U.S. Economy This Week, April 4, 2025: Tariff Terror
The markets went haywire in response to Trump's tariff announcement. Ph.D. economist Bob Genetski guides you through it with a quick, commonsense analysis.
Guest post by economist Robert Genetski, Ph.D.
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Trump’s “Liberation Day” marks a major shift in U.S. policy toward tariffs and protectionism. While the objective is to bring about a golden age of self-sufficiency, the impact is highly disruptive, whatever the ultimate end.
The imposition of a 10% tariff on all goods plus higher rates on various countries is reminiscent of the infamous Smoot-Hawley Tariff of 1930 that led to the Depression of the 1930s.
Tariffs are a tax on Americans. Trump’s action is comparable to placing roughly a 20% tax on all imports. The main impact will be to raise prices, reduce business, and make the U.S. poorer. Unless it is quickly reversed or mutually modified, the disruptive impact of tariffs will create a serious downturn.
As China and Canada retaliate with major tariffs on the United States, a trade war has begun. Tariff policy overwhelms the significance of today’s jobs report, which shows a gain of 209,000 private payroll jobs in March.
For the week ahead, the developing trade war will remain the most significant event impacting markets. The stock market will be the first to respond positively to any meaningful positive shift in trade policy. We will be monitoring our stock momentum indicator closely for signs of any significant shifts.
Aside from tariffs, the most significant news next week will be Thursday’s CPI report for March. As with most economic numbers, these will be distorted by tariffs and other items. For March, the Cleveland Fed estimates the total CPI will be essentially unchanged while the core CPI will be up 0.26% for the month or a 3.1% annualized.
A 6% decline in oil prices in March was a key factor holding the total CPI down. If the Fed’s estimates are accurate, the year-over-year rates will decline to 2.5% for the total and 3.0% for core.
Even if the numbers show inflation declining, most will question the downward trend. The initial impact of tariffs will raise most prices and keep consumer inflation expectations elevated.