Liberation Day: The announcement that cornered the United States
Trump has not only ignited a new global trade war but also raised serious doubts about the stability and credibility of the world’s leading economy.
April 2, dubbed “Liberation Day,” marked a turning point in US trade policy. That day, speaking from the White House Rose Garden, Donald Trump announced a historic tariff hike that raised the average effective US tariff rate to its highest level since the infamous Smoot–Hawley protectionist law of 1930. But whereas foreign trade accounted for just 11% of US GDP back then, today it exceeds 25%. We are therefore facing the greatest trade shock in modern history.
Markets reacted with immediate panic. In just the two days following “Liberation Day,” the US stock market lost approximately $6.6 trillion in market value, according to Dow Jones data—the largest destruction of shareholder value ever recorded in such a short span. This financial storm forced Trump to partially soften his initial stance, announcing a temporary 90-day pause during which he imposed general tariffs of 10%, except for China, which was hit with an extraordinary rate of 145%. Wall Street responded to this apparent pivot with spectacular initial euphoria: the Nasdaq index jumped 12%, its biggest daily gain since January 3, 2001. However, a closer analysis reveals that this apparent moderation does not imply a real reduction in overall tariff levels, but merely a geographic redistribution, with China bearing the brunt. As a result, this policy will inevitably carry severe economic consequences.
The design of these tariffs in key sectors like steel and aluminum is clearly counterproductive
The pause clearly revealed Trump’s explicit intent to focus his offensive primarily on China. But this strategy poses serious internal challenges for the United States. Around 45% of US imports are intermediate goods essential to its exports. By making these intermediate goods more expensive, Trump directly undermines US export competitiveness, weakening the economy in the long run. Although the administration justifies these measures with promises of reviving manufacturing jobs, what’s most striking—or perhaps most troubling—is that the design of these tariffs in key sectors like steel and aluminum is clearly counterproductive. For instance, Trump has imposed 25% tariffs on steel and 10% on aluminum. But for every US worker in these basic industries, there are approximately 60 workers in sectors that use these materials as key inputs—such as automotive, machinery, construction, or aerospace. Therefore, raising tariffs benefits a small group of workers in the short term but severely harms industries that employ millions. Even from a purely protectionist perspective, this policy is poorly conceived and could cause considerable net damage to the US economy.
Uncertainty skyrockets
The uncertainty triggered by these announcements is already hitting the economy hard. A clear signal of this extreme climate is the VIX index (known as the “fear index,” which measures expected stock market volatility), which has recently reached exceptionally high levels—among the highest ever recorded. This shows that anxiety among investors and businesses is at a historic peak, deeply affecting business confidence, freezing strategic investments, and threatening to trigger a possible recession in the US
In trying to 'liberate' the US economy, Trump has shackled it to unprecedented and alarming uncertainty
Perhaps even more concerning is the atypical reaction observed in international financial markets. Normally, in times of global uncertainty, the dollar strengthens and US bonds serve as a safe haven. However, this time the dollar depreciated significantly: it lost about 2.7% against major currencies in the week following the announcement, pushing the euro to its highest level against the dollar in the past three years. In addition, US bond yields soared: the 10-year Treasury yield jumped sharply from around 3.86% on April 4 to 4.5% on April 9—the steepest weekly rise since 1982. This spike reflects investors’ unease about inflationary pressures from the tariffs and growing doubts about US fiscal stability.
The US at a crossroads
Ultimately, “Liberation Day” has not only shaken global trade but has placed the United States at a dangerous economic and financial crossroads. Trump has not only launched a new global trade war but also cast serious doubt on the stability and credibility of the world’s largest economy. Trump’s legacy may not be the one he had imagined, but history will clearly remember him as the president who, in trying to “liberate” the US economy, ended up chaining it to an unprecedented and alarming level of uncertainty.