Trump declares April 2nd as “Liberation Day” for new targeted tariffs

Trump plans to announce reciprocal tariffs on April 2nd. These tariffs will target countries that have imposed tariffs and other long-term limitations on the US. 

Officials who are aware of the matter say this announcement on “Liberation Day” will be more specific than Trump’s overall global threats. It will relieve stock and trade markets’ concerns about an extensive trade war.

However, the announcement will increase the tariffs that Trump has already imposed.

While these tariffs will be focused on a group of countries, others will be exempted. The officials told Bloomberg that the administration would not reveal the industry-based tariffs on the same day, even though Trump had hinted at their possibility.

Trump vowed to introduce sector-specific tariffs targeting industries such as automobiles, semiconductor chips, pharmaceuticals, and lumber. He specifically mentioned that auto tariffs would be included in the same batch.

While an auto tariff is still under consideration, Trump has not dismissed the possibility of implementing it at a later time.

Avoiding the measure in the April 2 announcement would likely be a relief for the auto industry, which is already concerned about the potential strain of multiple tariff streams on supply chains.

Trump’s “Liberation Day” tariffs will take effect immediately

The upcoming rates will be implemented and enforced right away to have an immediate impact. Officials say this will further damage the relations between the US and the allied countries, with possible reactions leading to a back-and-forth trade war.

Although nothing is certain yet, as with Trump, decisions can be unpredictable until he officially announces them. Trump’s administration is having discussions on how to advance the trade strategy. Despite these internal negotiations, Trump himself is the force of aggressive intentions. He supports high tariffs. This is because Trump views raising import taxes as a way to generate revenue for the U.S. government.

On Friday, during an Oval Office meeting, Trump said, “April 2nd is going to be liberation day for America. We’ve been ripped off by every country in the world, friend and foe”.

Trump believes these tariffs can bring in “tens of billions.” Another aide recently said the revenue could be worth trillions of dollars over 10 years.

However, the market is showing different signs. It responded negatively to Trump’s initial tariffs on Canada, China, and Mexico, as well as his recent tariffs on metals such as steel and aluminum.

The market’s decline has put pressure on the White House due to economic instability. Trump has often measured his success as president by how well the major stock indexes are performing. So, if tariffs cause the market to drop, it reflects poorly on his presidency by his own standards.

US is focusing on “reciprocal tariffs” for a fair trade

Trump officials have admitted that the list of countries facing new tariffs might not include everyone. Some countries may be exempted.

For certain products, like steel, the new tariffs may not be added on top of existing tariffs. Instead, they may be adjusted or applied differently, reducing the overall impact on those industries.

Trump himself is increasingly talking about reciprocal measures. This means he is focusing on making trade fair by imposing tariffs only on countries that impose tariffs on the U.S. or have an unfair trade advantage.

The officials say it’s uncertain which countries will be included in targeted tariffs. Trump has mentioned the EU, Japan, South Korea, Mexico, India, China, and Canada and called them trade abusers in discussions with the officials.

Although narrower in scope, Trump’s proposal still represents a much larger effort than his first term. It challenges the market’s tolerance for unpredictability and includes a series of import taxes.

Kevin Hassett, Director of Trump’s National Economic Council, indicated that markets are overestimating the extent of the tariffs.

He said in an interview with Larry Kudlow on Fox Business, “One of the things we see from markets is they’re expecting they’re going to be these really large tariffs on every single country.” Larry Kudlow held the same position as Hasset during Trump’s first term.

Hasset said that market expectations should be changed as not all countries cheat the US on trade. The tariffs are for a few countries only.

“Liberation Day” event could include some tariff reductions

In the past, Trump imposed and then significantly scaled back tariffs on Canada and Mexico over alleged failures to curb fentanyl shipments to the U.S. The future of these tariffs is still uncertain, as a Trump-imposed pause on many of them is nearing expiration. Officials noted that the tariffs could either be lifted altogether or replaced with an equivalent amount.

Treasury Secretary Scott Bessent mentioned last week that steel and aluminum tariffs may not necessarily be added to existing country-specific rates.

He told Fox Business.“I will have a better sense as we get closer to April 2nd. So, they could be stacked,”

Bessent also identified around 15% of countries as the most significant offenders.

“It’s 15% of the countries, but it’s a huge amount of our trading volume,” he said, labeling them the “dirty 15”. He said these 15 countries are the primary target.

Before abandoning the idea, Trump’s team reportedly considered a three-tiered global tariff system that would categorize countries based on how restrictive their trade barriers were, according to sources familiar with the discussions. The Wall Street Journal previously reported on this approach.

Trump sees tariffs as a strategic tool

Trump views tariffs as a critical instrument to encourage new investment in the U.S. while also generating revenue that could potentially offset Republican-led tax cuts.

“Tariffs will make America more competitive. They will incentivize investment into America,” said Stephen Miran, chairman of Trump’s Council of Economic Advisers, said during an interview.

The administration argues that foreign governments and corporations pledging trillions of dollars in investments proves Trump’s strategy is effective. Miran told Fox Business last week that discussions are ongoing as the April 2nd deadline approaches.

“I do think that it’s perfectly reasonable to expect that we could raise trillions of dollars from tariffs over a 10-year budget window and like I said before, using those revenues to finance lower rates on American workers, on American businesses,” he stated.

Moreover, companies could adapt to the tariffs, particularly if not all countries are affected. According to a survey last year by the Peterson Institute for International Economics, U.S. customs revenue from China surged following the imposition of tariffs in 2018, but then peaked in 2022 and experienced a sharp decline in 2023.

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