Liberation Day tariffs shock global markets

The week of March 31 to April 4 2025 marked a regime change for global markets. The Trump administration announced Liberation Day reciprocal tariffs on April 2 after market close. Week-on-week, the S&P 500 fell 9.1%, the largest weekly decline since March 2020. The VIX climbed from 21 to 45. Gold rose 2.5% to $3,085. USDJPY fell 4% as yen strengthened on safe-haven flows.

The tariff announcement included a 10% universal baseline plus country-specific rates: 20% on EU, 54% on China, 46% on Vietnam, 32% on Taiwan. The rates were calculated from bilateral trade deficits using a formula that bore no relation to actual foreign tariff rates on US goods. Global trading partners announced retaliatory measures within 48 hours, raising concern about a full-scale trade war.

The week established patterns that would dominate 2025 markets: event-driven vol clustering, dollar weakness despite US economic relative strength, and gold's role as the premier tariff hedge. Sectors with concentrated China exposure (semiconductors, Apple supply chain, consumer goods) fell 15-20%, while domestic services fell 5-7%. The week ended with futures limit-down for Monday April 7 open.