“Eye-watering.” “Illogical.” “Absurd.” “Economic armageddon.”
This isn’t what incensed, partisan internet commentators have to say about President Donald Trump’s recently released list of “reciprocal tariffs.”
This is the unusually colorful commentary of Wall Street’s traditionally temperate analysts, strategists, and economists—and they have plenty more to say.
Today, we’re going to take a brief look at Trump’s bombshell announcement of virtually worldwide tariffs, and then we’ll plug you into what the experts have to say about what these massive taxes mean for consumers, the economy, and the stock market.
Table of Contents
Trump’s ‘Reciprocal’ Tariffs, Explained
On April 2, President Trump announced a two-part set of tariffs:
–A 10% tariff on all countries, effective April 5, 2025
–“Individualized reciprocal higher tariff[s]” on the countries with which the United States has the largest trade deficits, effective April 9, 2025
It seems like as blanket a tariff as you could want, though there are carve-outs: semiconductors, pharmaceuticals, copper, lumber, steel, aluminum, energy exports, and certain other goods will not be hit by the “reciprocal” tariffs, for instance.
But it still represents a remarkable tax burden on American consumers not seen in more than a decade. From The Budget Lab at Yale:
“The April 2nd action is the equivalent of a rise in the effective U.S. tariff rate of 11 ½ percentage points. The average effective U.S. tariff rate after incorporating all 2025 tariffs is now 22 ½%, the highest since 1909.
The price level from all 2025 tariffs rises by 2.3% in the short-run, the equivalent of an average per household consumer loss of $3,800 in 2024$. Annual losses for households at the bottom of the income distribution are $1,700.”
What the Pros Think
The announcement reverberated across the world, and why not? These tariffs will impact imports from all around the globe … and ultimately hit American wallets.
The following is a collection of commentary about how Trump’s recently announced tariffs could be felt by American consumers, the domestic economy, our broader stock markets, specific industries, and the rest of the world.
Wedbush
President Trump laid out a jaw dropping reciprocal tariff chart that will be showed in classrooms and be written about for years to come by economists … because they are so illogical and absurd.
Let’s start there.
First off, the tariff numbers showed are factually incorrect what other countries charge the U.S. They are a convoluted set of numbers/calculations that appear to be taking each nation’s trade surplus by their total imports with the U.S. To be clear, these are not the actual tariff rates. If a ninth-grader in high school presented this tariff chart to a teacher in a basic economics class, the teacher would laugh and say “sit down and work on the assignment.”
The reason we are saying this is over the coming 24 hours, the world will quickly realize these tariff rates will never stay as they are shown; otherwise, it would be a self-inflicted economic armageddon that Trump would send the U.S. and world through over the coming year. We have to assume this is the start of a negotiation and these rates will not hold … stocks will sell off massively, but ultimately our view is these numbers would throw the U.S. into a clear recession and cause stagflation almost immediately … if they hold (and they will not for long, in our view).
For today with clients, we are taking the approach after speaking with business leaders/supply chain experts from around the world last night that these tariffs (and the fascinating calculations, which need to be explained by someone from the White House today) are the start of negotiations with countries and even individual companies to even the playing field.
No matter what the White House says, basic economic theory over the last 100 years tells you one person pays these tariffs: the US consumer. It’s not a debate.
—Wedbush analyst team, led by Daniel Ives
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Goldman Sachs
The “reciprocal” tariff policy President Trump announced would impose a weighted average tariff rate of 18.3%, around 3pp higher than we expected. However, roughly 1/3 of total imports would be exempt, which reduces the impact to a 12.6pp increase in the effective tariff rate. We estimate this and other tariffs announced year-to-date would raise the U.S. effective tariff rate by 18.8pp.
While we assume that negotiations with trading partners will lead to somewhat lower “reciprocal” rates than announced today, the prospect for escalation following retaliatory tariffs and a high probability of further sectoral tariffs suggests a risk that the U.S. effective tariff rate rises more than the 15pp increase we assume in our economic forecast.
Canada and Mexico received better treatment than we expected. The executive order continues to exempt USMCA-compliant imports from the 25% tariff on Canada and Mexico. We had expected at least an incremental tariff increase on both countries. The order states that if the exemption ends in the future, USMCA-compliant goods and energy products would receive duty-free treatment while non-compliant products would face a tariff rate of 12%, excluding energy and potash which would be duty-free. This 12% rate might signal the upper bound for tariff rates for Canada and Mexico.
