Tuesday, 22 April 2025
Written by MYTHEO
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“Trump’s surprise “Liberation Day” tariff blitz has shaken global markets and exposed deep economic and political risks. As tensions rise and volatility returns, MYTHEO breaks down what it all means—and how our smart, diversified portfolios help you stay ahead in uncertain times.”

Key Takeaways
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• Trump’s “Liberation Day” tariffs shocked the market—aggressive, poorly planned, and built on a flawed formula, fueling avoidable volatility.
• Trump may have underestimated China’s supply chain dominance. While the US struggles to find replacements, China is finding alternative partners with greater ease.
• MYTHEO’s portfolios are built for all market conditions—dynamically diversified across Growth, Inflation Hedge, and Income strategies, covering over 20,000 companies globally.

TRUMP’S LIBERATION DAY’, CHINA’S PUSHBACK, AND MARKET FALLOUT
EXECUTIVE SUMMARY
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President Trump’s bold return to the global trade arena has ignited a fresh wave of economic turbulence. On his self-declared “Liberation Day,” a sweeping and controversial tariff regime was unleashed—unintentionally hitting poorer countries harder than wealthier ones, with Southeast Asia providing a striking example of the imbalance. China, already strained by earlier levies, now faces a staggering 245% tariff wall, triggering fierce retaliation and a pivot toward more aggressive international alliances. Financial markets responded negatively, with US Treasury yields surging and a $9 trillion debt rollover looming—forcing the White House into a dramatic, last-minute policy reversal. At home, Trump’s tariff strategy is shaking political foundations, dividing allies, and fueling inflation fears. Yet, more policies may lie ahead, as Trump also promises sweeping tax cuts and radical economic reforms. MYTHEO views his aggressive approach as ill-timed and unnecessary, reinforcing the importance of a resilient, globally diversified investment strategy.

INTRODUCTION

Since taking office in January, President Donald Trump has launched an aggressive trade offensive, starting with a sharp increase in steel and aluminum tariffs—from 10% to 25%. This was followed by a 25% levy on goods from Canada and Mexico. In both instances, China was separately slapped with a 10% tariff, escalating tensions further and setting the stage for a broader trade war.

But Trump’s most dramatic move came on what he dubbed “Liberation Day.” Despite clear market volatility caused by earlier measures, the administration forged ahead in April with broader and more severe tariffs than anyone expected. Even more controversial was the formula used to justify these tariffs—rather than basing tariffs on actual rates charged by other countries, the administration devised a formula that divides the US trade deficit with a country by that country's exports to the US, then halves the result. Economists have slammed this method as misleading. It even led to punitive tariffs on countries that impose no tariffs on US goods at all.

Snapshot of Trump Reciprocal Tariff impose by Trump

Source: Trump Administration, April 2025

What’s more troubling is the injustice created by the tariff formula. It disproportionately punishes poorer countries, particularly those with limited capacity to import US goods due to lower purchasing power. These nations, which export more to the US out of economic necessity, are now facing some of the steepest penalties.

Take Southeast Asia as an example. Singapore, the region’s wealthiest country, is subject to a 10% tariff. Meanwhile, less developed neighbours face significantly higher rates: Cambodia (49%), Laos (47%), Vietnam (46%), and Myanmar (44%).

The Trump tariff regime clearly targets China most aggressively. Despite already being subject to a combined 20% tariff before Liberation Day, China was hit with an additional 34% levy under the “reciprocal” tariff system.

Trump administration also imposes a “general” 10% tariff countries where the US holds a trade surplus—including the United Kingdom, the UAE, and Australia

WHY DID TRUMP HIT THE BRAKES ON RECIPROCAL TARIFFS—JUST HOURS BEFORE LAUNCH?

The general 10% tariff, effective from April 5th, applied to all nations except Canada and Mexico. Meanwhile, the “reciprocal” tariffs, scheduled to go live on April 9, were suddenly paused for all countries except China—just hours before implementation. Strikingly, the announcement came not through official government channels, but via Trump’s personal social media account.

The reason for the sudden pause? Financial market turmoil. In the days leading up to the tariff rollout, US Treasury markets were in disarray. Yields on 10-year Treasuries surged from 4.13% on April 7 to 4.74% by April 9—a steep rise reflecting a major sell-off. The imbalance alarmed the Trump administration, as rising yields mean higher borrowing costs for both the government and businesses.

The Movement of Treasury Yields in US since Early March to Mid-April 2025‍

Source: LSEG, April, 2025

Behind the scenes, a looming debt challenge added to the urgency. The US faces a massive debt rollover in 2025—about $9 trillion in maturing Treasuries, with $6 trillion due in the first half alone. With rising yields, refinancing this debt could become significantly more expensive, further straining federal finances.

