Trump’s 'Liberation Day' Tariffs Trigger Global Shock: Experts Warn of Recession, Leaders Pledge Retaliation

Markets Slide as Economists Warn of Short-Term Damage

The impact on the markets was immediate. Stock gains from earlier in the day were wiped out in after-hours trading. Asian indexes saw sharp losses, signaling fears that the trade war might spread rapidly.

Economists voiced near-universal concern. BMO’s Sal Guatieri and Jennifer Lee warned that the tariffs would damage not just global growth but the U.S. economy as well. AXA Investment Managers raised the prospect of stagflation — an unwelcome combination of rising inflation and slowing growth.

Experts at the Cato Institute, Scott Lincicome and Colin Grabow, put it plainly: “This is a massive tax hike that will raise prices for American families, weaken business investment, and hurt exports.”

Recession Risks Rise as Long-Term Effects Set In

Beyond the initial shock, many economists fear the long-term consequences could be even worse.

Mark Zandi at Moody’s warned that retaliatory tariffs from abroad could push the U.S. into a full-blown recession. Deutsche Bank’s Matthew Luzzetti predicted the uncertainty alone could knock about 1% off U.S. GDP for several quarters.

A Capital Economics analysis suggested inflation could spike as high as 4% if effective tariffs climb to 25%, likely forcing the Federal Reserve to keep interest rates elevated.

Veljko Fotak, a finance professor at the University at Buffalo, went further, saying the current course “effectively guarantees a recession” if tariffs stay in place.

A Yale Budget Lab study added that a 20% universal tariff would cost the average U.S. household $3,400–$4,200 and reduce GDP growth by about one percentage point.

Industries Brace for Sector-Wide Disruption

The effects of the tariff plan aren’t confined to GDP figures — several sectors are already anticipating deep cost shocks.

Randy Carr, CEO of World Emblem, said he expects a 25% tariff on goods from Canada and Mexico, costs he’ll pass to customers via an 8% price hike.

Tech companies could feel serious heat. Wedbush’s Dan Ives warned that electronics — including iPhones and Nvidia-powered devices — will likely become more expensive as tariffs hit suppliers in China, Taiwan, and South Korea.

Auto manufacturers face steep increases, too. The Anderson Economic Group projects $2,500–$5,000 price hikes for budget cars, and as much as $20,000 more for some imported models.

Retail and restaurants aren't spared either. Clothing and footwear, largely sourced from Asia, are set to rise in price, while Michelle Korsmo of the National Restaurant Association warned of higher costs for food and kitchen equipment — expenses likely to be passed onto diners.

Experts Warn of Policy Uncertainty and Volatility Ahead

Beyond numbers, experts agree on one thing: uncertainty is here to stay.

Kelly Ann Shaw, a former White House trade advisor, called April 2 “the starting gun, not the finish line.” She described Trump’s strategy as intentionally ambiguous to gain leverage in negotiations.

Veljko Fotak noted that markets didn’t crash as hard as they could have — likely because traders suspect changes are still possible.

Barbara Matthews at the Atlantic Council added that the world should prepare for “a steady stream of policy volatility” as countries recalibrate trade strategy around the U.S.

Foreign Leaders Unite in Condemnation and Retaliation Plans

Reactions from U.S. allies and trading partners were swift and sharply critical.

EU President Ursula von der Leyen called the move “a major blow to the global economy.” Canada’s Mark Carney promised retaliation, and Australia’s PM Anthony Albanese said the tariffs were “not the act of a friend.”

European and Asian leaders, from Germany’s Olaf Scholz to Japan’s Yoji Muto, condemned the policy. Some, like Ireland’s Micheál Martin and Italy’s Giorgia Meloni, framed the move as damaging not just to global trade — but to U.S. interests as well.

Countermeasures Are Already on the Table

Many nations are already preparing their responses. The EU plans a two-phase rollout of countermeasures in April. China vowed firm retaliation. Canada launched a $2 billion strategic fund to absorb shocks and push back.

Japan warned that “all options are open,” and Brazil passed a bill allowing swift retaliation against any country targeting its exports.

An EU diplomat went so far as to call it “America Brexiting the world.”

U.S. Political Divide Grows Over Tariffs

Domestically, Trump’s tariffs have reignited old political divides.

While the White House framed the policy as a fix for “unfair trade” and a national security priority, critics were quick to pounce.

Heather Boushey, an economic adviser in the Biden administration, called the move a repeat of a failed strategy from Trump’s first term. Chuck Schumer labeled the plan a ploy to fund tax cuts for the wealthy.

Rep. Suzan DelBene called it “a massive tax increase” pushed through without Congressional approval, breaking a core Trump promise to cut costs.

Some commentators see the tariffs as a turning point for the U.S. economy, with House Speaker Mike Johnson stating, “President Trump is making it clear: America won’t be exploited by unfair trade practices.” Senators Mullin, Lummis, and Kennedy all expressed varying degrees of trust in Trump’s judgment, though some hinted at the need to adjust if inflation surges.