Here Comes "Liberation Day"

There’s a date that Donald Trump can’t stop talking about.

“April 2nd is Liberation Day for America,” Trump announced in a Truth Social post this month, identifying it as the day that the next escalation in his trade agenda — reciprocal tariffs — will go into effect.

Under reciprocal tariffs, the U.S. would tax products entering from other countries at the rate that those countries tax products from the U.S. If Japan, say, imposed a 30% tariff on all American imports, the U.S. would set a 30% tariff on all Japanese imports in return. The move would jack up American tariffs to levels not seen in almost a century.

Trump went on to promote the “Liberation Day” declaration three days later, and again the next day, and again two days after that. (The date, in case you’re wondering, was specifically picked to avoid April Fool’s Day.) “For DECADES we have been ripped off and abused by every nation in the World, both friend and foe,” the president wrote in one post. “Now it is finally time for the Good Ol’ USA to get some of that MONEY, and RESPECT, BACK.”

But Americans don’t seem nearly as excited about their impending “liberation.”

Every month, The Conference Board — a non-partisan business research group — surveys Americans on how they think the economy is doing. They put the answers together to create something called the Consumer Confidence Index.

The index for March came out this week, and it showed consumer confidence slipping by seven points, to its lowest level since January 2021.

But that wasn’t it. The group also asks people to project forward, asking them how they think the economy will perform in the near future. By Trump’s rationale, this should be a no-brainer: no matter how the economy is doing now, it is about to soar upward, due to his new tariffs. It’s about to be liberated.

Americans aren’t convinced. The Conference Board’s Expectations Index dropped even more than the Present Index, reaching its lowest level in 12 years. Even during the coronavirus pandemic, Americans weren’t as pessimistic about the future of the economy as they are now.

When the research group asked respondents to explain their answers, one topic came up especially often: “Inflation is still a major concern for consumers,” The Conference Board reported, summarizing the responses, and “worries about the impact of trade policies and tariffs in particular are on the rise.”

Investors are just as panicked: stock markets soared to record heights on the week of Trump’s inauguration, but they’ve repeatedly taken dips since then. Nearly everyone on Wall Street agrees that concerns about Trump’s tariffs are the key reason for the plunge.

Why all the worry about tariffs?

Because the U.S. economy is incredibly interconnected with the rest of the world: much of what we buy is made, in all or in part, in other countries.

And when the U.S. imposes tariffs, that means that American companies have to pay more to import those foreign-made products. Often, companies pass those costs onto consumers by raising prices. Countries hit with U.S. tariffs often impose their own tariffs in retaliation, which can hurt further American companies by decreasing the likelihood that foreign companies will buy their goods.

According to Yale University’s Budget Lab, Trump’s increased tariffs on Canada, Mexico, and China (some of which have been paused) are set to increase costs for the average American family by $1,600 to $2,000 each year.

And that’s before the April 2 tariffs are factored on. According to Yale, under a full-scale retaliatory tariff policy, the average family would see costs go up by $2,700 to $3,400 annually. America’s gross domestic product, or GDP, an important economic indicator that measures the value of goods and services produced in a country, would shrink by an estimated $100 billion to $175 billion annually.

Predictions like that have some economists whispering about a dreaded phrase: stagflation, which refers to the dire combination of high inflation, stagnant economic growth, and low unemployment.

At their meeting this month, the Federal Reserve — citing Trump’s tariffs — adjusted its inflation projections for 2025 upwards, from 2.5% to 2.8%, and its GDP growth projections downward, from 2.1% to 1.7%. The Fed projected that the unemployment rate will remain low.

Fed chair Jerome Powell told reporters that he doesn’t believe 1970s-era stagflation is on the horizon. “I don’t see any reason to think that we’re looking at a replay of the ’70s or anything like that,” he said. “Underlying inflation is still running [around 2%, the Fed’s target], with probably a little bit of a pickup associated with tariffs. So I don’t think we’re facing—I wouldn’t say we’re in a situation that’s remotely comparable to that.”

Powell also noted that, despite sinking consumer sentiment, Americans are continuing to spend. “We do understand that sentiment has fallen off pretty sharply, but economic activity has not yet and so we are watching carefully,” he said. “I would tell people the economy seems to be healthy.”

