President Trump surprised markets again on Wednesday, announcing steep reciprocal tariffs on a range of trading partners in addition to a “baseline” reciprocal tariff rate of 10% in a move that sent markets tumbling.
“The tariffs were definitely worse than we had anticipated,” Deutsche Bank senior US economist Brett Ryan told Yahoo Finance.
For example, Chinese imports are set to be hit by a 34% tariff while imports from the European Union will be dealt 20% tariffs. Trump said the tariff calculations were actually only “half” of what they could’ve been had the administration chose to match White House estimates of how other countries tariff the US.
Stocks sold off sharply following Trump’s announcement.
The decline in US stock futures was led by Nasdaq 100 futures, which were down more than 4.5% near 6:15 p.m. ET. S&P 500 futures were down 3.5% while contracts tied to the Dow were off closer to 2.2%.
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Megacap tech stocks were under heavy selling pressure in extended trading, with Apple stock down more than 6% and Nvidia (NVDA), Meta (META), Amazon (AMZN), and Tesla (TSLA) shares each sliding more than 4%.
Ryan added his team had expected the effective tariff rate to land in a range of 15%-20%. Wednesday’s announcement suggests the overall effective tariff rate on all US imports will sit in a range closer to 25%-30%.
Strategists at Evercore ISI placed the effective tariff rate at 29% in a note late Wednesday. This projects the US tariff rate will stand at its highest level in more than a century.
“I wouldn’t say it’s outright recessionary,” Ryan added. “I would say that it certainly increases the risk of recession.”
Renaissance Macro’s head of economics, Neil Dutta, described the announcements as a “a massive shock to the economy.”
“It’s surprising stocks are not down even more,” Dutta wrote at 5 p.m. ET on Wednesday. “Perhaps investors assume cooler heads prevail later. I would not hold your breath.”
As investors digest the latest levies, the looming market question remains for how long Trump will enforce these tariffs and whether other countries will retaliate or negotiate.
Given the expected tit-for-tat that could play out between the US and some partners, Wall Street strategists don’t believe Wednesday will serve as a “clearing event” where the tariff risk is swiftly priced in with a one-time, sweeping sell-off.
Stuart Kaiser, Citi’s head of US equity trading strategy, wrote in a note to clients late Wednesday that the tariff announcements were worse than investor expectations and he doesn’t recommend buying the dip in stocks yet.
