What could reciprocal tarrifs mean for my investments?

Investors are holding their breath for 'liberation day'…

Well, this is the week that Donald Trump's much-hyped 'liberation day' will happen. This is when the US President has promised to simultaneously unveil and implement the next stage of his tariff plans. He has called these latest taxes 'reciprocal tariffs'.

Over the past two months or so, the Trump administration has ratcheted up its policy of implementing tariffs – or import taxes – on a number of imports into the US economy. First, it was those 25% tax hikes on Mexican and Canadian imports, as well as additional taxes on Chinese imports. Then, it was steel and aluminium tariffs.

Well, things are about to get a whole lot more interesting. As we covered last week, Trump has named 2 April 'liberation day. This will involve imposing a series of additional, wide-ranging tariffs on dozens of other countries' imports into the US economy.

These new 'reciprocal tariffs' will be determined on a country-by-country basis and will be influenced by a range of factors. These include whether a country has a trade surplus with the United States and what taxes it imposes on American exports.

Australia, as well as other major trading economies like South Korea, Japan, and the European Union, are expected to be included, although we don't know exactly what tariffs will be imposed yet.

So, what does all this mean for an ASX investor's share portfolio?

Three colleagues stare at a computer screen with serious looks on their faces.

Image source: Getty Images

How will 'reciprocal tariffs' hit ASX shares?

Well, it's quite tricky to put the finger on right now, as we don't yet know how severe Trump's new tariffs will be.

However, it's hard to see the new tariff regime as beneficial to most ASX investors. On the surface, relatively few Australian companies derive a majority of their revenue from exports to the United States.

Any new import taxes are unlikely to directly impact the profits of most blue-chip ASX shares. That includes the big four banks, Telstra Group Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW) and Wesfarmers Ltd (ASX: WES).

However, it's these tariffs' effects on the health of the global economy that are arguably a clearer and more present danger. There is a real risk that if Trump's new tariffs are as harsh as some fear, they could spark a serious downturn in global growth.

Our economy might not feel too much of an immediate impact if Trump levies a tariff on Australian exports. However, if European, Japanese, South Korean and, in particular, Chinese economic activity slows, it will be bad news (to say the least) for our economy and thus for many ASX stocks.

Let's see what Trump comes up with later this week. The market's reaction will probably tell you all you need to know. Brace yourself.

Motley Fool contributor Sebastian Bowen has positions in Telstra Group and Wesfarmers. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Economy

Man holding graphic houses with dollar signs and graph points surrounding them.
Economy

How much further will house prices fall, according to AMP's chief economist?

There's no good news around house values for the foreseeable future.

Read more »

A businessman pushes a giant percentage sign down, indicating eforts to keep inflation in check
Economy

Inflation jumps back to 4%. Are more interest rate hikes coming?

Another inflation increase has put the RBA back in focus.

Read more »

Red percentage sign in front of a chart.
ASX Share Market News

ASX 200 slips as RBA boosts interest rates to 15-year highs

ASX investors and mortgage holders are now eyeing the highest interest rates in 15 years.

Read more »

Oil spelt out on block cubes with an up and down arrow.
Economy

Oil prices rise again as Middle East uncertainty keeps traders guessing

Oil prices are back on the move.

Read more »

A man stands in overalls and a hardhat with a clipboard in front of stacked black oil drums at an oil industry site.
Economy

Oil prices surge as Trump rejects Iran peace deal. What's next?

Could oil prices be heading for another major move?

Read more »

A man sits at his kitchen table reading the paper and drinking coffee as rain pours on him, while a woman stands with an umbrella over her head in the distant background.
Economy

Australia's recession risk hits 50% as RBA prepares to lift rates

Could further RBA rate hikes push the economy too far?

Read more »

A shocked man sits at his desk looking at his laptop while talking on his mobile phone with declining arrows in the background representing falling ASX 200 shares today
Economy

Could two more RBA rate hikes push Australia into recession?

One economist has issued a warning about our economic outlook.

Read more »

a man in a suit jacked sits uncomfortably with his hands clasped before his face in a job interview situation while sitting across from an interviewer
Economy

Unemployment hits 4.6%. Could the RBA hold off on another rate hike?

The RBA has plenty to consider ahead of next week's meeting.

Read more »