“Tariffs will affect all countries”, Trump said to reporters on March 31st, right as the rest of the world is preparing to engage in what now seems like a global trade war.
On April 2nd, President Trump’s new tariff plan will be announced, a day so big that he himself has branded it as ‘Liberation Day’.
These tariffs will target nearly all major US trading partners. It is the most aggressive protectionist action taken by a US president in modern history.
However, Europe and Asia are not sitting back with their hands tied.
All major economies have been preparing for the worst, and are now making their own plans on how to fight back against the increasingly aggressive US trade policy.
So the real question here is whether April 2nd will come down as the ‘Liberation Day’ or ‘Isolation Day’ for the United States.
What is Liberation Day and why does it matter?
President Trump’s new tariffs are expected to raise duties on nearly all US trading partners.
They are labeled as “reciprocal,” meaning they would match the barriers US exporters face abroad.
But instead of targeting a few sectors or countries, this round casts a wide net.
White House advisers have floated an average rate of 20 percent, with an annual revenue goal of $6 trillion, although this figure has been heavily criticized.
The first wave of tariffs includes a 25 percent duty on all fully imported vehicles starting April 3.
Tariffs will also apply to auto parts over the following month.
A separate 25 percent levy targets any imports linked to countries that continue purchasing oil or gas from Venezuela, including US refineries.
Additional measures are expected to hit pharmaceuticals, copper, and semiconductor components.
Trump has already raised tariffs on China to 20 percent across the board and imposed new steel and aluminum duties of 25 percent.
Mexico and Canada, despite their status as trade partners under the USMCA, have also been hit with sweeping tariffs due to concerns over migration and fentanyl.
Markets are reacting sharply. The S&P 500 closed its worst quarter relative to global peers since 2009. Consumer sentiment in the US has dropped to a two-year low.
Banks and analysts are pointing towards recession and stagflation scenarios for the world’s largest economy.
How bad could it get?
An analysis by Bloomberg Economics estimates that if the tariff package reaches its maximal form, it could raise average US tariffs by 28 percentage points.
That would make it the highest level since the 1800s.
These forecasts estimate that a maximalist tariff plan could cut 4 percent from US GDP over the next two to three years, equivalent to $1 trillion.
That is because imports account for approximately 14% of US GDP.
In March, the Federal Reserve cut its US growth forecast from 2.1 percent to 1.7 percent, citing trade uncertainty, while inflation expectations hit a 32-year high.
Booking activity in sectors such as logistics and freight is already down sharply.
The uncertainty is more damaging than the tariffs themselves.
During the 2019 trade war, the Fed found that business delays caused by policy unpredictability had a greater effect on investment and hiring than the actual tariffs imposed.
This scenario appears to be repeating in 2025.
Is this the beginning of the largest trade war?
Europe and Asia have been positioning themselves in response.
European Central Bank President Christine Lagarde has privately warned EU leaders to prepare for a worst-case scenario.
The European Commission is preparing retaliatory tariffs valued at €26 billion targeting US goods such as steel, aluminum, bourbon, motorcycles, and jeans.
Although implementation was initially planned for early April, it has been delayed until mid-month, possibly to give space for negotiations.
France and Germany will be the first European countries to respond, having hinted that broader retaliatory measures may follow if the US does not soften its stance.
European officials are also exploring structural changes in trade policy, including prioritizing new trade agreements with Latin America and Southeast Asia to hedge against long-term reliance on US markets.
In Asia, the response has been more strategic than reactive. Just days before Trump’s tariff rollout, China, Japan, and South Korea held their first high-level economic dialogue in five years.
While each country has its own tensions with Washington, their message was coordinated: regional supply chain integration must accelerate.
Trade ministers from the three nations reaffirmed their commitment to trilateral free trade talks and emphasized the need to strengthen the RCEP, the region’s existing trade agreement that excludes the US.
China’s state media initially claimed that all three nations had agreed to a joint response to US tariffs.
While South Korea quickly clarified that the claim was overstated, the fact that such a claim was made speaks volumes about Beijing’s intent to lead a new trade framework in East Asia.
What is Asia building?
The China–Japan–South Korea axis is becoming more central to regional economic policy.
Their recent meetings focused not only on free trade but also on semiconductor cooperation, green technology, and resilient supply chains.
China, for example, wants to import advanced chip products from Japan and South Korea, while offering access to raw materials and infrastructure in return.
Japan and South Korea, both large auto exporters facing US tariffs, are preparing domestic relief packages to support affected industries.
Japan is also exploring subsidies for manufacturers relocating production from the US to Southeast Asia.
Beyond trade, the cooperation is also about demographics and innovation.
All three countries are dealing with aging populations.
China has over 300 million people aged 60 or older, and Japan’s experience in robotics and elder care is seen as a model.
South Korea leads in healthcare technology. Joint research in these fields is now on the agenda.
On digital infrastructure, the three countries are discussing initiatives like regional AI hubs, shared e-commerce systems, and common data standards, with the goal of creating a competitive digital ecosystem rivaling the West.
Is this the end of the global trade system?
The reality is that Trump’s tariffs are rejecting the foundations of the global system that the US helped create.
Namely, the Most-Favored Nation (MFN) principle under the General Agreement on Tariffs and Trade (GATT) and later the World Trade Organization (WTO).
In their place, Trump is pushing a power-based bilateral model where each country negotiates directly with the US or faces consequences.
The world is more connected today. US imports are now 14 percent of GDP, that is triple what they were in 1930.
Global supply chains are more complex. Retaliation is faster.
Consumer backlashes are more organized, and investment capital is more mobile.
Trump’s 2025 tariffs are dismantling the idea of shared prosperity and replacing it with zero-sum national self-interest.
With the goal of making the US a “global manufacturing hub”, the US is now risking leaving itself isolated from the rest of the world.
Opportunities are being created for every other country to step up and absorb some of the trade share that will be left by the reduced US imports.
At the same time, informal discussions in Europe are circling doubts over the US’s role as the global liquidity provider.
Could this mean that a new global reserve currency could emerge?
Could these tariffs result in the China–Japan–South Korea alliance becoming the spine of global economic stability?
Nothing is off the table.
The post How Trump’s ‘Liberation Day’ tariffs may disrupt global markets appeared first on Invezz
