“Liberation Day”

• President Trump imposed a 10% tariff on all U.S. imports, effective April 5.
• With higher rates up to 49% for countries like Cambodia.
• Aiming to protect domestic industries and reduce a $1.2 trillion trade deficit from 2024.
• 25% tariff on foreign cars started April 3, impacting the automotive sector.
• Potentially raising prices by thousands and affecting countries like Mexico and Germany.
• Tariffs causing significant crypto market sell-offs.
• Bitcoin dropping to around $83,000, amid economic uncertainty, though long-term benefits for crypto as a hedge are debated.

President Donald Trump unveiled a sweeping tariff policy dubbed “Liberation Day,” imposing a 10% baseline tariff on all imports effective April 5, with higher reciprocal rates for countries with significant trade deficits, aligning with his “Fair and Reciprocal Plan” introduced earlier in February 2025.

Tariff Structure and Objectives

The tariffs aim to address a persistent $1.2 trillion goods trade deficit from 2024, driven by non-reciprocal trade practices, as outlined in a White House fact sheet. “President Donald J. Trump declared that foreign trade and economic practices have created a national emergency, and his order imposes responsive tariffs to strengthen the international economic position of the United States and protect American workers.”

The baseline 10% rate applies to all countries, but countries like Cambodia face a 49% tariff, and Vietnam 90%, based on their trade imbalances. Trump stated, “We will charge them approximately half of what they are charging us,” seeking to protect domestic industries and generate revenue to reduce public debt.

The tariff structure, detailed in the White House announcement, includes exemptions for certain goods like steel, aluminum, and energy under previous Section 232 measures, and specific rates for Canada and Mexico, with non-USMCA compliant goods facing 25% tariffs.

“Some goods will not be subject to the Reciprocal Tariff. These include: (1) articles subject to 50 USC 1702(b); (2) steel/aluminum articles and autos/auto parts already subject to Section 232 tariffs; (3) copper, pharmaceuticals, semiconductors, and lumber articles; (4) all articles that may become subject to future Section 232 tariffs; (5) bullion; and (6) energy and other certain minerals that are not available in the United States.”

Automotive Sector Impact

A significant component is the 25% tariff on imported automobiles and parts, effective April 3, 2025, targeting a sector critical to national security, as per reported in CNN Business. Mexico, exporting $181 billion in vehicles and parts last year, faces severe impacts, with Capital Economics noting the sector accounts for 5% of GDP and employs 1 million people, as reported by The New York Times.

Germany, a major auto exporter, sees potential price hikes, with Hildegard Mueller, president of VDA, stating, “The German automotive industry is calling for urgent negotiations between the US and the EU on a bilateral agreement.” Trump’s comment, “We’ll effectively be charging a 25% tariff, but if you build your car in the U.S., there is no tariff,” aims to incentivize domestic production, but Reuters warns working-class buyers could face higher costs, with new cars under $30,000 mostly built abroad.

Crypto Market Reaction

The tariff announcement triggered significant volatility in the crypto market, with CoinDesk reporting a $100 billion sell-off, as investors reacted to economic uncertainty. Bitcoin, previously above $100,000 early in 2025, dropped to around $82,000.

Analysts suggest long-term potential for Bitcoin as a hedge against a weakening dollar, with Coinshares noting tariffs could fuel inflation, impacting crypto prices. However, short-term impacts include increased volatility.