Most Asian trading partners face a higher tariff than we expected. We had expected China imports to be covered by the reciprocal tariff announcement and believed that this would add to the 20pp in China-focused tariffs already imposed in February and March. However, the 34% tariff rate announced is higher than expected. The higher tariff rate includes imports from Hong Kong and Macau. Other Asian exporters also face much higher tariff rates, including Vietnam (46%), Taiwan (36%), Thailand (36%), and Indonesia (32%), among others.
De minimis treatment will remain in place except for China. The order temporarily preserves tariff-free treatment for personal shipments under $800 for countries subject to the reciprocal tariff until the Sec. of Commerce can certify that systems are in place to apply tariffs to these smaller shipments. A separate executive order President Trump signed today rescinds de minimis treatment for shipments from China in particular, which currently account for a substantial share of total de minimis volume.
—Goldman Sachs economist team, led by Jan Hatzius
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Morgan Stanley
Our outlook for the U.S. economy this year was predicated on restrictive trade and immigration policies arriving first and potential growth-enhancing policies arriving later, or not at all. Today’s announcement only reinforces our opinion that restrictive trade and immigration policies, along with uncertainty related to fiscal policy, are likely to weigh meaningfully on the outlook for growth.
Risks to our outlook for growth skew more meaningfully to the downside if these tariffs remain in place for a non-trivial period of time, and risks to our outlook for inflation are weighted to the upside, particularly over the next three to six months. We continue to doubt the ability of deregulation and fiscal policy measures to offset the drag from trade and immigration policy and boost economic activity.
We think the implication of today’s announcement is clearer in terms of our views on uncertainty and the distribution of risks. Effective tariff rates have not been this high for a century, and it can be argued that today’s decision is the most consequential policy framework change since the U.S. was taken off the gold standard. Our confidence around any point-estimate on growth and inflation is low, but our confidence is high that risks to inflation are to the upside and growth to the downside. A significant deterioration in asset prices remains an important risk to the outlook for consumer spending.
Previously we had one rate cut this year in June, and the remainder of our rate cuts beginning in March 2026 for a terminal rate of 2.50-2.75% reached in late 2026. We now remove our expected rate cut in June given what is likely to be a healthy inflation impulse in the coming months and push it into 2026. Hence, our new forecast calls for no rate cuts in 2025 and a rate cutting cycle that begins next March. We continue to look for a terminal rate of 2.50-2.75%.
Our view is that the Fed will have trouble looking through the near-term impulse to inflation and ease quickly. This, of course, is contingent on the economy remaining in a modest growth environment. If so, the Fed will need to see that the impulse to goods prices are transitory before actively reducing its policy rate to support economic activity.
—Morgan Stanley team of economists and strategists
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HSBC
President Trump’s announcement of a 10% baseline tariff effective from 5 April, along with individual reciprocal tariffs on some economies from 9 April, has jolted equity markets. Among the economies most affected are the EU (20% tariff), mainland China (34%) and Japan (24%). It’s clear that the so-called “liberation day” will have done little to reduce uncertainty and is potentially a starting point for negotiations rather than a clearing event.
We see two key takeaways for global equities:
- Downward pressure on stocks is likely to stay in the near term. The size and scope of the tariffs exceeded expectations and will reinforce concerns around global growth.
- The breadth of the tariffs means U.S. [corporations] could end up hurting the most given limited scope for substitution. Trump’s plans are estimated to lift the U.S. effective tariff rate by 20ppt, which based on our framework could hit S&P 500 earnings by 8% assuming [corporations] pass on 20% of the cost. We believe this could accelerate the ongoing rotation out of U.S. equities and into international.
The recession narrative will gain traction, but some of this is already priced in, limiting the extent of the potential downside. Our equity market implied recession probability indicator suggests equities are already pricing in a 40% chance of a recession by the end of the year. Meanwhile, the 8% drawdown in U.S. equities since its February peak is consistent with what we typically see in a shallow recession.
However, the upside for equities in the next few weeks is also capped, and we expect further U.S. underperformance given:
- Consumer fragility is building. High-income households have been doing the heavy lifting for consumption recently, boosted by a strong wealth effect. But with the S&P 500 down 5% in Q1, we believe U.S. household wealth could have fallen by $3 trillion, which explains some of the recent weakness we are seeing in real-time consumer spending related data.
- The upcoming Q1 earnings season looks messy. Although it’s a low hurdle to beat—consensus expecting an 8% decline quarter-over-quarter—the risk/rewards do not look good. Investors are likely to brush off beats as old news, while any misses will simply reinforce the slowdown narrative. Guidance from companies is already getting knocked down, and we see little incentive for corporates to show any strong positive conviction given elevated levels of uncertainty
- The “Fed put” is also increasingly challenged. With unemployment still low at 4.1% and CPI inflation sticky at 2.8%, the Fed’s hands look somewhat tied and it is unlikely to come to the rescue until June.
