One way to look at Liberation Day Tariffs

Carney & Marlow are rarely wrong. Be patient.

April 01, 2025

Liberation Day and the End of the World's Trade War Against America

President Trump is set to step into the Rose Garden tomorrow for what may be the most consequential economic announcement of his second term. Markets are bracing. Diplomats are dialing. Pundits are speculating wildly. But no one—not Wall Street, not foreign governments, not even some inside the West Wing—seems to know exactly what will be announced.

This, as it turns out, is part of the design.

Trump has dubbed it Liberation Day—a piece of branding with more substance than cynicism. For weeks, he’s signaled that a sweeping new tariff regime is coming. Twenty percent across the board? A reciprocal system that mirrors foreign rates? Something hybrid and more complex? The ambiguity is not a bug. It’s leverage.

As a Bloomberg columnist put it in a moment of unguarded awe, “I can’t recall the last time when so many people around the world were waiting for a White House announcement where no one seems to know what exactly is going to be announced.”

President Donald Trump displays a signed executive order on auto import tariffs in the Oval Office on March 26, 2025. (Francis Chung/Politico/Bloomberg via Getty Images)

That’s not chaos. It’s choreography. Trump, the eternal showman, has once again turned policy into primetime. This is part salesman’s instinct, part negotiator’s tactic—and wholly consistent with the idea of America reclaiming its role as the agenda-setter in global trade.

The Global Trading System Is Rigged Against the U.S.

While the legacy press fixates on who in the White House prefers which plan, the more important story has already been written—in the U.S. Trade Representative’s report, in the history of America’s failed trade battles, and in the decades of structural disadvantages quietly accepted by successive administrations. The economic case for Liberation Day is, in fact, stunningly straightforward.

Consider Europe’s VAT regime. A German automaker exporting a car to the U.S. does so tax-free—thanks to a VAT rebate. An American automaker shipping a car to Europe pays embedded U.S. taxes and a European VAT upon entry. One enjoys a de facto export subsidy. The other faces a tax wall. The WTO, in its infinite wisdom, allows this disparity and has repeatedly blocked American attempts to address it through legal or tax-code innovations. The Foreign Sales Corporation regime? Illegal. Domestic International Sales Corporations? Illegal. Export tax incentives? Illegal.

Tariffs, it turns out, are the only instrument left that isn’t prohibited by the rules of a game designed for America to lose.

A tariff of 25 percent on European goods, as some Trump advisers have suggested, would not be punitive. It would be compensatory. It would account for the embedded tax burden American producers face, neutralize Europe’s VAT advantage, and—most importantly—do what every past effort has failed to do: signal that the playing field is about to tilt back toward the American worker.

The Old Orthodoxy Is Dead

The idea that tariffs are inherently self-defeating relies on a century-old orthodoxy that has not aged well. Critics invoke Smoot-Hawley like a mantra, ignoring the fact that America’s greatest industrial expansion occurred under a high-tariff regime and that the Great Depression had far more to do with monetary collapse than border taxes. Meanwhile, what passes for “free trade” today is anything but: global commerce is dominated by managed currencies, state-backed subsidies, and vast networks of non-tariff barriers—all working to suppress U.S. production and inflate foreign leverage.

John Michaelson, writing in the Wall Street Journal, made the national security case: a deindustrialized America cannot sustain military primacy, much less economic independence. But he also made the business case. For investment to flow into factories, supply chains, and workforce development, companies need stable price signals. Tariffs provide them. And unlike central planning, they require no bureaucracy to administer. They function like a carbon tax on mercantilism—except that they encourage employment, not austerity.

The USTR’s annual trade report backs this with grim precision. China remains a fortress of subsidies and forced tech transfers. The EU clings to legacy protections. Even allies like South Korea and Taiwan deploy tax tricks, regulatory filters, and cultural barriers to frustrate American competition. The resulting imbalance has helped hollow out America’s industrial core, flooded the U.S. with artificially cheap goods, and left entire regions better known for fentanyl than for foundries.

Liberation Day: Not the Start of a Trade War But Its End

Liberation Day, then, is not merely symbolic. It’s long overdue. For 50 years, the consensus position was that America should absorb these shocks for the sake of global harmony. Trump’s first term cracked that consensus. His second appears ready to bury it.

Given the trade barriers faced by U.S. businesses and workers all around the globe, the gnashing of teeth over Trump's tariff proposals brings to mind the words of the prophet Jeremiah: "They dress the wound of my people with very little care, saying, ‘Peace, peace,’ when there is no peace at all." Those words, famously repurposed by Patrick Henry in the spring of 1775, are not out of place here. "It is in vain, sir, to extenuate the matter. Gentlemen may cry, Peace, Peace—but there is no peace. The war is actually begun!"

Liberation Day is not a provocation. It is the recognition that the economic war was long ago declared—just not by us.

If the tariffs announced tomorrow are broad, high, and long-term—as they should be—they will finally give American producers the confidence to invest at home rather than abroad. If they’re structured as reciprocal, they will force trade partners to disclose and dismantle their hidden barriers. If they’re hybrid, they will combine revenue generation, diplomatic leverage, and industrial policy under one umbrella. In any scenario, the old rules will no longer apply.

And if some investors are hoping this is another “boy who cried tariff” moment or that Trump's tariffs are nothing but a bluff, they may be misreading the moment and the man.

Trump has sold this too hard to walk away quietly. Liberation Day will be remembered as the day America said: we will not subsidize our own decline. Not with tax policy. Not with trade policy. Not with silence.

This will not be the beginning of the trade war. It's the beginning of the end of the trade war, the day America started fighting back.

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