Please see the below article from Brooks Macdonald detailing their views on the impact of Trump Tariffs on the macro economy. Received this morning 03/04/2025.
What has happened
US markets started Wednesday on a positive note, with the S&P 500 climbing 0.67%—marking its third straight day of gains. Investors seemed optimistic during regular trading hours, but that mood shifted dramatically after the close. In after-hours trading, markets took a sharp dive following news of President Donald Trump’s latest tariff announcements, dubbed ‘Liberation Day.’ The S&P 500 futures dropped over 2%, while the Nasdaq futures fell more than 4% at their peak. Big-name stocks felt the heat too, with the Magnificent 7 group (including Apple, down over 6%, and Amazon and Tesla, both off more than 5%) leading the decline.
Trump’s tariffs plan – US vs the world
The centrepiece of Trump’s announcement is a new tariff structure aimed at levelling the playing field for US trade. Here’s how it works:
- Baseline Tariff: Starting this Saturday, all countries will face at least 10% on tariff on goods shipped to the US. The UK is one of the few ‘lucky’ ones subject only to this baseline 10%
- Higher Rates for Key Partners: On April 9, many major trading partners will see much steeper tariffs. For example, the European Union faces 20%, Japan 24%, and Vietnam a hefty 46%. China gets hit hardest with a 34% tariff – on top of a 20% increase announced earlier this year
Not everyone is in the crosshairs, though. Canada and Mexico are exempt for now (though some goods already face a 25% tariff due to separate fentanyl and migration policies). Critical items like pharmaceuticals, semiconductors, lumber, copper, and gold are also off the hook, but they’re under review in separate trade investigations. Steel, aluminium, and auto imports, however, will still face 25% tariffs as recently outlined.
What does Brooks Macdonald think
Trump’s tariff plans raised concerns about higher costs, disrupted trade, and economic uncertainty. If fully implemented, these reciprocal tariffs could push the average levy on US imports to over 25%—a level not seen since the early 1900s and nearly 20% higher than today’s rates. Economists are already sounding the alarm. Early estimates suggest these tariffs could shave 1–1.5% off US economic growth this year while pushing up inflation (measured by core PCE) by a similar amount. Higher costs for imported goods could squeeze consumers and businesses alike, especially if trading partners retaliate with tariffs of their own. For investors, the big unknown is what happens next. Will other countries strike deals to lower these rates, or will they accept this as the new normal and adjust their supply chains? Trump’s openness to negotiation offers some hope, but his warning of potential escalation keeps the risk of a trade war alive.
Bloomberg as at 03/04/2025. TR denotes Net Total Return.
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Alex Clare
03/04/2025