The Big Liberation Day Surprise
The big Liberation Day Surprise was the size of the reciprocal tariffs announced by President Trump.
While most assumed America’s reciprocal tariffs would be based on the actual tariffs other countries levy on American products, the Trump Administration included “currency manipulation and trade barriers” to get its eye-opening numbers.
A few different posters on X determined that the Trump Administration used our trade deficit with each country to determine the size of our reciprocal tariffs. This is essentially the “scaled tariff” approach we wrote about here a couple of weeks ago.
Let’s talk about why Trump isn’t the crazy one here, and then let’s address the market implications.
That Perennial Trade Deficits Are Bad Used To Be A Mainstream Idea
As Ian Fletcher wrote back in 2010 (“America Was Founded As A Protectionist Nation”), pretty much all of America’s founders were protectionists. And we only abandoned protectionism to prop up our allies during the Cold War:
What happened to America’s long protectionist tradition? In the end, America only seriously turned away from protectionism as a Cold War gambit to prop up capitalist economies abroad and tie them to the U.S. Geopolitics trumped domestic economics.
Ironically, our old protectionist playbook for economic development is the same one, in many respects, that China and other nations are using against the United States today. Back when we were the ascending economic power in the late 19th century, it was Britain that complained about “unfair trade!” They were right, of course–but given that nobody forced free trade upon them, it was their own fault. Today, having forgotten our own history, we can’t even recognize the game being played against us, let alone figure out how to counter it. We will continue to pay a high price in lost jobs and declining industries until we wise up.
The problem is most American pundits’ knowledge of history extends back to World War II (“Hitler bad”) and no further.
Warren Buffett knew better. Seven years before Ian Fletcher’s essay above, he called for balanced trade in a front page essay in Fortune.
The Market Implications
The main market implication now is that the markets are going down. The futures are a sea of red, and American companies heavily dependent on imports are going to face some major headwinds. The CEO of the retailer formerly known as Restoration Hardware, RH RH saw his company’s stock drop 25% after hours, during his earnings call.
What To Do Now?
If you followed our suggestion on Monday, you hedged or raised cash before Liberation Day.
As we wrote there:
Raise cash or hedge. Given market uncertainty, you should have a significant cash position, or hedge. To be hedged is essentially to have synthetic cash, because when the market tanks, the cash value of your hedge will go up. As a reminder, You can download the Portfolio Armor optimal hedging app by aiming your iPhone camera at the QR code below (or by tapping here, if you’re reading this on your phone). Our app can help you find the least expensive hedges given your risk tolerance and time frame.
And if you followed our pre-Liberation Day gameplan, you should have at least one trade that’s in the black today, our bearish trade on Tesla, Inc. TSLA.
And hopefully, you took advantage of yesterday’s mild rally to add some short exposure, as we did, with bets against a few tech stocks including Nvidia, Inc. NVDA.
The Silver Lining In This Cloud
The silver lining here is that enterprising investors and traders are going to have an opportunity to make a lot of money over the next year or two. The Trump Administration will want the U.S. economy and stock market to be roaring back in time for the midterm elections next year.
Everything is in flux now, and there are going to be securities that are mispriced. We’re going to do our best to find them. If you’d like a heads up when we do, feel free to subscribe to our trading Substack/occasional email list below.
If you’d like to stay in touch
You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we’re using that for our occasional emails now).
Edge Rankings
Price Trend
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
