The Trump administration said it will not prioritize talks with China but will focus on allies like South Korea and Japan. This comes as tensions escalate following Beijing’s recent measures.

Meanwhile, the US will impose a 104% tariff on Chinese imports starting Apr. 9, along with up to 50% tariffs on products from other countries.

The announcement has shaken markets. The S&P 500 closed below 5,000 for the first time in nearly a year, now 18.9% below its Feb. 19 peak.

US companies have lost US$5.8 trillion in market value since last week, according to LSEG.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Current tariffs represent the most dramatic protectionist shift since the Great Depression

The newly implemented tariffs mark a radical departure from decades of U.S. trade policy, with economic impacts potentially rivaling historical protectionist eras.

According to Yale Budget Lab analysis, these tariffs will raise the average effective U.S. tariff rate to 22.5%, the highest level since 1909, a dramatic increase from the historic low of 1.61% maintained in recent decades 1.

This shift echoes the Smoot-Hawley Tariff Act of 1930, which raised duties to 59.1% on dutiable imports and is widely believed to have worsened the Great Depression by triggering international retaliation 2.

The rapid stock market response demonstrates how quickly protectionist policies can erode market confidence. For example, the S&P 500’s $5.8 trillion loss in just four days represents the deepest four-day loss since the benchmark’s creation.

History suggests severe economic consequences may follow, as post-Smoot-Hawley U.S. imports from Europe plummeted from $1.3 billion in 1929 to just $390 million by 1932, a 70% collapse that deepened the global economic crisis 2.

2️⃣ Consumers face substantial price increases with disproportionate impact on lower-income households

The economic burden of these tariffs will fall heavily on American consumers through price increases across a wide range of everyday products.

J.P. Morgan estimates the tariffs will raise consumer prices by approximately 2.3%, costing the average household about $3,800 annually in higher expenses 3.

Specific product impacts are already materializing. For instance, industry data shows running shoes made in Vietnam that currently retail for $155 will jump to $220 when the 46% tariff takes effect.