell -7.69%, and the Russell 2000 lost -6.99%. (1)

Tariffs, Tariffs, Tariffs

As you have likely heard by now, earlier this week, President Trump put forth new tariffs for foreign goods entering into the United States. On April 2nd, the Administration announced a minimum tariff of 10% on most goods entering into the country, with some limited exceptions such as gold, copper, lumber, pharmaceuticals, and semiconductors. This was actually somewhat of a short-lived sigh of relief because his prior statements were implying across-the-board tariffs of 25% for all imports. (2)

However, it was also announced there will be “reciprocal” tariffs; meaning any country who imposes existing tariffs on goods from the United States will now have tariffs on exports to the US at a rate of 50% of their own tariffs (for most countries). This includes the Trump Administration’s own calculations for foreign currency manipulation and trade barriers.

For example, the Indonesia imposes a total of 64% import tariffs for goods exported by the US, according to their calculations. In turn, any imports from Indonesia into the US will now be taxed at a rate half that at 32%. In total, these specialized and customized “reciprocal” tariffs impact about 60 countries, and these rates are in lieu of the flat rate 10% rate imposed for every other country. The only exceptions (for now) are goods from Canada and Mexico which are compliant with the U.S.-Mexico-Canada Agreement (USMCA) which will remain tariff-free. (3,4,5)

The most impactful tariffs stem from the countries which the US imports a large portion of our goods, including Japan at a rate of 24%, India at 26%, Taiwan 32%, Vietnam 46%, Malaysia 24%, Thailand 32%, the European Union 20%, and South Korea 25%.

Perhaps the biggest implications for our economy will come from new tariffs (taxes) imposed on Chinese goods, which is the second largest exporter to the US behind only Mexico. Trump announced a stiff 34% additional tax on Chinese imports. This is on top of the existing 20% tariff in place from his first administration, meaning the total tax for goods coming from China is now a whopping 54%. (2)

Finally, but not least, there will be a 25% tariff for all non-American made vehicles entering into the country. An analysis of the tariff codes listed in the Federal Register estimates this impact will be nearly $600 billion worth of imported goods related to the auto industry. (6)

Looking Forward…

It is hard to overstate the implications of these trade policy decisions. These tariffs are not a tax to foreign countries; they are a tax to American businesses who rely on cheap goods imported from other countries. These additional costs will be burdened by businesses but ultimately, and inevitably, be passed onto the consumer resulting in another wave of inflation. That is, unless the Administration backs down from these tariffs or negotiations are made to appease the Administration’s demands.

So far, there have been only threats by foreign countries to further retaliate against the United States for these actions, including China implementing 10-15% tariffs on US agricultural goods, and now threatening to do an additional 34% on all goods starting April 10th. Only time will tell how this all shakes out over the long term.

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Citations:

1. Charles Schwab, March 31, 2025

2. White House, April 02, 2025

3. CNBC, April 02, 2025

4. CNN, April 02, 2025

5. Wall Street Journal, April 02, 2025

6. Financial Juice, April 02, 2025

Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.