This has happened before. The stock market is irrational and volatile, and a bounce back does not mean the economy will be okay. It won't. The administration's own sources that "justify" and "calculate" their tariffs confirms that it will only hurt the US economy.
The Office of the U.S. Trade Representative released its methodology and cited an academic paper produced by four economists, including me, seemingly in support of its numbers. But it got it wrong. Very wrong. I disagree fundamentally with the government’s trade policy and approach.
Alberto Cavallo, Gita Gopinath, Jenny Tang and I studied the tariffs placed on Chinese exports in 2018 and 2019. (This is the “Cavallo et al.” reference in the government’s methodology.) We found that tariffs of, say, 20 percent caused domestic importers to pay nearly 19 percent more. This represents a pass-through into import prices of about 95 percent, which is the value I would have plugged into the government’s tariff formula. In simple terms, that implies that the price paid for U.S. imports would rise almost as much as the tariff rate.
[...] Wednesday’s reciprocal tariffs will bring average tariff rates to their highest level in over 100 years. Their breadth is striking, hitting large economies such as China and Europe, and also small developing and emerging-market countries including Jordan and Zambia. And despite being billed as a “do unto others” trade policy, they are not calculated in line with the Bible’s golden rule.
I would strongly prefer that the policy and methodology be scrapped entirely. But barring that, the administration should divide its results by four.
Emphasis mine. https://web.archive.org/web/20250408161636/https://www.nytimes.com/2025/04/07/opinion/trump-tariff-math-formula.html