President Donald Trump pronounced April 2, when his administration plans to more than double the tariffs it’s imposed already, “a Liberation Day for our country because we’re going to be getting back a lot of the wealth that we so foolishly gave up to other countries.” April 2 is not to be confused with January 20, which, Trump said in his inaugural speech, was “Liberation Day,” nor with November 4, which Trump predicted in advance would be “Liberation Day”—the liberation in these latter instances being Trump’s triumphal return to the White House. Before 2025 ends, we will surely witness five or six more Liberation Days.
Trump likes the Liberation Day metaphor because it evokes American GIs parading tanks down the Champs-Élysées and throwing nylons and cigarette packs at cheering French crowds. But it’s an especially inapt way to describe the initiation of a trade war. The liberation of Paris marked an end to hostilities, not their beginning. To whatever extent August 1944 was about sharing the bounties of American commerce, April 2025 will be about not sharing them. Make your own goddamned nylons and cigarettes.
It’s hard to know in advance precisely what Trump has in store, but Trump is calling for reciprocal tariffs, wherein U.S. trade restrictions for a given country match whatever trade restriction that country imposes on goods from the U.S., including tariffs, taxes, regulations, and currency exchange rates. The looseness of this definition, as laid out in a February 13 White House memo, gives Trump ample room to define reciprocity in as maximally self-interested a manner as he desires.
Consider the Value-Added Tax, or VAT, on which many European countries depend, with rates typically around 20 percent. The VAT, which taxes goods at every stage of production, is passed on to the consumer, to whom it is for all practical purposes a sales tax. Here in the U.S. we have sales taxes too, at the state and local level, but state and local taxes combined never reach 10 percent, much less 20 percent. From this, Trump concludes that “a VAT is a tariff.”
A VAT is not a tariff. As Greg McKenna pointed out last month in Fortune, “A tariff is a tax on imports, while the VAT is simply a tax on all domestic consumption, regardless of where the good or service is produced.” The VAT is not imposed on exports, but that’s a red herring, because the U.S. doesn’t tax its exports either; Article One of the Constitution doesn’t allow it (“No Tax or Duty shall be laid on Articles exported from any State”).
I laughed out loud when I saw that the February 13 White House memo listed among the regulatory policies the U.S. will consider trade restrictions “government-tolerated anticompetitive conduct of state-owned or private firms” (italics mine). That sounds more like a justification for European nations to slap additional tariffs on us, given that antitrust regulation is considerably weaker in the U.S. than in the European Union. Trump gave us a preview of his commitment to policing antitrust this week when he fired the Federal Trade Commission’s two Democratic commissioners. “The president wants the FTC to be a lapdog for his golfing buddies,” said one of these commissioners, Alvaro Bedoya, on social media. That was slightly unfair; Trump also wants the FTC to be a bulldog against his political enemies.
To no one’s surprise, the Federal Reserve responded Wednesday to Trump’s Liberation Day pledge by leaving interest rates unchanged. “Inflation has started to move up partly in response to tariffs,” said Fed Chair Jerome Powell. “There might be a delay in further progress over the course of this year.” Asked specifically about Liberation Day, Powell said, “We know that [more] tariffs are coming in, we know that they’re probably already—all forecasters have tariff inflation affecting core PCE inflation, core CPI inflation this year, without exception. We kind of know there are going to be [more] tariffs and they tend to bring growth down, they tend to bring inflation up.” Powell also said that he assumes Trump’s tariffs will bring retaliation from other countries. “That’s baked into the numbers,” he said.
I think it’s reasonable to conclude that Powell is not on Team Trump. That makes it a solid 40–50 percent likelihood that Trump will fire Powell before long, or at least claim to have done so. Firing Powell would be illegal, just as Trump’s firing of the FTC’s Bedoya and various other administrative personnel at independent agencies was illegal. Unlike those firings, a Powell firing would freak out the financial markets. But Trump’s persistence in trying to replace tax revenue with tariff revenue, and in manufacturing reasons to do so, is freaking out the markets already, and Trump doesn’t seem to mind. Liberators don’t sweat the small stuff.
