April 2 is fast approaching, and if you listen to Donald Trump, it’s not just another day, it’s “liberation day. ”

But for investors, that so-called liberation might come with a hefty price tag, thanks to a wave of new tariffs that could rattle markets, hike inflation, and throw growth projections into question.

Goldman Sachs Unimpressed by the Hype

The bank just raised its recession probability to 35%, which is a significant jump. This leap shows a slowing growth, declining consumer confidence, and a willingness from policymakers to tolerate short-term economic pain.

On top of that, they’re forecasting an S&P 500 drop of 5% over the next three months, as tariff risks fuel valuation contractions.

The primary suspect is a possible 15-percentage-point rise in taxes by 2025. Trump’s proposed plan would impose substantial tariffs on all trading partners of the United States, which would increase the anxiety in already unstable financial markets.

Although exclusions may soften the blow, the harm to corporate earnings and investor sentiment has already started.

Will Your Portfolio Suffer?

• Goldman estimates tariffs could push PCE inflation up 0.5 percentage points to 3.5% YoY. That means consumer prices could surge and squeeze margins for businesses and erode purchasing power.
• With recession risks climbing, the Fed may step in. Goldman now expects three rate cuts this year (July, September, and November) to offset the tariff-induced slowdown. This means lower rates could provide relief for equities, but uncertainty remains.
• Defensive sectors like utilities and consumer staples could outperform in a volatile, tariff-heavy environment. Meanwhile, trade-sensitive industries like tech, manufacturing, and autos could take a hit.

Pre-WWII Tariff Levels?

As if that weren’t enough, Barclays analysts are taking a historical perspective.

They are warning us that U.S. tariffs could soon reach levels “not seen since before World War II.” That’s a sobering thought for global trade and market stability.

In a true poetic fashion, Barclays’ fixed income team invoked Marcel Proust, by comparing Trump’s tariff strategy to “reciprocal torture.”

Their view? These tariffs won’t just hurt foreign exporters; they could hammer domestic businesses and consumers as well.

For investors, April 2 isn’t just another date, it’s a potential market-moving event.

With tariffs set to spike this year, inflationary pressure climbing, and Wall Street adjusting its playbook, it is crucial to stay ahead of the curve.

Watch out for these things:

• The official tariff announcement on April 2, 2025.
• The Fed’s response. Will Powell confirm the expected rate cuts?
• Sector performance shifts, such as defensive sectors which may gain traction.

One thing is clear though, this “Liberation Day” could be anything but liberating for investors.