Trump's Tariffs: WTF Just Happened?

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Alright, it is official.

Trump just announced sweeping tariffs on practically every country in the world. Even countries that are only inhabited by penguins.

Markets reacted instantly, and not in a good way. The S&P 500 has dropped more than 5% as of writing this.

The markets are convulsing not just because of the tariffs as a whole, but also because of how the tariffs were calculated… which is leaving many analysts and investors scratching their head.

Ok, so what exactly just happened? And should you be worried as an investor?

Today we cover:

• What tariffs were announced

• How the tariffs were calculated

• The market reaction

• The near-term risks to watch out for

• What it means for us as investors

As always, you can watch this article on YouTube as well:

Let’s dive in.

The Tariff Announcement

On April 2nd, Trump took to the podium in the Rose Garden and declared Liberation Day as “one of the most important days in American history”.

He then outlined a very long list of tariffs on practically the entire world.

Specifically, Trump announced the following tariffs would take effect April 9th:

• A universal, minimum 10% tariff on all U.S. imports.

• An additional 34% tariff on Chinese goods, adding to the existing 10%-25% tariffs that Trump placed on China in his first term.

• 20% tariff on EU imports, signaling that even allies are not safe.

• No new tariffs on Canada and Mexico. Important to note that Trump already placed a 25% tariff on most Canadian imports and a 10% tariff on Canadian energy products.

• Exemptions on certain critical products, such as semiconductors and pharmaceuticals. Some products like steel were exempted because they already are affected by a separate tariff.

Last week, we talked about how the threat of tariffs was creating uncertainty, and that is why the S&P 500 was down.

Well, we now have some certainty. And yet the stock market continues to fall.

And there are a few reasons for this.

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How The Tariffs Were Calculated

This is perhaps the most controversial and confounding element of these new tariffs.

Trump claims that he is responding to the tariffs that other nations have placed on the U.S.

And the U.S. is only responding with 50% of what their tariffs are! Here’s a direct quote from Trump’s speech:

There’s only one problem.

That 2nd column isn’t the tariffs of those countries.

Vietnam does not have a 90% tariff on US goods.

Instead, what the Trump administration appear to have done, is taken America’s trade deficit with that country, and divided it by their exports.

This is, quite frankly, not even remotely close to the “tariff” of that country.

Now, there is some logic behind this… even if it requires some serious mental gymnastics.

But this head-scratching calculation is one of the big reasons we are seeing the market drop in response.

The Market Reaction to the Tariffs

So how did investors respond to “Liberation Day”?

It wasn’t pretty…

• S&P 500 dropped 5%, Nasdaq down 6%, Dow fell 4%

  • The S&P lost $2.4 trillion in a single day, making it the single largest drop since 2020

• Companies with global supply chains (Amazon, Nike, Apple) were hit hardest.

• The U.S. dollar fell sharply, its biggest drop since 2023

• The 10-year yield dropped close to 40 basis points, to 3.9% and change

If it was uncertainty pulling the market down in the weeks leading up to the tariffs, why are they continuing to drop?

Firstly, it’s important to note that uncertainty is still a major factor.

While there is now “certainty” around the tariffs themselves, there is now even more uncertainty around how other countries will react, how corporations will have to adjust their supply chains, how much inflation it could cause by raising prices for consumers, and so on.

And the head-scratching method the White House used to calculate the tariffs is not instilling confidence.

As mentioned last week, a tariff is a tax.

More specifically, it’s an import tax, which is a tax on consumption.

Taxes generally disincentivize behavior. That’s why the government taxes alcohol and cigarettes.

So in a sense, tariffs are disincentivizing consumption, which is bad for growth and bad for the economy in the near term.

Immediate Risks for Investors

So what should we be looking out for?

• Higher consumer prices: Again, as we covered last week, tariffs are paid by the importer of foreign goods and will likely get passed down to the end consumer.

• Retaliation: China has already announced a 34% reciprocal tariff. The EU and Canada are already preparing counter-tariffs.

• Supply chain chaos: Companies relying on imports will scramble to adjust. e.g. Jaguar, Land Rover and Nintendo are already pausing some of their operations.

• Inflation pressure: Fed rate cuts may be off the table if inflation spikes again.

I said it last week, and I’ll say it again now:

I don’t have a crystal ball. CNBC doesn’t have a crystal ball. Even Trump, Bessent, Navarro, and Lutnick (the very architects of these tariffs) do not have a crystal ball.

And while it’s easy to dismiss these tariffs as a complete fumble of economic policy, from all the interviews I’ve watched of these folks, it’s clear to me that the Trump administration genuinely believes that this is the right strategy for the United States.

If there’s interest in better understanding their worldview, and why they might think tariffs are a good things, let me know. I’m happy to provide that perspective.

But for now, we need to look at our own portfolios and what we should do in the face of this new paradigm of global trade.

What We Should Do as Investors

So far, here’s what it means for us as everyday investors:

• Expect more volatility. Don’t be surprised if we see some sharp swings, especially in stocks that are particularly affected by tariffs.

• Watch inflation-sensitive sectors. Tariffs = higher import costs. That can trickle down into consumer prices. I’ll be watching the inflation numbers closely, and will report back to you all once we know more.

• Stay diversified. If you're a passive investor, this is why you stay passive. Broad-based ETFs like VTI or SPY minimize the impacts of these kinds of shocks.

• Don’t panic… but pay attention. If more countries retaliate or inflation flares again, the Fed could be forced to respond. And if you don’t have time to follow the news, don’t worry — Wealth Potion has you covered 😉

• Opportunities may emerge. If certain sectors overreact (like consumer goods or industrials), there may be buying opportunities for long-term investors. Some reports suggest that retail is already buying the dip. I’m going to wait until we see institutions doing the same. As always, buy and hold assets that you believe will go up in value in the long-term.

Short-term volatility is never fun. Trust me, as a Bitcoin investor, I’m no stranger to volatility. But as Warren Buffett so eloquently says:

Right now, the market’s vote is clear. Tariffs are going to be very bad for the economy.

But as time goes on, the market will shift to weigh the real impacts of these tariffs on the global economy.

And as always, I’ll be watching.

To your prosperity,

Brandon @ Wealth Potion

Build in Public Update

Trump is giving me so much material to cover 💀

In all seriousness, I wasn’t originally planning to keep up the 2 videos / week cadence, but with how much discussion (and confusion) there has been about these tariffs, I felt that a fast newsletter and video would be appreciated by you all.

That said, I’d still love your feedback.

Is two newsletter articles per week a pleasantly surprising update?

Or would you rather keep it to one article per week?

I read all replies, so let me know.