(A)Political - April 5th

Good morning everyone,

Well the markets are certainly…reacting…to the spate of tariffs that Trump released this week. I guess we’re in for some high-level fireworks a few month’s early. Let’s dive in!

Ambitious tariff rollouts by the Trump administration were unveiled on Wednesday, sparking a cascade of geopolitical and economic consequences. Economic sentiment is dropping, and there are clear signals as to “why”. The U.S. Supreme Court narrowly gave a victory to the Trump administration, allowing Trump to cut DEI related teacher grants. Chief Justice Roberts joined the 3 left-leaning Justices in the dissent.

• Trump’s ‘Liberation Day’ Unveiled

• Analysis: Economic Sentiment Falling Nationwide

• Trump wins 5-4 SCOTUS Decision on DEI Grant Funding

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Trump’s ‘Liberation Day’ Unveiled

_{By: Atlas}

President Donald Trump announced sweeping new tariffs on April 2, dubbed "Liberation Day," implementing a baseline 10 percent duty on virtually all imports to the United States with significantly higher rates for countries maintaining large trade surpluses or barriers against American goods.

Speaking from the White House Rose Garden, Trump outlined what he called a "fair and reciprocal plan" to combat decades of trade imbalances. The most severe measures target China, with combined duties now reaching 54 percent – a 34 percent reciprocal tariff on top of the 20 percent levy imposed in February over fentanyl trafficking concerns.

"This will be indeed the golden age of America, it's coming back, we're going to come back very strongly," Trump declared during the announcement.

The tariffs, which took effect immediately for most goods, establish higher rates for dozens of countries including the European Union (20 percent), Japan, South Korea, India, Vietnam, Mexico and Canada. According to Treasury Secretary Scott Bessent, the measures aim to correct longstanding imbalances in global trade relationships.

"Well, I would say they've been doing it to us for a long time. And, if they don't like tariffs, then why do they have them?" Bessent told CNN's Kaitlan Collins when asked about allies' concerns.

Market Reaction and Economic Impact

The financial fallout was immediate and severe. U.S. markets plunged in the days following the announcement, with the S&P 500 recording its worst two-day slide since March 2020, losing 11 percent and wiping out approximately $5.4 trillion in market value. The Nasdaq 100 entered bear market territory, falling more than 20 percent from its February peak.

By April 4, the Dow Jones Industrial Average had drawn down nearly 7 percent for the week, approaching correction territory. Global markets followed suit, with significant drops in Asian indices including the Nikkei 225 and Hang Seng.

Federal Reserve Chairman Jerome Powell warned that the tariffs "could have a persistent impact on inflation" while speaking at a business journalism conference in Arlington, Virginia. Meanwhile, traders quickly adjusted their expectations, now fully pricing in four quarter-point interest rate cuts by year-end, with a growing possibility of a fifth.

International Response

China moved swiftly to retaliate, announcing matching 34 percent tariffs on all U.S. imports effective April 10. Beijing also added 16 American companies to its export control list and placed 11 firms on its "unreliable entities list," alleging violations of market rules and contractual obligations. Additionally, Chinese officials filed a formal complaint with the World Trade Organization, claiming the U.S. tariffs violate international trade rules.

"China firmly rejects this and will do what is necessary to defend our legitimate rights and interests," a spokesperson for China's Ministry of Foreign Affairs said, describing the U.S. measures as undermining "the rules-based multilateral trading system."

European reactions were similarly pronounced. German Economic Minister Robert Habeck warned that Europe is "not prepared" to cope with the 20 percent duty imposed on EU exports, comparing the potential disruption to that caused by Russia's 2022 invasion of Ukraine. Spanish Prime Minister Pedro Sánchez called for negotiations and announced a $15.6 billion spending package to mitigate impacts on Spain's economy.

Norwegian Foreign Minister Espen Barth Eide suggested the tariffs could potentially violate NATO principles, stating that the alliance "is stronger when all of its signatory states are economically strong."

Corporate and Congressional Reactions

The auto industry faced immediate disruption, with Stellantis pausing production at assembly plants in Canada and Mexico to assess the situation after Trump's 25 percent tariff on foreign-made vehicles took effect April 3. Conversely, General Motors announced plans to increase production of light-duty trucks at its Fort Wayne, Indiana plant, potentially creating hundreds of temporary jobs.

On Capitol Hill, a bipartisan group of senators introduced legislation to limit presidential tariff authority. The Trade Review Act of 2025, spearheaded by Senators Chuck Grassley (R-Iowa) and Maria Cantwell (D-Wash.), would require congressional approval within 60 days for any new tariffs, after which they would automatically expire.

Senate Minority Leader Mitch McConnell (R-Ky.) publicly criticized the tariffs as "bad policy," writing that "preserving the long-term prosperity of American industry and workers requires working with our allies, not against them."

Legal Challenges Begin

The first legal challenge materialized on April 3 when the New Civil Liberties Alliance filed a lawsuit in federal court in Florida on behalf of Simplified, a retailer of home management products. The suit alleges Trump overstepped his authority by imposing tariffs under the International Emergency Economic Powers Act.

"The Constitution assigns Congress exclusive power to impose tariffs and regulate foreign commerce," the lawsuit states. "Presidents can impose tariffs only when Congress grants permission, which it has done in carefully drawn trade statutes."

Administration Defends Strategy

Despite market turmoil and international backlash, the Trump administration has remained steadfast. White House spokesman Kush Desai defended the policy as addressing "the national emergency that President Trump has rightfully identified is posed by our country running regular trade deficits."

Treasury Secretary Bessent has urged trading partners to avoid hasty retaliation. "One of the messages that I'd like to get out tonight is everybody sit back, take a deep breath, don't immediately retaliate, let's see where this goes. Because if you retaliate, that's how we get escalation," he told CNN.

Trump himself remained defiant amid market turbulence, writing on Truth Social: "To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich, richer than ever before!"

The president has signaled some flexibility, suggesting he might negotiate with countries offering "phenomenal" concessions. He also indicated that a deal for China to approve the sale of TikTok could potentially ease that country's tariff burden.

As global markets continue to digest the implications of these sweeping trade measures, economists warn that prolonged uncertainty could push the U.S. economy toward recession, while administration officials maintain the policies will ultimately strengthen American manufacturing and reduce trade deficits.

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