The global trade landscape was thrown into flux when the U.S. introduced a sweeping wave of tariffs on April’s “Liberation Day,” aimed at reshaping its economic relationships. While the situation continues to evolve, tariffs remain at the centre of global attention. Here’s a brief look at how they are reshaping trade dynamics—and what it could mean going forward.
First, What Is a Tariff?
A tariff is a duty (or tax) applied to goods brought into a country, calculated as a percentage of the product’s value. The rate often depends on two factors: i) Product country of origin (where it’s from); and ii) Type of product.
Tariffs are generally designed to protect domestic industries by reducing the competitive advantage that foreign producers might have—whether due to cheaper labor, lower production costs, more lenient environmental regulations or financial support from foreign governments. These tariffs are paid by the importer when goods enter the country, with the funds collected on behalf of the government of the importing country.
What Is the Rationale Behind Broad-Based Tariffs?
Although the current U.S. administration hasn’t officially outlined its reasoning, President Trump has long advocated for tariffs as a strategic tool. They appear to be aimed at a range of objectives: shrinking the trade deficit by boosting exports and curbing imports, encouraging domestic manufacturing and onshoring, reinforcing national supply chain security, fighting unfair trade practices, increasing federal revenue and applying pressure on trading partners to negotiate better terms.
The Potential Effects: Economic and Market Impacts
Tariffs have heightened economic uncertainty, due to a range of potential effects, such as:
Pricing pressures for consumers — Since tariffs are essentially import taxes, U.S. businesses bringing in foreign goods are on the hook for the added cost. More often than not, these additional costs get passed down to consumers. That means higher prices, feeding into inflation and potentially softening purchasing power.
Disrupted trade and supply chains — Businesses thrive on predictability, but evolving tariff measures introduce uncertainty. Many firms now struggle to make long-term decisions on production, investment and supplier relationships. Tariffs can also impact trade volumes. As a recent example, in April amid the temporary but sharp 135 percent tariff on Chinese imports, there was a 21 percent yea over- year drop in Chinese outbound shipments to the U.S.1
Downward pressure on company profits — Higher input costs and logistical complications can impact profit margins for affected companies. This can lead to cost cutting, including layoffs—especially in industries heavily reliant on international trade.
Broader economic drag — Collectively, all of these dynamics weigh on economic growth. In the U.S., consumer spending accounts for roughly 68 percent of U.S. GDP, so the combination of rising prices, rising unemployment and general uncertainty could weigh on economic growth.
Rethinking Global Trade Norms
For decades, global trade has leaned on the principle of “comparative advantage”—the idea that countries should focus on producing goods they can make most efficiently. That approach has kept prices lower— and supported broad-based global economic growth. As renowned investor Howard Marks recently noted: “Globalization has contributed to a rising economic tide that has lifted all boats.”2
Critics of the new tariff strategy argue that shifting away from globalization isn’t so simple. For example, building out domestic manufacturing requires massive investments in infrastructure, which also take time. Plus, U.S. companies often can’t match the low labor costs found overseas. According to one estimate, producing an item like an iPhone on U.S. soil could cost around US$3,500.3 While developing nations have benefitted from globalization, so have countries like the U.S. and Canada, especially through cheaper consumer goods.
What Lies Ahead?
At the time of writing, there have been legal challenges to the broad-based Liberation Day tariffs, which may affect some of the imposed global tariffs. However, it appears that the U.S. administration is not backing down. As such, trade policy is likely to remain a market driver in the near term. Yet, market disruptions of one sort or another are not uncommon over history, and free-market economies have shown time and again that they can adapt and progress. There’s no reason to believe this period will be any different.
1. https://www.cnbc.com/2025/05/09/chinas-exports-jump-us-tariffs-imports-tumble.html;
2. https://www.oaktreecapital.com/insights/memo/nobody-knows-yet-again;
3. https://www.cnbc.com/2025/04/11/heres-how-much-a-made-in-the-usa-iphone-would-cost.html#
The information contained herein has been provided for information purposes only. The information has been drawn from sources believed to be reliable. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Financial Inc. (Wellington-Altus) is the parent company to Wellington-Altus Private Wealth Inc. (WAPW), Wellington-Altus Private Counsel Inc. (WAPC), Wellington-Altus Insurance Inc. (WAII), Wellington-Altus Group Solutions Inc. (WAGS), and Wellington-Altus USA Inc. Wellington-Altus (WA) does not guarantee the accuracy or completeness of the information contained herein, nor does WA assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact your financial advisor..
©2024, Wellington-Altus Private Wealth Inc., Wellington-Altus Private Counsel Inc., Wellington-Altus Insurance Inc., Wellington-Altus Group Solutions Inc., and Wellington-Altus USA Inc. ALL RIGHTS RESERVED. NO USE OR REPRODUCTION WITHOUT PERMISSION. www.wellington-altus.ca
If you no longer wish to receive commercial electronic messages from Wellington-Altus Private Wealth Inc., please send an email to unsubscribe@wellington-altus.ca
