Tariff Tsunami Hits Global Shores

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Good morning, Woke up to find tariffs making a comeback, oil prices taking a dive, jobs pretending everything's fine, and AI models charging like they're gold-plated. Meanwhile, Vietnam just became the new economic scapegoat and your sneakers might soon cost as much as your rent.

Happy Saturday—Capitalism's working hard. Hope you are too!

TARIFF
A billion-dollar bet with global fallout

President Trump has launched one of the most aggressive tariff offensives in decades, targeting U.S. imports with a sweeping overhaul that could cost Americans billions and reshape global trade dynamics.

On Wednesday, the president replaced America’s long-standing trade structure with a new tariff system, arguing it will correct “decades of unfair treatment” by foreign nations. But behind the political bravado lies a complicated mix of economic consequences, unanswered questions, and rising global tensions. Here’s what matters: new tariffs ranging from 10% to a staggering 79% on goods from 57 countries will take effect in stages starting Saturday. The goal? Push factories and jobs back to the U.S. But what it may also push up are consumer prices, global tensions, and the risk of recession.

Let’s break it down:

• A 10% base tariff applies to nearly all U.S. imports (excluding Canada and Mexico).

• A second “reciprocal” tariff targets 57 countries—including allies like Japan, Germany, and South Korea—with rates from 1% to 40%, depending on the U.S. trade deficit with each nation.

• Chinese goods face the harshest blow: an extra 34%, on top of the 20% from recent months—totalling 79% on some products.

• Vietnam and Cambodia, favoured as manufacturing alternatives to China, will now be hit with 46% and 49% tariffs respectively.

• Meanwhile, Russia, North Korea, Cuba, and Belarus—already under sanctions—are exempted, though oddly, Lesotho and the Falkland Islands didn’t escape.

The White House claims the tariff formula is based on the gap between what each country sells to the U.S. and buys from it. But this ignores basic economic principles like comparative advantage.

So what happens next?

Imports just got a lot more expensive for U.S. companies. Take Walmart: a $10 shoe from Vietnam now carries a $4.60 tariff. That cost could hit suppliers, and retailers—or land squarely on American consumers. Economists say we’ve seen this movie before—and in most cases, shoppers paid the price. Expect ripple effects across the economy. Stock markets already dived. Fitch and other analysts are warning of recession risks, slower growth, and higher consumer costs. Yale’s Budget Lab estimates an average $2,100 annual increase in household expenses, with lower-income families hit hardest.

And with potential retaliation from global partners looming, this bold economic move could spark a trade war with uncertain fallout. Whether this strategy reshapes global trade—or destabilizes it remains to be seen.

ECONOMY
Jobs rise, But trade fears loom

March saw a stronger-than-expected rise in U.S. payrolls, with 228,000 jobs added—well above the 140,000 forecast. But the good news was offset by a rise in the unemployment rate to 4.2%, up from 4.1%, as more Americans entered the workforce. The upbeat job numbers arrived during a tense week dominated by fears of a global trade war, following President Trump’s tariff announcement. Despite the solid employment data, market focus remained on broader economic risks, with the Dow falling over 900 points and investors fleeing to bonds.

Healthcare remained the top hiring sector, adding 54,000 jobs. Retail and social assistance each added 24,000, and transportation gained 23,000. Meanwhile, federal jobs dropped slightly by 4,000—even as over 275,000 cuts tied to the Department of Government Efficiency are reportedly in progress. Wage growth held steady at 0.3% for the month, but annual growth slipped to 3.8%, its weakest since July 2024. Full-time jobs rose by 459,000, while part-time roles declined by 44,000. Broader unemployment, including underemployed workers, eased to 7.9%.

The labour market is still adding jobs despite trade concerns and government cuts. But with recent downward revisions to January and February figures, and policy uncertainty growing, questions remain about how long the momentum can hold.

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ENERGY
Oil sinks 8% amid China tariff shock

Oil prices plunged nearly 8% on Friday, hitting their lowest since 2021, after China imposed 34% tariffs on all U.S. goods starting April 10 — a sharp escalation in the trade war. Brent fell $5.55 (7.9%) to $64.59, and WTI dropped $5.87 (8.8%) to $61.04, with both benchmarks set for their biggest weekly losses in over two years. Earlier, they touched $64.15 and $60.81 — four-year lows.

Markets are pricing in a hit to global oil demand. Some, like BOK Financial’s Dennis Kissler, wonder if this is a real fallout or another negotiating move from the Trump team. Either way, volatility is here to stay. Adding to pressure, OPEC+ fast-tracked output increased to 411,000 bpd in May, up from 135,000. Meanwhile, a Russian court ruling kept CPC exports flowing, easing fears of a supply dip from Kazakhstan.

Though oil imports were exempted from new U.S. tariffs, analysts warn of inflation and slower growth. JP Morgan now sees a 60% chance of recession by year-end, up from 40%. Goldman Sachs cut its 2025 Brent and WTI targets by $5 to $66 and $62, citing downside risks. HSBC lowered its oil demand growth forecast for 2025 to 0.9 million bpd. The trade war is deepening, and oil is paying the price.

AI & TECHNOLOGY
Gemini 2.5 Pro is expensive

Gemini 2.5 Pro isn’t just another AI model—it’s Google’s most expensive one yet.

Developers were waiting to see how Google would price its new flagship model, and Friday’s reveal didn’t disappoint—or come cheap. With support for prompts up to 200,000 tokens, the model costs $1.25 per million input tokens and $10 for output. For longer prompts, it jumps to $2.50 and $15 per million tokens, respectively.

That makes Gemini 2.5 Pro pricier than Gemini 2.0 Flash, OpenAI’s o3-mini, and DeepSeek’s R1. However, it still undercuts top-tier options like Claude 3.7 Sonnet and GPT-4.5. What’s more, Google offers it for free—albeit with tight limits—giving developers a taste before they buy.

Still, pricing trends are shifting. Across the board, leading models are getting more expensive, with OpenAI’s o1-pro setting a staggering benchmark at $150 per million input tokens. Google seems to be riding a wave of demand. CEO Sundar Pichai confirmed Gemini 2.5 Pro is now the most-used model on Google’s platforms, spiking usage by 80% in just one month.

While rates are rising, so is interest—and Gemini 2.5 Pro may well be the model that justifies its cost.