—Alastair Pinder, Head EM and Global Equity Strategist, HSBC
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Janus Henderson Investors
Despite high expectations for a poor outcome on “Liberation Day,” the reality was even worse. Tariffs were higher on key trading partners, with Asian export powerhouses seeing the most severe impact. In addition, there was a new baseline tariff of 10% applied to all countries and the “de minimis” exception that had applied to Chinese goods was removed.
In a blow to those looking for negotiations to bring down the applied rates, the timeframes laid out for implementation are very short, leaving little room for specific deals to be carved out. While that perhaps brings greater transparency in some respects, markets will await any reciprocal tariff response from the larger economies around the world, and any potential consequent escalatory “retaliation” from the U.S. that follows. With the potential revenue to be generated from tariffs featuring heavily, it is also far from clear that the U.S. administration is going to strive for deals that might reduce the money raised from imports. Uncertainty over how the dust ultimately settles looks likely to hang around for some time yet, frustrating investors who crave clarity.
Such a broad negative policy catalyst for the global economy rightfully demands a reassessment of the general outlook. If the announced tariffs are implemented and remain at the levels laid out, the danger of the global economy slipping into contraction has certainly jumped higher. This is not to say that recessions are a certainty, only that the likelihood is now meaningfully higher.
Markets have clearly taken note but are still far from pricing in the most negative scenarios, with valuations on many equities still elevated vs history. We can find some evidence that markets are oversold in places but deterioration in fundamentals could easily make these irrelevant. Similarly, government bond markets would likely need to see a further shift lower in yields to price in more dramatic responses from central banks to support employment levels.
—Adam Hetts, Portfolio Manager and Global Head of Multi-Asset, Janus Henderson Investors
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LPL Financial
“Trump’s tariff plan probably represents a shift for markets to quickly move from max uncertainty to max pessimism, although if countries retaliate—and Europe and China are talking like they will—rates could go up even further and drive another leg down for markets.
The next week will be critical as the highest tariff rates go in on April 9. Stocks should stabilize once negotiations start to bear fruit and take rates down, assuming it’s clear to markets that no meaningful tariff rates will be increased further because of retaliation.
Services-oriented and more domestic businesses could be relative winners, but if recession odds rise as more job losses come, and rates don’t fall much because of tariff-driven increases in inflation expectations, even the most defensive, income-oriented areas of the equity market would be vulnerable.
In a high-tariff scenario, S&P 500 earnings per share (EPS) could easily be hit by 5% or more. It looks like that’s what we’ll get, so expect the consensus estimate for 2025 S&P 500 EPS to drop from $268 to below $260 estimate in the coming weeks, barring significant fruitful bilateral negotiations. Our $260 estimate is now at greater risk and odds of recession have perhaps risen from 30% to 50%.
—Jeff Buchbinder, Chief Equity Strategist, LPL Financial
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William Blair
The April 2 tariffs seem purpose-built to hobble the apparel industry, with the highest tariffs targeting regions that in aggregate are the source of 50% of apparel imports and a weighted average tariff of some 32% now levied against countries that are the source of close to 85% of apparel imports.
Companies had a relatively uniform lack of clarity and therefore strategy on this event, while the clear consensus is that the new tariffs are well above what most envisioned. In response, there is an uncertain share of cost to be spread between suppliers, companies, and customers.
We believe apparel companies have less capacity to take price than they had coming out of 2020 when the industry was absorbing the initial China tariffs. There was a clear benefit during this period from stimulus, forced savings and real wage growth, which allowed for a combined increase in price of more than 10% over three years versus average inflation of -50 basis points going back to the mid-1990s.
We think in a category where price has historically been harder won, passing through price rises after a period of outsized increases is less of an option for most companies, let alone enough to make a significant dent in the magnitude of the tariff impact. Suppliers will likely be expected to make up most of the shortfall, where we have less visibility.
Moving production into other countries is a less attractive option given lack of skilled labor and infrastructure in these regions. This mostly points to companies having to take a very real, very uncertain-in-magnitude margin hit that is to remain an overhang on the group into first-quarter earnings season starting in early May. The notion that companies will have much clarity a month in could still prove overly optimistic. We think the aggregate increase in merchandise cost is likely to be about 30%, of which it is safe to assume companies will have to eat a fair share.
