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The Macro, Economic Impacts of Trump’s Tremendous Tariffs

Taken as one of the world’s most trusted economic indicators, the S&P 500 index fell 17.6% from its February high through Monday, April 7. This level of stock devaluation has only been seen 5 times in the past 80 years.


trump's impact on stocks

The losses were driven by global investors retracting their shares from markets, catalyzed by Donald Trump’s largest financial policy changes yet. Starting April 5th, President Trump imposed a 10% tariff on imports from all trading partners, apparently following his longheld conviction that taxing foreign goods will help boost the U.S. economy. He argues that “cheaters” and foreigners have “pillaged” the American economy, and further advances the tariffs as retribution for illegal immigration and the inflow of drugs to the U.S. Many commentators have conceived of the tariffs as Trump’s political ultimatum for these foreign powers.


In addition to the baseline 10% tariff, Trump plans to impose “reciprocal tariffs” on specific nations with whom the U.S. has faced the largest trade deficits starting April 9. These countries include Cambodia (a 49% tariff), Vietnam (46%), members of the European Union (20%), and China, whose government is currently threatened with a whopping 104% tariff. This audacious move comes in response to a retaliatory 34% tariff from China’s government, which has sworn that it would “fight to the end” against Trump’s new policy. 


With each move from the White House shaking a volatile market, some of the world’s biggest financial giants have spoken up. Hedge fund manager Bill Ackman, who endorsed Trump, wrote on Sunday, “...we are heading for a self-induced, economic nuclear winter, and we should start hunkering down. May cooler heads prevail.” Top Trump advisor Elon Musk further criticized the policies, honing in on Trump’s trade advisor Peter Navarro as an enemy of essential free trade principles. 


Despite strong criticism from numerous supporters, Trump’s administration seems to be doubling down on its proverbial “game of chicken” staked on the world economy. One theory as to why proposes that the president hopes to weaken the U.S. dollar on international markets, thereby making U.S. exports more affordable and diminishing the value of China’s large U.S. dollar reserves.


Trump’s intentions aside, many believe that these changes portend their most extreme consequences for low-income Americans. Falls like the one earlier this week have been historically accompanied by widespread economic downturn, impacting the lives of nearly everyone who participates in markets. The current administration has indicated across-the-board that it will be highly sparing with welfare investments. Just last week, the administration laid off the entire staff of a $4.1 billion program which helps millions of Americans access heating and cooling, known as the Low Income Home Energy Assistance Program (LIHEAP). These workers were a handful of the 10,000 federal workers fired in the dramatic restructuring of the Department of Health and Human Services. Thus, while economic players and news outlets portray Trump’s latest policies as a political game, the consequences for America’s poorest may be very real, regardless of whether or not they choose to play.


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