US President Donald Trump’s “Liberation Day” tariffs have sparked recession fears and international economic turmoil. Announced on April 2, 2025, they put a minimum 10% duty on all imports, much higher rates on major trade partners. Markets dipped, inflation worries mounted, and analysts cautioned of delayed growth, reduced consumer spending, and potential retaliation from major economies.
Fitch Warns of Recession Risks
Fitch Ratings warned that steep tariff increases may plunge the US into recession and decelerate world growth. The effective tariff rate (ETR) is currently 20% on EU imports and 54% on Chinese imports. Other Asian countries also bear high duties—Vietnam (46%), Thailand (36%), Taiwan (32%), India (26%), South Korea (25%), Malaysia (24%), and Japan (24%). These rates are much higher than Fitch’s earlier estimates of 15% for the EU and 35% for China.
Fitch now predicts the aggregate US ETR to reach 25%, the highest since more than a century ago. This rise will most likely pull US growth down below the previous projection of 1.7% for 2025. Consumer confidence is weakening, and spending is decelerating, which is an indicator of economic weakness.
Higher tariffs will raise consumer prices and reduce corporate profits. Companies hit with increased import costs could lay off workers, while inflation-pinched consumers cut back on buying. With these forces building, the Federal Reserve might be reluctant to slash interest rates, further slowing growth.
Stock Markets Crash as Investors Respond
Markets plummeted following the tariff announcement. On April 3, the S&P 500 fell 4.8%, wiping out more than $2 trillion—the largest one-day decline since March 2020. The Dow fell over 1,200 points, and the Nasdaq dropped 5.1%.
Stocks and retail got particularly hammered. Apple, Amazon, and Nike dipped sharply as investors prepared for the increased cost of goods and the reduced demand. Experts have forewarned higher tariffs, explaining that the tariffs will lead to higher-priced merchandise, thereby slicing purchasing power as well as hampering economic activity.
World Ripple Effects and Intensifying Uncertainty
The effects are not just limited to the US Asian and European economies also fell as trade war concerns increased. Although some Latin American nations may experience small trade benefits, Fitch warned the broad-based nature of these tariffs will tend to reverse any gains.
Large US trading partners can retaliate with their own tariffs, further destabilizing international trade. If China and the EU retaliate, it could increase inflation and exacerbate supply chain disruptions.
With potential retaliation, market volatility, and an escalating trade war, global uncertainty looms. Investors and businesses brace for further economic shocks as the full effects of these tariffs unfold.