Liberation Day Unveiled: Trump’s Reciprocal Plan – What Investors Need to Know by April 2nd

Trump's ambitious goal of balancing the budget is being lead by two businessmen known for getting things done.

Let the countdown begin …

Liberation day is coming.

The White House has hyped up April 2nd when the Fair and Reciprocal Plan is unveiled.

We know some parts already, and today I’ll outline what you should know as an investor.

Let’s take a step back and understand the goal put in place by the Trump administration.

The US budget deficit stands at around $2T.

That means the government spends $2T more than it takes in.

According to US Commerce Secretary Howard Lutnick the plan to balance the budget is fairly simple:

• Elon Musk and DOGE will cut $1T of “waste, fraud, and abuse” from spending.

• Lutnick is in charge of raising $1T in new revenue - primarily through tariffs.

The plan is unique because it doesn’t require a thinly divided congress to function.

Spending cuts from Musk and DOGE seem well underway.

These have some impact on the stock market.

Aside from the workers being unemployed, companies directly exposed to the government grift will get hammered.

For example, Booz Allen Hamilton BAH 0.00%↑ shares have plunged on the news it receives 98% of its revenues from the American taxpayers.

Say what you want about Musk, but the guy has proven himself to be a ruthless cost cutter.

Even without $1T in additional revenues, if the United States can shave $1T from its spending each year - that’s a good thing.

But as ambitious as Musk is, Howard Lutnick is cut from the same cloth.

He’s in charge of slapping tariffs on nations in an attempt to raise $1T in new income.

But Lutnick’s plan is more complicated and has a bigger impact on the markets.

It starts April 2nd when the White House is expected to slap, what it calls, “reciprocal tariffs” on countries.

For example:

The EU imposes a 10% tariff on all automobiles imported from the US to Europe.

The USA on the other hand only imposes a 2.5% on European cars imported into the US.

In India - the country places a 100% tariff on motorcycles imported from the US. Whereas motorcycles exported to the US only face a 2.4% tariff.

Across the board, US exporters face significantly higher tariffs - making US products uncompetitive in many markets outside the US.

Trump’s plan on April 2nd is to impose “reciprocal tariffs” that are equal to the ones American businesses face.

So if a US car maker faces 10% export tariff into Europe, the European car maker will face the same.

The mainstream press and general public with a 3rd grade understanding of economics have all come to the same logical conclusion.

This will lead to higher prices.

This is both obvious and well known.

But businesses won’t just sit back and do nothing.

Howard Lutnick realizes this.

In fact, the EU is already in discussions with the US - primarily because for decades US businesses have already adapted to the higher tariffs - so the shocks will be felt more on the exporting countries.

Several other nations have done the same. Most of this won’t get much press because it makes it appear Trump’s plan is working.

Here’s where things will get more nuanced … and complicated for the Trump administration.

In response to the tariffs, some companies have committed to investing in the United States including:

• Apple: Announced a $500 billion investment over the next four years, aimed at creating 20,000 new U.S.-based jobs. This includes plans for a new server factory in Texas, with some production shifting from Mexico to the U.S.

• Taiwan Semiconductor Manufacturing Company (TSMC): Committed to a $100 billion investment to build five new chip manufacturing facilities in Arizona, on top of a previously announced $65 billion for three plants.

• Nvidia: Plans to invest hundreds of billions of dollars over the next four years in U.S.-based chipmaking operations, supporting the expansion of artificial intelligence infrastructure.

• Eli Lilly and Company: Pledged a $27 billion investment in U.S.-based manufacturing to expand domestic drug production.

• Johnson & Johnson: Announced a $55 billion investment over the next four years in U.S. manufacturing, research, and technology, including a new biologics facility in North Carolina, creating around 5,000 jobs.

• Hyundai: Committed $21 billion through 2028, including $5.8 billion for a steel plant in Louisiana (employing 1,300 people) and $9 billion to expand production of Hyundai, Kia, and Genesis vehicles in Georgia and Alabama.

• Stellantis: Plans a $5 billion investment to reopen its Belvidere, Illinois, assembly plant (putting 1,500 employees back to work) and enhance its U.S. manufacturing network.

But these investments don’t always work out.

If you recall, during the 1st Trump administration Foxconn announced a $10B LCD manufacturing facility in Wisconsin that never came to be.

In other words, it’s easy to say you’re going to invest billions in the United States, it’s another to actually do it.

This will make Lutnick’s job more difficult than Musk’s.

That’s because Lutnick’s payoff could take years - and with Trump only having a 4 year term … companies could easily delay investment knowing Trump’s window closes rather quickly.

For investor it means a few things.

1. Companies (smart ones) know how to play Trump. You simply promise something he wants (US investment) and it gets him on your side.

2. The financial impacts of the tariffs will largely be negotiated away in the coming weeks - so any volatility they creates is likely an opportunity for long term investors.

3. The administration wants to cut taxes on tips, overtime, and income under $150,000 - which would offset some of the tariff income.

4. That means Lutnick’s side of the $1T in new revenue will be much harder to generate.

5. Under the hood, the Trump administration plans to reduce banking regulations to allow for easier access to credit. It also wants to close several tax loopholes. I’ll discuss more on the livestream … few financial publications are talking about this.

If (and it’s a big if) companies do re-shore and spend the money they commit to spending here in the United States, Lutnick will likely (easily) raise $1T in new revenue - but it will be over the course of several years.

In the meantime these large construction projects create opportunities for investors as some obvious companies benefit.

Be sure to join me LIVE April 2nd 5:30 PST / 8:30 EST to discuss this and more:

Link to the livestream: https://youtube.com/live/fvLKKTzlgMg?feature=share

See you next week!

Colin