April Update
Tariffs have dominated headlines in 2025, and April was no exception. As a cornerstone of President Trump’s re-election platform, his administration wasted no time rolling out sweeping trade policies. The scale of these tariffs, however, caught markets by surprise, sparking volatility and reshaping the economic landscape. Let’s break down what happened in April, explore the historical context of U.S. tariffs, and unpack the market’s wild ride, from a sharp sell-off to a partial recovery.
Tariff Tantrums
On April 2, dubbed “Liberation Day” by the administration (though some traders grimly called it “Liquidation Day”), the U.S. unleashed a 10% baseline tariff on imports from most trading partners. Higher rates hit around 60 countries, with Chinese imports slammed by a 54% tariff (20% base plus 34% reciprocal). Steel, aluminum, and auto tariffs of 25% kicked in earlier, followed by 25% duties on non-USMCA goods from Canada and Mexico. By April 9, tariffs on Chinese imports skyrocketed to 125%, prompting China to retaliate with matching 125% tariffs on U.S. goods.
Mid-month, Trump dialed back the intensity, announcing a 90-day pause on most “reciprocal” tariffs (excluding China) to calm markets. On April 11, exemptions for smartphones, laptops, and certain chips were added, offering relief to tech giants like Apple and Nvidia. By month’s end, the average effective tariff rate hit 22.5%, the highest since 1909, though substitutions in import sources could lower it to around 18%.
To put today’s policies in context, let’s zoom out and trace the arc of U.S. tariff history.
In the early 1900s, tariffs averaged 20-30%, serving as the federal government’s primary revenue source before the income tax was introduced in 1913. They also shielded American industries from foreign competition, aligning with Republican priorities. The 1913 Underwood Tariff Act slashed rates, and World War I further disrupted trade, dropping effective tariffs to 6% by 1920.
The 1920s and early 1930s saw a protectionist resurgence. The Smoot-Hawley Act of 1930, raising tariffs on over 20,000 imports, aimed to protect jobs during the Great Depression but backfired, triggering global retaliatory tariffs and worsening the economic crisis. This led to a policy pivot in 1934 with the Reciprocal Trade Agreements Act, empowering presidents to negotiate lower tariffs and marking a shift toward global cooperation.
Post-World War II, the U.S. championed trade liberalization. Tariffs fell to 3-4% by the 1970s, driven by institutions like the IMF, World Bank, and GATT. The 1990s and 2000s ushered in “hyper-globalization,” with tariffs dipping below 2% amid NAFTA, the WTO’s creation, and China’s 2001 WTO entry. Global supply chains thrived, until cracks appeared.
Since 2018, protectionism has roared back. Trump’s initial tariffs on steel, aluminum, and Chinese goods marked the first sustained tariff hike in decades. Today’s 22.5% average rate, while high, remains below early 20th-century peaks but signals tariffs are again a tool for industrial policy and geopolitical leverage.
Source: Goldman Sachs Investment Research, United States International Trade Commission, J.P. Morgan Asset Management. For illustrative purposes only. The estimated weighted average U.S. tariff rate includes the latest tariff announcements, even if they are not fully in effect yet. Estimates about which goods are USMCA compliant come from Goldman Sachs Investment Research. Imports for consumption: goods brought into a country for direct use or sale in the domestic market. Figures are based on 2024 import levels and assume no change in demand due to increases. Forecasts are based on current data and assumptions about future economic conditions. Actual results may differ materially due to changes in economic, market, and other conditions. Data are as of April 2, 2025.
Volatility Index
The April 2 tariff announcements triggered a severe risk-off event across global markets. On April 3, the S&P 500 plunged 4.84%, its worst single-day drop since June 2020, followed by an even steeper 5.97% decline on April 4. During the same two-day span, the Nasdaq 100 fell 5.41% and 6.07%, while the Russell 2000 dropped 6.59% and 4.37% respectively.
Thursday became known as the Liberation Day shock, while Friday was marked by aggressive retaliation from China. These developments fueled some of the largest single-day surges in volatility seen in decades. The VIX spiked 39.56% on April 3 and an additional 50.93% on April 4, ranking as the 27th and 9th largest single-day increases since 1990. For context, this places them alongside volatility events triggered by the Dot Com Crash, the Global Financial Crisis, and the COVID 19 pandemic.
Despite the turmoil, history suggests a resilient market over the long term. That is why we preface our outlook with a reminder: time in the market often beats timing the market.
Source: Charlie Bilello, Grey St Partners
Case Study: Cuban Missile Crisis
The Cuban Missile Crisis of 1962 offers a striking historical parallel to today’s tariff driven market volatility. Over just 12 days, from October 16 to 28, the world stood on the brink of nuclear war. Markets initially reacted with fear, falling 5% over seven trading days. But what is remarkable is how quickly sentiment turned. The market bottomed on October 23 and began to rally before the crisis was even resolved, recovering 66% of its losses by the time a resolution was reached on October 28. Just think about that: even in the face of potential global catastrophe, investors began positioning for recovery. It is a powerful reminder of the market’s forward looking nature and the resilience that often emerges in the face of uncertainty.
Source: Grey St Partners
Case Study: Covid-19
In early 2020, the COVID 19 pandemic triggered the fastest market correction in history. A correction is defined as a 10% decline from recent peaks, and the S&P 500 delivered just that, dropping 10% in only eight days, which was the fastest correction recorded since 1950. As the world went into lockdown, the index ultimately crashed -33.92% over just 23 days, from February 19 to March 23. Streets emptied, economies came to a halt, and global uncertainty took hold. Yet the rebound was just as dramatic. By August 12, the S&P 500 had surged 51.08% in only 99 days, recovering all of its losses and marking one of the sharpest recoveries in modern market history.
Source: Grey St Partners
Case Study: Trump Tariff Tantrums - 2018
The early stages of the U.S.–China trade war in 2018 triggered significant market turbulence, marked by sharp drawdowns and rapid rebounds. As tariffs began rolling out—starting with solar panels and washing machines in January, and escalating through mid-year with hundreds of billions in duties on both sides—markets reacted swiftly. The first major drawdown came in just 9 trading days, with the S&P 500 dropping 10.16% as investors digested the implications of a prolonged trade conflict. Remarkably, the market then rebounded 7.69% over the next 11 days, demonstrating how quickly sentiment could shift. But the volatility wasn’t over. As tariff threats turned into concrete actions throughout July, August, and September, the market bottomed again with a 7.23% decline. This time, recovery took longer—105 days—to regain those losses, climbing 11.34% in the process. These swings unfolded against a backdrop of tit-for-tat tariffs, WTO complaints, and shifting rhetoric, highlighting how geopolitics can inject sudden, and sometimes prolonged, volatility into global markets.
Source: Grey St Partners