What to Make of Liberation Day

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As much as I’d like to avoid today’s political drama, we cannot NOT talk about Liberation Day. April 2^nd , 2025, could go down as one of the most important moments in modern economic history. President Trump has essentially declared war on the entire post-WWII international order and, if we can trust his words, he’s aiming for nothing less than the complete elimination of America’s trade deficit—i.e. a total reversal of the dominant trading patterns of the globalization era. 

Trump’s Liberation Day tariffs introduced a tremendous amount of uncertainty in the world and for a while, at least, markets everywhere were reeling. With volatility spiking, equities selling off, and bonds whipsawing, it wasn’t long before Trump was forced to announce a 90-day delay. The trillion-dollar question now is whether the 90-days is real deadline or just more showmanship.

It's hard to tell at this point.

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To evaluate Liberation Day from a rational, practical perspective, there are questions we need to ask ourselves:

1.  Is this really about eliminating our trade deficit or is that just what President Trump is saying out loud? 

We cannot ignore the possibility that there are a bunch of other political motivations for this move—appealing to the base, extracting security concessions from allies and neighbors, getting help with the war on drugs, securing mineral rights deals…etc. I have to believe these considerations are on the table. The trade deficit is a problem for sure but only really in the long run. There’s nothing urgent about the situation and we could probably run trade deficits for decades before sparking a crisis. So, to make such a bold move now, President Trump and his team have to be looking for other benefits. 

2. Is it even possible for the United States to become a balanced or trade surplus country again? 

Today at least, it’s hard to see how it can. Without the use of some revolutionary labor-saving technology, America simply cannot compete with China, India, and the rest of the population-rich Global South. There’s a reason this whole outsourcing thing happened in the first place, and it’s not like we can just will our way out of the mathematical logic of demographics and labor force economics. 

That being said, we absolutely should be trying to reduce our trade deficit. The path we are on is clearly unsustainable and reducing debt-fueled consumption is a good thing.

3. What are the secondary and tertiary impacts of making such a big deal of tariffs?

One (conspiracy) theory among the finance elite is that Liberation Day was about interest rates as much as it was about the politics of tariffs. Basically, rather than trying to pressure Fed Chairman Powell to cut rates (like he did unsuccessfully in 2018), President Trump can just scare the markets into taking care of it. Introducing a massive amount of uncertainty into the world will spur investors to de-risk—which means selling stocks and buying bonds and voilà, interest rates are lower. This means lower borrowing costs for the US Government…oh, and for real estate companies. Coincidence? 

Another theory is that this is President Trump’s secret master plan to engineer the necessary global macro conditions for a GDP growth boom. In recent times, at least, growth booms have been correlated with 3 things: a weak US dollar, low interest rates, and low oil prices. The theory here is that tariffs will scare the markets into producing these 3 conditions. Yeah, maybe we will get some short-term pain and volatility in markets, but eventually we’ll get a global GDP boom. While this is an interesting idea, I’m not convinced President Trump and his advisors are thinking this way and the bond market wasn’t exactly cooperating as expected anyway. 

In any event, it’s an incredibly dangerous game to play. Can President Trump really afford a market meltdown? What about the American people? While Secretary of the Treasury Scott Bessent loves to point out that the stock market is 80% owned by the richest 10% of Americans, over 60% of American households own equities in the market. As popular as he thinks he is, a market crash would crush his political momentum and all but guarantee the Democrats regain control of Congress in the Midterms. Plus, an equity wipeout would be really bad for his Boomer base—people who are highly reliant on their stock portfolios for their retirements—and all the pension funds around the country, even those of his newfound allies in Organized Labor.

4. Will any of this produce any real long-term positive impacts for Americans?

At this point, who knows! No matter what happens though, some interesting dynamics have emerged as a result of the big announcement.

First of all, Americans have woken up to the reality that we haven’t exactly been living in some free trade utopia all these years. Many people have been surprised to learn that just about every country in the world has been tariffing us for years, even our closest allies. If all that comes from this is that we improve/level the playing field for international trade, that will be a big win for America. 

Secondly, there has been a surprising emergence of a new, more moral perspective on consumerism. Trump administration officials have been answering questions from the media in the most interesting ways—appealing to patriotic notions like “Buy American” or questioning consumption on moral grounds: “Do we really need all these cheap foreign goods?” 

For the last 40 years we have been worshipping at the altar of free market capitalism, where all that mattered was profit and the lowest price. Now things appear to be changing. All of a sudden, the “politics” part of the science of political economy has come back into the equation. Call it what you will—neo-mercantilism or the resurgence of economic nationalism—the calculation is changing. 

Look, maybe this is a good thing. As I’ve been writing about for years here, there’s more to profit than profit. While the ESG and DEI movements may have run out of steam, perhaps the trade war can revive the idea that businesses should be concerned about more than just maximizing short-term gains for owners and managers. We’ll have to see. 

I could talk about this stuff all day but as this post is getting long, let me wrap this up. 

What, if anything, does this all mean for us and our mission to build wealth while doing good in the world at the same time? Here are a few thoughts:

• We need to be really careful about our exposure to and decision-making in public markets. Emotional decisions at a time like this can be really costly. Don’t be greedy or get too frightened by the volatility, and just remember that the markets have seen far worse than this! 

• There are huge opportunities in non-trade exposed industries, like real estate, health care, and education. I’m starting to believe that these moribund industries are on the verge of a renaissance. With a massive global trade war, investors will be more incentivized to look to these industries and where capital flows, opportunities arise.

• New opportunities in reshoring / domestic production will create massive entrepreneurial open space. This might be the biggest opportunity in the world today outside of AI. Clearly, the outsourcing arbitrage game is over, and everyone from multinational behemoths to small start-ups will be looking for ways to produce locally. This will produce opportunities in everything from industrial real estate to workforce training businesses to technology.

• Patriotic consumerism will become a big deal and as “Buy American” becomes more of a badge of honor, companies that take advantage of this sentiment will outperform.

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