After the announcement of reciprocal tariff, the US and China engaged in a heated tariff battle, continuously escalating duties on each other's goods. This tit-for-tat retaliation resulted in Chinese imports facing US tariffs as high as 245%, while US exports to China were hit with tariffs reaching 125%.

Then on April 12, US President Donald Trump's administration has exempted smartphones, computers and some other electronic devices from "reciprocal" tariffs, including the 125% levies imposed on Chinese imports.

HOW MYTHEO SEES TRUMP’S TRADE AND TARIFF STRATEGY?

The Trump administration’s tariff strategy has been one of the most controversial aspects of its economic agenda—broad, aggressive, and indiscriminate. Even nations with trade surpluses in favour of the US found themselves in the crosshairs. From our perspective, this trade war was not only unnecessary, but ill-timed. President Trump inherited a strong and resilient economy from the Biden administration. While efforts to address the nation’s mounting debt and huge trade deficit are valid, a more measured and gradual approach could have avoided unnecessary market shocks.

The US economy has already evolved beyond its traditional industrial base. While manufacturing competitiveness has declined over time, the US has carved out a clear global leadership position in high-value service sectors—particularly in technology and artificial intelligence. These sectors have been critical drivers of economic growth and stock market performance over recent years. Rather than attempting to revive a past era of industrial dominance, the smarter path forward lies in doubling down on innovation and further strengthening the service economy.

US GDP Growth over the past Six Quarters

Source: US Bureau of Economic Analysis, April 2025

The existence of tariffs doesn’t automatically mean the US is at a disadvantage in global trade. A clear example is the trade relationship between the US and the European Union (EU).

According to research published by Visual Capitalist, based on World Trade Organization (WTO) data, the EU’s weighted average tariff across all imports is just 2.70%. In fact, around 72% of goods entering the EU face zero tariffs. Surprisingly, it’s not the US, but China that faces the toughest conditions—fewer than 50% of its exports to the EU are exempt from tariffs, making China one of the most disadvantaged major economies for the European market.

According to the European Commission, the average tariff applied specifically to US goods is just 1%—far below the EU’s overall average of 2.7%. This means that while tariffs on US goods do exist, they are relatively modest and do not place the US at a significant disadvantage compared to other nations.

Trade weighted average tariff of Countries around the world before Trump’s Tariff

Source: Visual Capitalist, April 2025.

As of April 16, the total tariffs announced by the Trump administration on Chinese goods have soared to 245%, while China’s tariffs on US goods stand at 125%. Yet, the actual impact may not be as damaging as the numbers suggest. When tariff differentials are this extreme, they often open up arbitrage opportunities and lead to trade rerouting. Goods from China facing steep tariffs could still end up in the US—just through third countries. Nations with low trade barriers to both the US and China may import these goods and re-export them to the US, profiting from the pricing gap created by the tariffs. We’ve seen a similar dynamic during the Russia-Ukraine trade war, where sanctions on Russian oil had limited impact as India and China purchased the crude and resold it into European markets.

Imports of Selected EU Trading Partners by Tariff Regine in 2023 (%)

Source: Eurostat, April 2025

CHINA STRIKES BACK: JUSTIFIED RETALIATION OR ESCALATION?
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In our view, the Trump administration’s trade agenda has a clear primary objective: to weaken China’s economic position. This is evident in the aggressive series of tariffs imposed on Chinese goods since Trump took office. China initially faced a 10% tariff following Trump’s levies on aluminum and steel. That was soon followed by another 10% when a 25% tariff was slapped on imports from Canada and Mexico. On Liberation Day, China was hit yet again—this time with an additional 34% tariff.

Beyond tariffs, the Trump administration is now targeting China’s dominance in the global shipbuilding industry. Proposed measures include steep docking fees—up to US$1.5 million (RM6.6 million) for vessels built in China, regardless of the operator, and US$1.0 million for ships operated by Chinese firms. This marks a clear escalation, signalling that Trump’s trade offensive is expanding beyond tariffs into broader industrial pressure.

China’s retaliation, while unnerving for markets, isn’t surprising. It’s a response to a long list of trade and tech-related barriers that have been stacking up since Trump’s first term. These include the blacklisting of Huawei on national security grounds, tight export controls on advanced semiconductors (including cutting-edge chips from Nvidia), and a massive 100% tariff on Chinese electric vehicles. With tensions escalating and more restrictions likely on the horizon, China’s pivot away from the US—and toward broader international alliances—could be a calculated and strategic move. Trump’s confrontational stance, even toward long-time allies, only opens the door wider for China to expand its global influence.

