One year of Liberation Day

Today marks one year since President Trump’s Liberation Day press conference in the White House Rose Garden. Trump declared a national emergency because Americans import more goods than they export, claiming this gave him the ability to enact sweeping new tariffs.

I was in New York City that day to give a talk on trade and tariffs, fittingly enough. Trump’s press conference took place after the event, while I was waiting for my flight at LaGuardia. I drafted a quick statement at the airport and hit send while on the jet bridge boarding the plane.

A lot has happened since then.

Although Trump called the Liberation Day tariffs “reciprocal,” they were anything but. Rather than, say, matching another country’s 20 percent tariff with his own 20 percent tariff, Trump unveiled tariff rates that were seemingly random. There was even a 10 percent tariff on two islands inhabited only by penguins.

It soon emerged that the rates came from an equation involving trade deficits that may or may not have been hallucinated by ChatGPT or another AI.

Financial markets immediately revolted against the tariffs and their haphazard implementation. After a week, Trump partially walked them back, though he kept in place a universal 10 percent tariff.

A series of trade agreements followed over the next few months with the UK, the EU, and other trading partners. Details were scarce after the announcements, and the agreements’ fates are unclear now that the IEEPA tariffs are struck down. I theorized at the time that our allies may have been playing a waiting game for the tariffs to be overturned in court.

Trump continued to threaten and withdraw new tariffs, announcing rate changes in social media posts, which led to further turmoil in both financial markets and diplomatic relations.

In one instance, he raised tariffs on Canada because Ontario’s government ran a commercial showing Ronald Reagan giving a speech opposing tariffs. In another instance, Trump raised tariffs against Switzerland to 39 percent because the Swiss president “rubbed him the wrong way” in a phone call. Switzerland’s average tariff on American products is 0.2 percent, so this was in no way a reciprocal tariff. Nor was it based on a trade deficit, which was the legal requirement under the 1977 emergency powers legislation Trump cited.

All in all, tariff rates changed more than 50 times in 2025. In a normal year, they change two or three times.

Things have not yet settled since the Supreme Court struck down the Liberation Day tariffs in February. Trump immediately reenacted many of the tariffs under a different statute, Section 122 of the 1974 Trade Act. This was also likely illegal, as I explained earlier, leading to another lawsuit.

Even if this legal challenge fails or proceeds too slowly, Section 122 tariffs are time-limited to 150 days. Trump will need to turn to yet other statutes to extend the tariffs beyond July 24. There is a good chance this tariff Whac-a-Mole game will continue for the rest of Trump’s term.

How has the economy responded? It has not been apocalyptic in part because Trump delivered only about half of what he threatened. But it has not been great, either. Inflation has been above target for five years. Growth slowed from about 3 percent in 2024 to about 2 percent in 2025. The labor market has been tepid at best since Liberation Day.

Manufacturing jobs are down by nearly 100,000 since Liberation Day. Automakers have paid more than $35 billion in tariffs since 2025. New car prices are up by 10 percent, compared with overall inflation under 3 percent. The auto industry as a whole is down 30,000 jobs.

The lumber industry is down 18,000 jobs despite Liberation Day tariff protection, which has also contributed to rising housing and construction costs.

Tariffs are not strictly inflationary, since they are one-time price increases, and only for some goods, rather than all goods. They have still raised prices of affected goods enough to show up in inflation indicators like CPI and PCE, and to factor in the Federal Reserve’s interest rate decisions. Trump’s tariff policies are at odds with his preferred monetary policy of low interest rates and easy money.

Trump’s bullying approach to trade has also complicated his foreign policy agenda. Between his Liberation Day tariffs and his penchant for not honoring his other agreements, it is no wonder that even strong allies are balking at supporting his Iran war. Trade policy turns out to be about far more than trade.

Liberation Day’s effects will likely outlast Trump’s presidency. The best near-term solution is to restore the separation of powers. Courts are already willing to strike down unconstitutional tariffs. Now Congress needs to reclaim its taxing powers. Both parties also need to relearn the lessons of 1828 and 1930: tariffs are political poison, as well as bad policy.

For a more comprehensive trade reform program, see Kent Lassman, Iain Murray, and my paper Trade Under Blockade.