Time and again, though, he referred to the tariffs — not as a source of excitement, but as the main potential threat to an otherwise rosy economic outlook. “I think we were getting closer and closer” to price stability, Powell said, touting the Fed’s success in driving inflation down towards its goal. But now: “I do think, with the arrival of the tariff inflation, further progress may be delayed.”

The other word worrying Wall Street — Powell used it 10 times at his press conference — is “uncertainty.”

Healthy economies thrive on stability. Uncertainty can throw an economy into a tailspin.

According to an index tabulated by the Federal Reserve branch in St. Louis, economic policy uncertainty is currently higher in the U.S. than at any point since Covid — and since the 2008 recession before that. (“Recession” is yet another word on some economists’ lips right now. But, be warned: Economists are very bad at predicting recessions.)

Several of Trump’s policies — and their economic impact — are currently uncertain, including how his deportation campaign could jolt the economy, and how changes to Social Security or potential cuts to Medicaid could impact American pocketbooks.

But, once again, no factor dominates as much as the tariffs, not just because of how they might scramble the economy — but also because of the constant uncertainty about how they will be structured.

“Liberation Day” is a perfect example. Initially conceived as a plan to impose reciprocal tariffs on every country with tariffs against the U.S., Trump is now expected to focus only on the 15% of economies that boast the largest trade imbalances with the U.S.

The list — which his administration has called “the dirty 15” — is expected to include Brazil, Canada, China, the European Union, India, Indonesia, Japan, Malaysia, Mexico, South Africa, South Korea, Switzerland, Taiwan, Thailand, Turkey, and Vietnam, according to the Washington Post.

Although not as sweeping as his initial plan, increasing tariffs on these countries will still be a dramatic move: those nations accounted for nearly 90% of U.S. imports last year.

“I’ll probably be more lenient than reciprocal, because if I was reciprocal, that would be very tough for people,” Trump told Newsmax this week, even though he campaigned on reciprocal tariffs and has promised them repeatedly since taking office.

In another reversal, a series of industry-specific tariffs that were also set to go into effect on April 2 are now expected to be postponed, much to Wall Street’s relief. Stock markets had their best day in weeks after reports emerged that “Liberation Day” wouldn’t be as broad-based as originally planned, just another turn in the tariff rollercoaster.

Of course, none of this dovetails with Trump’s view of the economy.

The president has acknowledged that the tariffs may lead to temporarily higher prices, but he and his aides have insisted that the import taxes will be beneficial in the long-run.

April 2 “will be a day where the United States of America will no longer be ripped off by nations around this world,” White House press secretary Karoline Leavitt said this week. “It will be a day where Americans finally see free and fair trade practices restored. We are no longer going to allow our allies, our competitors, and our adversaries to take advantage of American workers.”

“If you think about your hometown in the state that you grew up, Main Street looks a lot different today than it did many years ago,” she added.

Some companies have already announced plans to move factories to the U.S. in order to avoid paying heightened tariffs, an early sign that the tariffs could lead to an uptick in domestic manufacturing. Hyundai, the South Korean automaker, announced a $21 billion investment in the U.S. this week. TSMC, the Taiwanese semiconductor giant, made a similar announcement, sized $100 billion; Apple did too, with a $500 billion price tag.

Each of these investments will lead to new American factories and tens of thousands of American jobs. “President Trump wants to restore America as a manufacturing superpower around the globe,” Leavitt said. “He wants products to be made right here in our great country with great, hard-working American hands. That will ultimately result in higher wages and more money in the pockets of the American people.”

The key word there is “ultimately.” Even if the tariffs work exactly as Trump promises, it could take months, or even years, for a positive impact to be felt; in the meantime, the prices of everything from phones to cars to food could begin to rise.

Trump is betting that consumers won’t be bothered. “There will be a little disturbance, but we’re OK with that,” he told Congress earlier this month. But with polls already showing an anxious public, and after years of dissatisfaction with inflation — which partially led to Trump’s election — toying with even higher prices could end up being a very dangerous bet.