—William Blair Analysts Dylan Carden and Anna Linscott
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Keefe, Bruyette & Woods
Within the property and casualty industry, we think the just-announced tariffs will mostly impact personal insurance (along with commercial auto physical damage, commercial property, marine lines, and surety) claim costs, including more expensive car parts, used cars, and construction materials.
That said, we expect insurers to be able to navigate these issues; Mexico and Canada (which represent significant shares of relevant imports) apparently aren’t facing new tariffs, and since it should take time for tariff-related inflationary impacts to manifest, we think insurers have time to file for rate increases, which state regulators are likely to approve.
Within personal lines, we expect a bigger tariff-related inflationary impact for auto than homeowners, given the 25% tariff on imported vehicles; the White House estimated that in 2024, imports accounted for about half of the 16 million vehicles bought domestically. In contrast, according to the National Association of Home Builders, only 7% ($14 billion out of $204 billion) of goods used in residential construction are imported (mostly from Canada, Mexico, and China). More than half of the roughly $83 billion of imported vehicle parts and accessories bought in 2024 came from Mexico and Canada.
—KBW analyst team, led by Meyer Shields
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Global X
“New tariffs are likely to weigh on U.S. and global growth, but this is an interesting time for the administration to take this gamble. Fundamentals in the U.S. economy across labor, leverage, and liquidity are healthy, and the U.S. has been the fastest-growing G7 country since 2020. Seems like the White House is taking that strength out for a spin to see whether the U.S. is more resilient to tariff headwinds than other trading partners.
The new round of tariffs are not quite as bad as they could be but still are significant. The administration announced a minimum rate of 10%, which was below the 20% that had been signaled. Perhaps more meaningfully, the administration is looking to charge half the monetary and non-monetary taxes on U.S. products. The U.S. decision to impose tariffs at half the rate of foreign partners is an interesting move. It signals the intent to even the playing field but also leaves the option of escalating further to match.
Trading partners will have to decide whether they want to try and negotiate the tariffs lower or live under the new regime. The administration based new tariff rates on calculations of barriers imposed by foreign countries on U.S. goods. Those calculations will come under scrutiny, and many trading partners will likely argue that those numbers are inflated. That leaves room for negotiations, but that will take time.
International markets outperformed U.S. equities in recent months on expectations that U.S. policies will slow growth. The new tariffs could take some steam out of international trade. Tariff announcements are not good news for trading partners, and the administration is likely to leave these in place for some time. Expect market volatility to persist in the coming months as tariff data works into economic data.
Consumer, small business, and investor sentiment has already softened. This will work into inflation, spending, and investment over the next couple of quarters. Adopting hedged strategies could prove interesting during that period. Not surprising to see markets move lower. There is some dispensation for Mexico and Canada, but this will impact many U.S. companies as S&P 500 companies derive meaningful revenue from overseas. Even domestic industries will likely feel some pinch.
Hope for a softer tariff policy has turned out to be misplaced.
—Scott Helfstein, Head of Investment Strategy, Global X
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Why Are There Quotes Around ‘Reciprocal’?
“Reciprocal. That means they do it to us and we do it to them. Very simple. Can’t get any simpler than that.”
That’s a direct quote from President Trump as he unveiled the reciprocal tariffs.
Unfortunately, it’s not that simple.
Truly reciprocal tariffs would be an exact-match tariff based on the tariffs other countries charged us. If, say, the U.K. had a blanket 10% tariff on U.S. goods, a “reciprocal” U.S. tariff would be 10%.
The tariffs we’re charging other countries are not that. According to various experts, they’re not even close, in fact.
James Surowiecki, contributing writer for Fast Company and The Atlantic, and Editor at The Yale Review, was among the first to figure out where the “reciprocal” tariff numbers actually came from:
“They didn’t actually calculate tariff rates + non-tariff barriers, as they say they did. Instead, for every country, they just took our trade deficit with that country and divided it by the country’s exports to us.”
The administration effectively confirmed this, with Trump saying we were charging “half of what they are and have been charging us,” and a White House official telling reporters that “the numbers [for tariffs by country] have been calculated by the Council of Economic Advisers … based on the concept that the trade deficit that we have with any given country is the sum of all trade practices, the sum of all cheating.”
In short: These are “reciprocal” tariffs in name only. In many cases, the tariffs are much, much higher than what other countries charge on our exports. You can see a full list of tariffs by country here … however, we’re not displaying the White House’s figures for “tariffs charged to the U.S.” because they’re factually inaccurate.
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