While President Donald Trump‘s rhetoric on tariffs has taken a noticeably softer tone in recent days, Goldman Sachs remains unmoved and says investors should brace for potentially unwelcome surprises on April 2.
In a note shared Tuesday, Goldman Sachs economist Alec Phillips said markets may be caught off guard by Trump’s approach, which appears designed to front-load tariff rates as a negotiation tactic. This echoes the administration’s previous strategy on Mexico and Canada, where aggressive initial tariffs were later rolled back.
According to Phillips, the headline tariff rates could land far above investor expectations, potentially causing a shock for markets.
Could The ‘Reciprocal Tariff’ Be A Market Shock?
Despite recent media hints suggesting a narrower, more targeted approach, Goldman Sachs warns the risks lean toward a “negative surprise” for investors. According to a recent survey conducted by the bank, participants who expect a reciprocal tariff see an average rate of 9 percentage points.
“We expect the initially proposed rate to be higher than the survey result, potentially closer to double what market participants expect,” Phillips said in the report.
Goldman Sachs indicated Trump’s team could propose a rate within the 15%–20% range—before moderating later.
This aggressive opening salvo could mirror past behavior. In 2018, the Trump administration initially imposed steep steel and aluminum tariffs before easing them for allies after a brief period.
That tactic may return, especially given that the White House has openly stated that new tariffs are intended as a starting point for talks.
According to Phillips, the administration could propose higher rates at the outset, reinforcing the idea that the initial figures may not reflect the endgame—but could still jolt investors in the short term.
On Monday, Trump struck a more conciliatory tone on tariffs, saying, “I may give a lot of countries breaks on tariffs,” though he also hinted at the magnitude of the potential measures: “They’ve charged us so much that I’m embarrassed to charge them what they’ve charged us. But it’ll be substantial.”
The remarks revived investor risk appetite, prompting a shift away from safe havens like bonds and gold toward riskier assets. The SPDR S&P 500 ETF Trust SPY rose 1.8%, while the Invesco QQQ Trust, Series 1 QQQ jumped 2% as tech stocks led the rally.
What Goes Into The Reciprocal Tariff Math?
According to the Office of the U.S. Trade Representative, 19 countries are currently under review for the reciprocal tariff framework. These nations account for 91% of U.S. imports, and 15 of them run trade surpluses with the U.S., representing 87% of imports.
Goldman Sachs indicates the new reciprocal tariff formula could be built on four components: import tariff differentials, non-tariff barriers, currency misalignments and foreign tax structures.
The investment bank estimates that tariff differentials between the U.S. and other countries stand at 1.3 percentage points, while non-tariff measures—such as regulatory hurdles or intellectual property restrictions—could add another 6 points on average, based on external studies.
On top of that, the administration might include controversial inputs such as value-added taxes and currency undervaluation. Trump has repeatedly cited VATs as unfair, despite them being standard fiscal tools across most economies. Currency misalignments, meanwhile, are tricky to quantify, but the administration could use thresholds to justify further rate hikes.
If all these components are included, Goldman Sachs expects the total increase in effective U.S. tariffs could reach 10 percentage points, up from just over 3 points. In a worst-case scenario, tariffs could rise by as much as 15 points.
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