“This resilience of the market in Q1, ex-Magnificent Seven, suggests investors were not yet focusing on the potential negative headwinds from tariffs but rather had continued to focus on the potential benefits to corporate profitability of the new administration policies, such as deregulation. As a result, the “Liberation Day” tariff announcement came as a shock, sending first equity markets and then bond markets into a spin. The two retreats, firstly on the supposedly reciprocal tariffs in the face of the bond markets, and then on Chinese tech in the face of special interest pleading, have been greeted with relief, with the equity market clawing back most of the April losses.Despite the relaxations, the net effect has still been a massive increase in the U.S. tariff rate, from around 3% to perhaps 15%.3 At the time of writing (15 April 2025) there is a 10% tariff rate almost across the board, along with 25% on the non-USMCA products from Mexico and Canada,4 and 100%+ on Chinese products barring consumer electronics. This is a significant tax on U.S. consumers, which will slow growth and increase inflation, as it stands.”
Morten W. Langer
