Why April 2nd will be a watershed for markets

Published on March 15, 2025

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In one sense, US President Donald Trump seemingly has a winning communication formula by calling for reciprocal tariffs. What that means is -- whatever tariff rates a country charges the US, the US will hit back with.
That makes sense to most people but it begins to fall apart in practice.
For one, many countries aren't interested in US exports of things like farm goods or autos and already don't export those things to the US, so they're pointless. Secondarily, the US may need things that have tariffs on them and the exporting country may not. Think of avocados from Mexico, which are heavily purchased by the US. If Mexico were to have tariffs on US avocados (which are barely shipped south) then reciprocal tariffs wouldn't accomplish anything except to drive up domestic costs.
More importantly for the short term though is the idea that the US has floated in the case of Europe, Canada and others -- that VAT or sales taxes are tariffs. It's an absurd take, that borders on disbelief. But so does the idea that 0.03 pounds of fentanyl crossing intercepted at the Canada-US border in Dec-Jan is an emergency that justifies 25% tariffs.

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