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"Liberation Day" Tariffs: Panic, Recovery & What Comes Next
Throughout his third campaign for the US Presidency, Donald Trump consistently described what he saw as the benefits of tariffs, even calling them his favorite word (only behind God and family). With almost all countries levying tariffs on the United States, Trump and his team saw a ‘reciprocal’ tariff policy as the way to reduce trade deficits, bring back US manufacturing jobs, and raise much-needed revenue for the US government. Trump would go on to win the presidency and, surprisingly, become the first Republican president to win the popular vote since George W. Bush in 2004.
Nevertheless, President Trump’s April ‘Liberation Day’ tariff rollout started as a disaster. First, the S&P 500 instantly plunged more than 10% as most Wall Street investors expected a slower, more gradual tariff policy.
Second, the United States became embroiled in several trade disputes, most prominently with the second-largest economy, China.
Trump Tariffs: A "Shock & Bore Approach”
The primary reason for the stock market plunge was added uncertainty. Would tariffs remain at sky-high levels? Would China come to the negotiating table? Would tariffs cause inflation? As investors contemplated what would happen next, most decided to sell first and ask questions later.
As is often the case on Wall Street, panic translated to opportunity. After more than $8 trillion was wiped out of the US stock market in a matter of days, President Trump and his economic team began pausing tariffs on countries willing to negotiate. Although some countries held out at first, most of the United States’ largest trading partners ultimately came to the table. Since then, the market has climbed the proverbial ‘Wall of Worry’ and is trading at all-time highs.
Have Tariffs Caused Inflation?
“Words talk, numbers scream.”
Whenever debating a politically hot-button topic like inflation, it’s critical that investors rely on data over opinions and forecasts to eliminate bias. From 1970 to 2025, the average consumer price index (CPI) inflation ratewas 3.93%. Currently, according to the Bureau of Labor Statistics (BLS) CPI is 3%.
Despite the normal inflation readings, many Americans are still struggling to get by financially after the 2022 inflation spike to 9%. In other words, many consumers are still facing the hangover of the post-COVID price spike, although the rate of inflation has reverted to the mean. Meanwhile, although some tariffs have undeniably impacted the price of certain products, rampant tariff-induced inflation has simply not shown up yet. A combination of lower energy prices and import costs of many goods has helped to offset tariffs.
Will Tariff-Induced Inflation Appear Later?
“The only function of economic forecasting is to make astrology look respectable.”
As we have learned this year, economic predictions are difficult. Treasury Secretary Scott Bessent argues that tariffs cause a one-time “price-adjustment” rather than the persistent 2022-esque inflation the US experienced. Additionally, Bessent suggests that lower interest rates and energy costs will help to offset any impacts from tariffs.
Not Everyone Is Happy About Trump Tariffs
Not all companies are happy about tariffs. For instance, Costco recently sued the Trump Administration over tariffs. Meanwhile, other retailers such as Walmart, Nike, Lululemon and Restoration Hardware have cited tariffs as a challenge during their earnings calls. Finally, and most importantly, the US Supreme Court is due to make a decision any day now on whether the Trump Tariffs are constitutional.
Bottom Line
While the initial shock of the tariff rollout rattled markets and stirred economic fear, history shows that panic often fades as cooler heads prevail. Inflation has stayed surprisingly tame, but the long-term effects of tariffs remain a story still unfolding. As investors look ahead, the Supreme Court’s upcoming decision could determine the fate of the Trump tariffs.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Costco, Walmart, Nike, Lululemon and Restoration Hardware
For Immediate Release
Chicago, IL – December 9, 2025 – Today, Zacks Investment Ideas feature highlights Costco (COST - Free Report) , Walmart (WMT - Free Report) , Nike (NKE - Free Report) , Lululemon (LULU - Free Report) and Restoration Hardware (RH - Free Report) .
"Liberation Day" Tariffs: Panic, Recovery & What Comes Next
Throughout his third campaign for the US Presidency, Donald Trump consistently described what he saw as the benefits of tariffs, even calling them his favorite word (only behind God and family). With almost all countries levying tariffs on the United States, Trump and his team saw a ‘reciprocal’ tariff policy as the way to reduce trade deficits, bring back US manufacturing jobs, and raise much-needed revenue for the US government. Trump would go on to win the presidency and, surprisingly, become the first Republican president to win the popular vote since George W. Bush in 2004.
Nevertheless, President Trump’s April ‘Liberation Day’ tariff rollout started as a disaster. First, the S&P 500 instantly plunged more than 10% as most Wall Street investors expected a slower, more gradual tariff policy.
Second, the United States became embroiled in several trade disputes, most prominently with the second-largest economy, China.
Trump Tariffs: A "Shock & Bore Approach”
The primary reason for the stock market plunge was added uncertainty. Would tariffs remain at sky-high levels? Would China come to the negotiating table? Would tariffs cause inflation? As investors contemplated what would happen next, most decided to sell first and ask questions later.
As is often the case on Wall Street, panic translated to opportunity. After more than $8 trillion was wiped out of the US stock market in a matter of days, President Trump and his economic team began pausing tariffs on countries willing to negotiate. Although some countries held out at first, most of the United States’ largest trading partners ultimately came to the table. Since then, the market has climbed the proverbial ‘Wall of Worry’ and is trading at all-time highs.
Have Tariffs Caused Inflation?
“Words talk, numbers scream.”
Whenever debating a politically hot-button topic like inflation, it’s critical that investors rely on data over opinions and forecasts to eliminate bias. From 1970 to 2025, the average consumer price index (CPI) inflation ratewas 3.93%. Currently, according to the Bureau of Labor Statistics (BLS) CPI is 3%.
Despite the normal inflation readings, many Americans are still struggling to get by financially after the 2022 inflation spike to 9%. In other words, many consumers are still facing the hangover of the post-COVID price spike, although the rate of inflation has reverted to the mean. Meanwhile, although some tariffs have undeniably impacted the price of certain products, rampant tariff-induced inflation has simply not shown up yet. A combination of lower energy prices and import costs of many goods has helped to offset tariffs.
Will Tariff-Induced Inflation Appear Later?
“The only function of economic forecasting is to make astrology look respectable.”
As we have learned this year, economic predictions are difficult. Treasury Secretary Scott Bessent argues that tariffs cause a one-time “price-adjustment” rather than the persistent 2022-esque inflation the US experienced. Additionally, Bessent suggests that lower interest rates and energy costs will help to offset any impacts from tariffs.
Not Everyone Is Happy About Trump Tariffs
Not all companies are happy about tariffs. For instance, Costco recently sued the Trump Administration over tariffs. Meanwhile, other retailers such as Walmart, Nike, Lululemon and Restoration Hardware have cited tariffs as a challenge during their earnings calls. Finally, and most importantly, the US Supreme Court is due to make a decision any day now on whether the Trump Tariffs are constitutional.
Bottom Line
While the initial shock of the tariff rollout rattled markets and stirred economic fear, history shows that panic often fades as cooler heads prevail. Inflation has stayed surprisingly tame, but the long-term effects of tariffs remain a story still unfolding. As investors look ahead, the Supreme Court’s upcoming decision could determine the fate of the Trump tariffs.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Get all the details here >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.