On April 9, the U.S. is poised to roll out a sweeping set of new tariffs under a policy President Trump is calling “reciprocal tariffs.” If fully enacted, these tariffs would raise the average U.S. import duty to over 25%—the highest level seen in more than a century.

So, what does this mean, and why should investors pay attention?

Tariffs Based on Deficits, Not Reality

Unlike traditional tariffs, which respond to specific trade barriers imposed by other countries, these new tariffs are tied to America’s trade deficits. In short, if the U.S. buys a lot more from a country than it sells to them, that country gets hit with a big tariff—even if they don’t actually have unfair trade practices in place.

Take Vietnam, for example. The U.S. has a large trade deficit with them, so under Trump’s formula, they’d face what amounts to a 45% tariff, even though Vietnam isn’t blocking U.S. products in any meaningful way.

Little Incentive to Negotiate

Here’s the twist: President Trump is not offering clear pathways for other countries to reduce these tariffs. They’d either need to build more factories in the U.S. or eliminate all trade barriers—an extremely vague and subjective ask. This means most countries see little reason to even come to the negotiating table.

How the World May Respond

• Vietnam likely won’t have many good options. As a smaller, developing economy, it may face economic pain, including slower growth or a weaker currency.
• China is more resilient. It’s expected to respond by strengthening its domestic economy and becoming even more competitive globally, rather than making concessions.
• Europe, facing lower tariffs, might still choose to absorb short-term costs and avoid negotiations altogether.

What This Means for Investors

This new tariff regime introduces a high degree of uncertainty in global trade and markets. If other nations choose to bypass the U.S. and refocus their economies, we could see:

• Shifts in global supply chains
• Increased costs for imported goods
• Potential for inflation or even recession in the U.S.

For long-term investors, it’s another reminder of the importance of diversification and staying informed. Geopolitical moves like this may not have immediate effects on your portfolio, but they shape the economic environment in which your investments grow.