Despite the rhetoric, we believe the US is more reliant on Chinese imports than the other way around. The significant US-China trade deficit isn’t accidental—it reflects how deeply American businesses depend on China’s supply chains to maintain growth. Take Apple, for instance. While some iPhone production has shifted to India, an estimated 80% of Apple’s assembly still takes place in China. This reliance likely explains why smartphones, laptops, and other key electronics were notably exempt from Trump’s tariffs—a sign that even the administration recognizes the limits of decoupling from China’s value chain.

What about China’s so-called “Trump card”—its large holdings of US Treasury debt? The reality is less threatening than it appears. China has been reducing its holdings steadily since Trump’s first term. As of March 31, 2025, China holds US$759 billion in US Treasuries—just over 2% of the total US debt, which now stands at US$36.21 trillion. The vast majority, US$28.91 trillion, is actually held domestically by the public.

US Debt Holdings by Intergovernmental vs Public for 2015 and 2025 (as of 31 March)

Source: US Treasury, April 2025

The Hidden Fallout: What Most Are Missing About Trump’s Tariffs?
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Much of the conversation around Trump’s tariffs has focused on their inflationary impact and the blow they’ve dealt to exporting and manufacturing countries—particularly China. But what’s been less discussed is how these tariffs are sparking a political crisis at home in the US.

Democrats have already launched fierce campaigns against Trump. But the real political risk lies with his own base. If tariffs continue driving up prices and straining household finances, even Republican voters may begin to waver. Cracks are already forming within Trump’s inner circle. Elon Musk has publicly clashed with Trump’s top trade adviser, Peter Navarro, over the administration’s tariff policies. Adding fuel to the fire, Musk’s brother, Kimbal Musk—who sits on Tesla’s board—has openly criticized the trade strategy, exposing clear fractures within elite business circles that once leaned pro-Trump.

While political instability is often viewed negatively by markets, there could be a silver lining. A weakening of Trump’s political grip might offer long-term benefits. With the midterm elections in 2025 looming, the tariffs and their fallout could become a referendum on Trump’s leadership. Midterms are typically seen as a report card on the president’s performance. If Republicans lose, it will signal a public rejection of Trump’s policies and could drastically shift the balance of power in Congress, making it harder for him to push through his agenda in the latter half of his term.

What’s also being overlooked is Trump’s broader economic vision. Tariffs aren’t his only bold policy move. He’s also proposed sweeping tax cuts, which could deliver a short-term jolt to the equity markets. There’s even talk within the administration of replacing the Inland Revenue Service (IRS) with a tariff-based revenue model—a radical shift aimed at stimulating economic growth. Trump’s top official claimed that tariffs could raise as much as $700 billion annually, nearly nine times current customs revenues, potentially paving the way for deep tax cuts.

INVESTING THROUGH THE CHAOS: HOW MYTHEO HELPS YOU IN THIS TESTING TIME.

Donald Trump’s aggressive tariff and global trade agenda has injected a high level of uncertainty into the market—and this may just be the beginning. No one can predict his next move, and it’s risky to assume that these tariffs will remain fixed or be implemented smoothly. They are highly susceptible to sudden changes, adjustments, or even reversals in response to shifting political and economic pressures.

In such an unpredictable landscape, a globally diversified and resilient investment strategy isn’t just a smart move—it’s essential.

At MYTHEO, our portfolios are designed to adapt. While a significant portion of our Growth Portfolio is invested in US-based companies, these are world-leading service-sector giants with globally diversified revenue streams. This global footprint helps buffer against domestic policy shocks and trade disruptions.

But we don’t stop at equities. MYTHEO also provides exposure to non-equity asset classes that enhance portfolio resilience. Our Inflation Hedge Portfolio is positioned to perform in inflationary environments, with allocations to real assets, commodities, and precious metals. Meanwhile, our Income Portfolio is strategically set to benefit from potential interest rate cuts.

In total, MYTHEO invests in around 30 ETFs, providing diversified exposure to over 20,000 companies worldwide. Every portfolio is powered by a sophisticated algorithm that automatically rebalances monthly and reviews ETF allocations regularly, ensuring portfolios remain optimized across different market conditions and stay aligned with long-term investment goals.

And to top it off—there’s MYTHEO AI-Assist. It monitors financial news, social media, and investor sentiment to detect signs of potential short-term market stress. If any asset is flagged for a high risk of rapid sell-off, AI-Assist will automatically reduce exposure—or fully exit the position. This built-in risk management adds a powerful layer of protection.

Discover how MYTHEO can enhance your portfolio diversification today and embark on your financial journey with confidence. Take the first step towards your financial goals now.

This material is subject to MYTHEO’s Notice and Disclaimer.