Trump, Tariffs and Liberation Day
The Royal Mint
Market News
Checked by , 
Liberation Day, as coined by President Trump, marked a key milestone in US trade and economic policy. In the run up to April 2nd, markets and countries were primed for the official announcement of trade tariffs which were assumed to be targeted at major trading partners who were deemed to be ‘getting a better deal’ on trade terms. However, Liberation Day brought not only sweeping 10% tariffs for all trading partners, but also reciprocal tariffs for the ‘worst offenders’.
Trade tariffs have long been considered in mainstream economics as a ‘beggar thy neighbour’ policy which disbenefits all parties. Most commentators are expecting the move to increase inflation and lower the global growth trajectory, a scenario known as ‘stagflation’. However, the tariff move has, and will, bring trading partners to the negotiating table, which could ultimately result in a mutual agreement on more preferential terms for the US.
The Trump administration’s case for implementing tariffs was simple on the surface: protect American industries, reduce the trade deficit, and bring manufacturing jobs back to US soil. The logic, wrapped in the slogan "America First," was that by making imported goods more expensive, domestic alternatives would thrive. It is an effort to rebalance what was seen as an unfair global playing field—especially with China, who are accused of intellectual property infringements, forced technology transfers, and currency manipulation. Whilst this is ostensibly an honourable endeavour by President Trump, with ever globalised and interconnected supply chains, the net benefit to the US is at best unclear.
On Wednesday, the EU and China announced retaliatory tariffs due to come into effect April 15th. The US’s largest trading partner, China, announced 84% tariffs on US imports, coming shortly after the US had escalated its China tariffs to 104%. In a statement to the World Trade Organisation, a Chinese delegate noted that ‘Reciprocal tariff is not - and will never be - a cure for trade imbalances. Instead, they will backfire, harming the US itself.’ The escalating tensions between the world’s largest economies is certainly an unwelcome development, and China has also indicated that key US industries could be further targeted should relations continue to sour.
If we look at the initial reaction from stock markets, tariff plans have been met with general negativity. Major western market indexes including the FTSE100 and US S&P500 fell more than 10% in the first leg down, whilst the economically sensitive Brent Crude oil price lost 20% since the announcement. Some of this ground has since been recovered, as later on Wednesday, as US trading got underway, President Trump moved to calm markets by placing a 90-day pause on reciprocal trade tariffs, excluding those applied to China, which were raised yet again. This row back no doubt influenced by news that investors were aggressively selling US government bonds; a move which had caused a swing in the US benchmark 10-year yield (interest rate) not seen in decades, casting a shadow over the credibility of Trump’s trade policy.
Tariffs implemented in President Trump’s first term in office (2017-21) had already strained relations with China. Far from folding under pressure, Beijing had dug in. It applied tariffs of its own on US goods, found alternative trade partners in the EU and Asia, and doubled down on its Belt and Road Initiative—a clear sign it wasn’t planning on being economically cornered.
Moreover, the tariffs served to catalyse a shift already underway: the decoupling of U.S.-China economic interdependence. Tech companies had started looking elsewhere for manufacturing, and both nations began talking less about trade and more about economic sovereignty and national security. In short, what began as a spat over steel and soybeans has morphed into a deeper geopolitical rivalry.
What’s clear is that sparring over trade terms, the announcement of tariffs, then escalation and abrupt pausing is resulting in significant market uncertainty and volatility; a scenario where gold tends to perform well. And, should tariffs ultimately lead to stagflation, particularly in the Western world, then this has historically been a ‘goldilocks’ environment for gold price performance.
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Sources
Trump tariffs live updates: European markets rally after Trump's tariffs paused - BBC News
“Liberation Day” Tariffs Explained
Sharp US bond selloff revives flashbacks of COVID-era 'dash-for-cash' | Reuters
