‘Liberation Day’ Tariffs: April 2025 Market Update

The Trump administration has doubled down on aggressive trade negotiations, using extreme demands and minimal concessions as leverage. Yesterday, President Donald Trump announced “Liberation Day” tariffs—sweeping reciprocal tariffs, targeting countries based on the duties, taxes, and non-monetary trade barriers they impose on US exports.

So, what’s really going on, and what do these tariffs mean for investors? We’re here to unpack it in our April 2025 Market Update.

Trump announces sweeping “Liberation Day” tariffs

In what was described as “kind” reciprocal tariffs, Trump announced tariffs at half the calculated level of foreign trade barriers, with a minimum base tariff of 10%—with this rate being applied to and affecting almost all Australian exports.

The move signals a sharp escalation in the global trade war, with significant economic and market implications.

The measures include:

• China: A 34% tariff on top of existing tariffs
• Europe: 20% tariff.
• Japan: 24% tariff.
• Higher tariffs for India, Vietnam, Taiwan, and South Korea.
• Canada & Mexico: No additional measures, though existing 25% tariffs remain.

Australia in the Crossfire: Beef Exports & Exempt Industries

Australian exports are now looking down the barrel of blanket 10% tariffs which apply from April 5.

Trump specifically targeted Australian beef exports, citing biosecurity restrictions on American beef. Meanwhile Australian exporters remain heavily reliant on the US market, with nearly 400,000 tonnes of beef exported to the US annually, valued at $3.4 billion (16% of total exports to the US).

While the tariff increases are broad-reaching, several industries have been granted exemptions, offering temporary relief to certain sectors.

Exempted Australian goods include pharmaceuticals, gold, copper, semiconductors, lumber, and energy resources such as oil and gas. Critical minerals not available in the US are also exempt. 

Notably, steel, aluminium, and foreign-made vehicles were spared from this round of tariffs—though they remain subject to existing duties as high as 25%. 

While Australia has avoided the worst of the tariff increases, broader global disruptions—especially in Asia—could significantly impact Australian trade and economic growth.

Trade War Fallout: Recession Fears Loom

The Trump administration’s aggressive trade stance has rattled financial markets over the past six weeks. Initially, investors expected a softening of demands, but the escalating tariff announcements have shattered that assumption. 

Markets have reacted sharply:

• US equities have fallen over 10%
• High-yield credit spreads have widened by 1%
• Bond yields have dropped more than 0.5%
• Markets are now pricing in the likelihood of four further rate cuts.

Only weeks ago, concerns focused on market volatility and prolonged high interest rates. Now, recession fears dominate.

Research house, Zenith Investment Partners, have raised their risk of recession forecasts from 20% to now 40%—a level that demands serious consideration.

While ‘hard’ economic data—such as consumer spending, business investment, car and truck sales—has not declined, confidence indicators (or ‘soft’ data) have dropped sharply. Elevated uncertainty can suppress hiring, capital expenditure, and can ultimately, reduce economic activity.

^{Chart: “Recession Probabilities.”
Hennessy, D. “Liberation Day. . . or the start of Recession.” Zenith Mosaic Portfolio Insights. 3 April 2025.}

^{Chart: “Economic Scenarios (3 April 2025).”
Hennessy, D. Liberation Day. . . or the start of Recession. Zenith Mosaic Portfolio Insights. 3 April 2025.} 

The Road Ahead: Negotiation or Further Escalation?

The night before “Liberation Day”, Treasury Secretary Scott Bessent said that these tariffs represent a “high-water mark” and countries would be able to take steps to bring their tariffs down. 

President Trump has also noted that tariffs could be reduced if countries ease their own trade barriers, while corporations can bypass tariffs by shifting investment, plant and factories into the US. He emphasised that many companies had already announced significant investment in the US.

These comments appear to indicate a negotiation process ahead, and we are hopeful a major slowdown in growth and lift in inflation can still be avoided.

While tariff levels are now clearer and there are incentives for investment in the US, uncertainty lingers. Trade disruptions, falling confidence and household incomes, and rising inflation point to weaker global growth under this new regime.

Portfolio Considerations.

Despite heightened recession risk, we continue to advocate for a long-term investment approach.

The fund managers selected for Ethos portfolios are of the highest calibre, and the more recent addition of the Talaria Global Equity Fund (hedged) provides additional resilience in volatile conditions. Complementing this, Ethos portfolios’ defensive sleeve includes managers that invest primarily in high-quality, long-duration, fixed-rate government bonds—an asset class that has historically provided strong performance during recessionary periods and in environments where interest rates decline.

For investors in the accumulation phase, maintaining exposure to long term growth assets remains prudent.

For retirees or those drawing income from their portfolios, your adviser will have structured investments to withstand market downturns without requiring the sale of growth assets at an inopportune time.

If you have concerns about how the current market environment may impact your portfolio, please contact your advice team.