During a ceremony in the White House Rose Garden, Trump stated that the day would be remembered as a turning point for American industry. He also mentioned that the tariffs would provide billions of dollars for tax reduction and debt repayment.
What has Trump proposed?
The tariffs add a 10% tariff on the majority of imported goods from all trading partners. Reciprocal tariffs would also be implemented on imports from dozens of countries.
For imports from the European Union, a new 20% tariff would be set. The tariff rate varies for individual countries: China 34%, Japan 24%, Vietnam 46%, South Korea 26%, Taiwan 32%.
Several products, including medical devices, semiconductors, pharmaceuticals, and gold, are currently exempt from the reciprocal duties.
The baseline import tariff of 10% will come into effect on April 5, leaving little time for negotiations. The higher rates for specific countries are set to take effect on April 9.
These tariffs are imposed in addition to existing US tariffs on China and levies on steel, aluminum, and cars.
How are Americans reacting to the news?
Reacting to the news, industry groups and economists have expressed their concerns.
Jay Timmons, the president of the National Association of Manufacturers, said, “Many manufacturers in the United States already operate with thin margins. The high costs of new tariffs threaten investment, jobs, supply chains, and America’s ability to outcompete other nations and lead as a manufacturing superpower.”
Gary Shapiro, the head of the Consumer Technology Association, expressed his concern stating that these tariffs are “massive tax hikes” for Americans, and could drive inflation, kill jobs on Main Street, and perhaps even cause a recession.
With friends like these, who needs tariffs?
These new tariffs come as the president is challenging decades of global trade rules and pushing for the acquisition of Canada, Greenland, and control of the Panama Canal.
These new tariffs will create uncertainty, disrupt supply chains, create more bureaucracy, and increase grocery bills, according to European Commission President Ursula von der Leyen. She also noted that there seems to be a lack of order in these actions.
Italy’s Prime Minister Giorgia Meloni, however, expressed a more conciliatory tone, stating that her country will do everything possible to reach an agreement with the United States to avoid a trade war.
How are investors reacting to the tariffs?
According to research strategist Jim Reid of Deutsche Bank, the tariffs added to the sense of a significant policy reordering by the new US administration. However, the lack of a comprehensive plan caused a lack of confidence. He also noted that these tariffs could reduce US growth by 1-1.5% and cause a 0.5% reduction in China’s GDP.
Capital Economics’ chief economist, Neil Shearing, stated that Canada and Mexico were less affected than expected as they are exempt from certain tariffs under the United States-Mexico-Canada Agreement. He also highlighted that countries like Australia, Brazil, and the UK would only face minimal 10% tariffs, whereas China and other Asian countries would be hit relatively hard.
Looking ahead into the unknown
It is currently impossible to estimate all the effects these tariffs will have on the US and its trading partners. However, most analysts agree that economic growth will slow and there will be no real winners. It may take years to quantify the unintended consequences of these economic policies.
Pulling the US out of normal trade balances, or making it a less appealing partner, could lead to new political and economic alliances, such as Canada turning to the European Union or Mexico tilting toward China.
In the shortest term, American consumers will bear the brunt of these tariffs as companies increase prices for imported goods. Inflation rates could also rise as a result of these price increases. Countries facing new US tariffs may retaliate with their own duties, escalating the situation into a broader trade war.
Edited by: Ashutosh Pandey
