Markets Likely to Continue to Reel From Liberation Day Tariffs
April 7, 2025
Last week ended with an unexpectedly strong employment report, with nonfarm payrolls rising 228,000 in March, easily surpassing the median forecast of 140,000.1 The unemployment rate ticked up to 4.2% from 4.1% in February.2 Markets shrugged off the employment report and continued the rout that began after the White House’s announcement of reciprocal tariffs on April 2, a day it dubbed “Liberation Day.”
These tariffs will vary by country, ranging from a minimum of 10% to a maximum of 50%.3 They will not apply to steel, aluminum or vehicles and parts, which are already subject to a separate 25% tariff.4 For the week, the S&P 500 Index fell 9.1%, its worst week since the beginning of the COVID-19 crisis in March 2020.5 The Dow Jones Industrial Average decreased by approximately 7.9%, the Nasdaq Composite Index dropped around 10% and the 10-year Treasury yield fell to 3.99% — its lowest since October 2024.6,7
The White House’s wide-ranging duties prompted a retaliatory response from China, which announced last Friday that it will impose a 34% tax on all U.S. imports, taking effect this Thursday.8 European Union leaders are still considering their response. The U.S. trade tariffs and China’s countermeasures have stoked fears of a trade war and the prospect of a global recession.
While tariffs will likely continue to dominate the headlines, the March consumer price index (CPI) report, will be released Thursday.9 It is anticipated that CPI will fall from 2.8% (over the trailing twelve months) in February to 2.5% in March, with core inflation expected to tick down slightly to 3.0%.10 Additionally, several Federal Reserve (Fed) officials are scheduled to speak throughout the week and may offer important insights into the Fed's monetary policy direction and economic outlook.
Sources:
1,2CNBC – U.S. payrolls rose by 228,000 in March, but unemployment rate increases to 4.2%; 4/4/25
3,4CBS News – Key moments and reaction to Trump's "Liberation Day" announcement of new tariffs; 4/2/25
5,6Barron’s – The Stock Market Had Its Worst Week Since the Pandemic. Keep Hope Alive; 4/4/25
7Morningstar – 10-Year Treasury Yield Falls to 3.992% This Week Largest One-week Decline Since August 2024 — Data Talk; 4/4/25
8AP – China slaps a 34% tax on all US imports in retaliation for Trump’s tariffs; 4/4/25
9,10MarketWatch – U.S. Economic Calendar; as of 3/17/25
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