Imagine going to the supermarket and your favourite snack suddenly costs twice as much. You didn’t get a raise. Inflation isn’t crazy. Nothing changed in your life — except one political decision made thousands of miles away. That’s the power of tariffs.
How Politics Moves Markets
Companies make money by selling goods and services. Politicians set laws and regulations. Sometimes those laws hit companies hard — changing what they can sell, where they can sell it, and how much it costs them to operate. Tariffs are one of the most powerful tools politicians have to do exactly that.
What Is a Tariff?
Think of it as a tax on imported goods. If a product costs $100 and there’s a 10% tariff, the importing company pays an extra $10 to the government on top. Simple. That money goes straight to the government.
Now scale that up. If tariffs on iPhones rise (most of which are made in China), Apple faces a choice: raise prices and risk losing customers, or absorb the extra cost and make less money. Either way, profits drop. And when investors see profits dropping, they sell shares. The stock price falls. A tariff just traveled from a government decision straight to Apple’s stock price.
Liberation Day — April 2, 2025
On this day, Trump imposed a minimum 10% tariff on nearly all imports into the U.S. — with a 34% tariff on China and 20% on the European Union.
His reasoning: reduce the trade deficit, encourage Americans to buy domestic goods, and push back against what he called exploitation by foreign nations.
Other countries fired back. The EU, China, and others imposed their own tariffs on American products. This is a trade war — a cycle where each side retaliates, and in the end businesses and consumers on both sides pay the price.
📉 The Market Impact
Around Liberation Day, the S&P 500 dropped nearly 20% in just seven weeks. The average American household is now paying around $1,500 more per year because of these tariffs. Markets did recover — but the uncertainty never fully went away.
💡 Key Takeaway