Trump’s ‘Liberation Day’ tariffs were worse than expected—sparking a global selloff

It’s worse than expected. As the White House was ironing out details of the plan deep into Tuesday, markets were showing some signs of life as investors hoped for last-minute leniency. But stock futures took a dive following Wednesday’s announcement. Only about half of what Americans buy is made in America, according to Commerce Department data, and industries like the auto sector that have complex global supply chains. 

This undermines manufacturers’ China+1 strategy. Some Asian countries are especially hard hit with tariffs of 40% or more, dealing a blow to U.S. manufacturers’ push to diversify production beyond China to low-cost neighbors like Vietnam, Bangladesh and Cambodia, especially in areas like textiles and electronics. Gap Inc.—home to Gap, Athleta, Banana Republic and Old Navy—has reduced its exposure to China in recent years but still sources the vast majority of its apparel from Asian countries targeted by the new tariffs. Change takes time. 

A global backlash could hurt all companies. Trump described yesterday’s tariffs as “kind” to America’s trading partners. From the anger of foreign leaders to the foreign consumers boycotting U.S. products and travel, it’s clear that our partners disagree. Hostility is bad for business, with economists from EY, Goldman Sachs, and Moodys predicting lower growth from self-inflicted tariff wounds. I spoke this week with Niccolo De Masi, CEO of quantum computing company IonQ. “We’re building all of our stuff in America,” he said. “We’re not impacted negatively by tariffs but we are realistic that our ability to succeed in Asia and Europe comes with having more of a presence there.” That’s harder to do if a trade war whips up nationalist instincts.

This could devastate hard-hit economies and industries. Jacques Vandermeiren, the CEO of the Port of Antwerp-Bruges, Europe’s second largest port, told my colleague Peter Vanham earlier this fall, “If Trump puts in place tariffs of up to 10 percent, we’ll deal.” Substantially higher than that, Vandermeiren warned, could spell disaster for Europe’s steel, aluminum, auto, and other export-oriented industries. Switzerland’s struggling watch industry, which exports more of its products to the U.S. than any other country, will now face a hefty 31% tariff. Will those who crave a Rolex or Patek Philippe settle for a substitute? I doubt it.

There will be much negotiating in the coming days and business leaders know from experience that what appears on paper at a press conference may not translate to action at the border–or can be swiftly reversed. And U.S. consumers, whose spending accounts for more than two-thirds of GDP, aren’t looking that excited by all these tariffs that they’re told will help them in the end. Consumer sentiment tracked by the University of Michigan has been trending down this year to the lowest level since 2022.

Adam Smith once wrote that nations rarely thrive by beggaring their neighbors. That was in 1776, when mercantilism was dying and the U.S. was being born. Freed from British rule, the young nation used tariffs to develop homegrown industries that later competed on the world stage. With a globally connected U.S now returning to tariff levels last seen in the early 1900s, as cars were just coming on the scene, the impact could be very different.

More news below.

Contact CEO Daily via Diane Brady at diane.brady@fortune.com

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“Liberation Day” tariffs: Americans will now pay import taxes for goods from more than 180 countries. Read a summary of the president’s announcement here. The official White House fact sheet is here. And Trump’s charts showing tariffs broken down by country are here. Now let’s dive into the details …

• The markets: Global selloff begins. Equities markets were expected to take a hit regardless but the tariff levels were higher than expected—and markets are reacting accordingly. Japan’s TOPIX was down 3%. European indexes were down across the board, with the Euro Stoxx 50 dropping 2% in early trading. S&P 500 futures contracts are down 3% this morning, premarket, a much larger decline than you’d normally see.

Europe was first out of the gate with threats to retaliate.

Russia isn’t on the list.The White House said that was “because sanctions from the Ukraine war have already rendered trade between the two countries as zero." But that’s not true. Russia and the U.S. still conduct about $3.5 billion in vestigial annual trade, a much larger amount than many of the small island nations on the list, according to Axios.

Must-read:John Authers’ column for Bloomberg. “Tariffs at these levels would turn America into its own economic island, trading only with itself. Horizontal links with the rest of the world are out,” he says. “Back-of-envelope math suggests that this is even bigger than the Smoot-Hawley tariffs at the beginning of the Great Depression.” And: “This represents 2.2% of GDP and twice the size of the largest tax increase in modern US history,” according to Dan Clifton of Strategas Research Partners, Authers says.

The math behind the tariffs is funky. The White House appears to have taken each country’s trade deficit with the U.S. and divided it by their total exports to the U.S. in order to create a percentage tariff charge, according to Ian Bremmer and James Surowiecki. Reality check: Trade deficits and surpluses are a normal part of international trade, reflecting the relative size of each country’s economy and the trade they do with others—they’re not “tariffs,” as Trump claims. Here is the White House's official explanation.

Searches for “Kindleberger Spiral” have risen 100%, according to Google Trends. The spiral is a diagram drawn by economic historian Charles P. Kindleberger to show the monthly decline in world trade from 1929 to 1933, when almost two-thirds of trade was wiped out by a U.S. tariff regime similar to the one Trump just announced. Read about it here.

Goldman’s Solomon isn’t panicking. Goldman Sachs CEO David Solomon said this week that “the U.S. economy is in relatively good shape” but warned against “enormous policy uncertainty.” The comments came during a conversation with Brittany Boals Moeller, the bank’s region head for San Francisco private wealth management.

Elon Musk denied he was imminently leaving his role at DOGE early to tend to his ailing electric car company. “Fake news.”

BYD outpaces Tesla. China-based BYD sold more electric vehicles in Q1 than any other EV company, overtaking Tesla—which had its worst quarter since 2022. Tesla bull and Wedbush Security analyst Dan Ives called Tesla’s quarter “a disaster on every metric.”

In conversation with KLM CEO Marjan Rintel. Fortune’s Phil Wahba flew to Amsterdam to speak with KLM CEO Marjan Rintel, who went from working in the city’s airport to running an airline that posted more than €12 billion in revenue last year. Read the new profile here, including the compliments she recently received from Delta Air Lines CEO Ed Bastian.

Google sued for allegedly discriminating against men. An unnamed boss at the company is accused of systematically favoring women for promotion.

From the analysts

• Wedbush on Tesla: “The more political he [Musk] gets with DOGE, the more the brand suffers, there is no debate. This quarter was an example of the damage Musk is causing Tesla. This continues to be a moment of truth for Musk to navigate this brand tornado crisis moment and get onto the other side of this dark chapter for Tesla with much better days ahead,” per Daniel Ives et al.
• Wedbush on tariffs: “Anyone that has taken a basic economics class in high school/college knows that consumers pay for the tariffs...there is no debate,” per Daniel Ives et al.
• Swoop Funding North America on tariffs: “U.S. farmers are bracing for retaliatory measures from trading partners such as China, Canada, and Mexico, which could further depress commodity prices and reduce export opportunities,” per Daire Burke.
• EY on Friday’s upcoming jobs report: “Despite increased tariff turbulence, the labor market likely maintained healthy growth in March with payroll employment rising by 135,000 and the unemployment rate drifting higher to 4.2%. While the significant increase in labor market pessimism points to rising job insecurity, labor market indicators point to only a gradual weakening in labor market conditions thus far,” per Lydia Boussour.

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Disgraced Frank founder Charlie Javice argues her ankle monitor is ruining her blossoming Pilates career by Beatrice Nolan

Trump team were still hashing out ‘Liberation Day’ tariff plans 24 hours before the announcement by Christiaan Hetzner