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Trump announced a sweeping tariff plan today, a date which he has dubbed “Liberation Day.”
A full breakdown of the list of tariffs from the White House is below.
These are some massive moves, ones that definitely change the status quo. China is hit with a reciprocal 34% tariff and the European Union a 20% tariff.
The goal of all of this is to safeguard U.S. industries and bring back blue-collar jobs to the U.S., especially those that are critical for national defense. My concern is what type of inflationary impact this will have on the average American and whether or not these tariffs will really spur industrial jobs. My thoughts on this topic are here.
Trump is going to be very right with this strategy, or he is going to be very wrong. We will know soon enough.
For now, the futures markets (which can turn on a dime once the markets fully open) aren’t pleased. The S&P 500 is down -3.3%, and the NASDAQ is down -4.2%.
Amazon’s (AMZN) shares are down by 6%, as roughly 30% of Amazon’s e-commerce business is dependent on Chinese goods and raw materials. Apple (AAPL) is down by 7%, as China is a significant market and major manufacturing hub for the company.
Spread Your Bets
All of this is to prove a point—risk can happen fast. And risk often comes from unknown sources. Six months ago, some would’ve predicted a trade war in 2025 of some sort. After all, Trump 1.0 implemented similar tariffs in 2017. No one thought there would be a trade war of this scale, one that includes our allies—Canada, Taiwan, Mexico, Australia, South Korea, the European Union, and the UK. If one were to adopt libertarian economic policies, especially with allies, it should include free trade.
With U.S. stocks still looking expensive, despite this pullback, European and Japanese stocks look downright attractive. We have seen a massive outperformance of EFA (Developed international stocks—Europe, Japan, South Korea, Australia, etc.) versus the S&P 500.
We believe in U.S. outperformance over time, but it makes sense to buy some international stocks (Ex-China and Russia) to spread your bets. This current market is an excellent reason for this.
We currently target a 25% allocation to the developed markets ex-U.S. We also believe in U.S. small-value stocks over time. Lately, the large-cap growth outperformance over the past decade is at risk, especially since they look grossly overvalued at just about every metric.
If you hold any large growth tech names, especially with large gains, keep this in mind. Maybe it’s not a bad idea to look to reduce your risk. Yes, paying capital gains sucks, but so do big market drops.
In The End
Markets move fast, but policy moves even quicker these days. We will soon find out whether Trump’s tariff blitz turns out to be a bold stroke of economic genius or a costly misstep.
In the meantime, keep this in mind: Concentration (stock/sector/country/etc.) breeds risk, and diversification is defense. Don’t bet the house. This is a time to stay nimble, stay globally minded, and, most of all—stay humble.
