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When the White House declared broad import duties on April 2, now infamous as “Liberation Day” , markets reacted as if a new trade war had begun. Analysts warned of runaway inflation…
Archive edition · Market data and company circumstances reflect 4 October 2025, when this newsletter was sent.
When the White House declared broad import duties on April 2, now infamous as “Liberation Day”, markets reacted as if a new trade war had begun. Analysts warned of runaway inflation, collapsing growth, and consumer panic.
Six months later, the U.S. economy is weaker but still far from broken. Inflation has edged up to 2.9%, GDP growth is softer, and financial markets have calmed down. The reality is that tariffs are acting more like a chronic illness than a sudden heart attack.
The question for investors is whether this resilience can continue or if the delayed effects will bite harder in 2026.
Officially, tariffs are supposed to average 17%. In reality, companies are paying closer to 11% today.
That gap exists because firms are actively finding ways around tariffs:
While tariffs will likely settle closer to 15% once inventories are cleared and exemptions expire, the lag explains why the economy has not been hit as hard, yet.
For investors, this means:
Economists often use a simple rule:
1% increase in tariffs = +10 bps inflation and -5 bps GDP growth.
Applying that math: With tariffs up ~9 percentage points (from 2% to 11%), the implied effect is +0.8% inflation and -0.4% GDP growth.
And indeed, that is close to what we have seen:
For investors, the important lesson is that the economy is weaker, but not collapsing. Tariffs have delivered a manageable drag, rather than the full-scale recession some feared.
Unlike a sudden shock, tariffs are seeping into consumer prices slowly, creating a steady but noticeable drag. Tariff revenue has jumped sharply, from about $6–8 billion a month before April to nearly $30 billion in August 2025, translating to an annualized $354 billion boost to Treasury coffers.
Companies, however, are uneven in their responses: Some are holding off on price hikes, others are cushioning the impact with promotions, and many are still betting that tariffs will prove temporary rather than permanent.
This creates two dynamics:
The tariff story is far from over. Key developments on the horizon:
The real risk is volatility in headlines: Tariff tweets may not spark panic as they did in April, but they will continue to whipsaw certain sectors, especially semiconductors, autos, and retail.
The most important takeaway for long-term investors: Globalization is not dead, it is changing.
This article preserves the analysis in our weekly newsletter sent 4 October 2025. Market prices, forecasts and company circumstances reflect the time of publication and may have changed.
This material is general information, not personal financial advice or a recommendation to trade. Investing and trading involve risk, including loss of capital.