On April 2, President Donald Trump announced sweeping new tariffs, escalating his trade war and calling the move a “declaration of economic independence.” While Trump aims to address what he calls unfair trade practices, many economists warn that the decision could raise prices for American consumers and slow economic growth.
Exercising national emergency powers, Trump revealed a 10 per cent tariff on all imports into the United States, with even higher tariffs on goods from around 60 countries or trading blocs that have large trade deficits with the US. Notably, China and the European Union will face new duties of 34 per cent and 20 per cent, respectively.
Trump’s latest actions mark the most significant increase in US tariffs in nearly a century, reminiscent of the Smoot-Hawley Act of 1930. However, the trade conflict is far from over.
Foreign nations, including longtime US allies, have stated that they will retaliate, setting the stage for a global trade war that could escalate quickly. This would likely contribute to rising inflation and place additional strain on US consumers, many of whom are already struggling.
Trump’s “Liberation Day” announcement did little to clarify the growing uncertainty surrounding the situation. Senior White House officials hinted that more sector-specific tariffs are expected in the coming weeks.
New tariffs
Trump’s so-called reciprocal tariffs won’t fully mirror the rates foreign countries impose on the United States, unless those countries already face a 10 per cent US tariff. Additionally, they won’t be applied on top of existing sector-specific duties.
“We will charge them about half of what they’ve been charging us, so the tariffs won’t be a full reciprocal,” Trump explained from the Rose Garden on Wednesday. “I could have done that, I suppose, but it would have been tough for many countries, and we didn’t want to do that.”
For instance, instead of matching the European Union’s 39 per cent tariff on US goods, the new tariff on the EU will be set at 20 per cent. As for China, which already faces a 20 per cent tariff due to its role in the fentanyl trade, it will now face an additional 34 per cent tariff—half of the 67 per cent tariff China imposes on US goods—bringing its total rate to 54 per cent.
Around 60 countries will face tariffs higher than the baseline 10%. The 10 tariff will take effect on Saturday, just after midnight, with higher tariffs rolling out on April 9. These new tariffs won’t be added on top of the previously announced duties on steel, aluminum, and cars.
The 25 per cent tariff on goods from Mexico and Canada that don’t comply with the United States-Mexico-Canada Agreement (USMCA) will remain in place until Trump determines that issues related to fentanyl and illegal immigration have been resolved. Once those issues are addressed, Canada and Mexico will revert to the administration’s standard trade policy for other nations.
Senior White House officials also indicated that Trump plans to impose additional tariffs on semiconductors, pharmaceuticals, and critical minerals, with details to be announced at a later date.
Foreign nations vow to retaliate
Several countries have signalled their intention to respond to Trump’s new tariffs, with the International Chamber of Commerce warning on Wednesday that escalating trade tensions could pose a “clear systemic risk to the global trading system.”
China, Japan, and South Korea announced on Sunday that they will coordinate their responses, with all three nations facing duties higher than 20 per cent.
Mexican President Claudia Sheinbaum stated she would unveil a broad economic plan on Thursday to counter Trump’s tariffs, including measures to protect the country’s automotive industry.
European leaders also reacted to the announcement, pledging to assess the impact of the new tariffs on their countries before determining their next steps. Karin Keller-Sutter, president of the Swiss Federation, shared on X that Swiss officials would “quickly determine the next steps.”
In response to Trump’s move, Canadian Prime Minister Mark Carney said the new tariffs would “fundamentally change the international trading system” and vowed to fight them with countermeasures.
US Treasury Secretary Scott Bessent advised caution, urging countries not to retaliate immediately. “Sit back, take a deep breath, don’t immediately retaliate,” he told CNN’s Kaitlan Collins. “Let’s see where this goes, because retaliating could escalate the situation.” He cautioned that any rash actions would be “unwise.”
Skittishness on Wall Street and Capitol Hill
The response to Trump’s new tariffs was immediate and dramatic. US stocks tumbled in after-hours trading, and US senators voted on a Democrat-led measure to rebuke Trump’s trade policy.
By early evening, Dow futures had dropped more than 900 points, or 2.19 per cent, while S&P 500 futures fell 3.38 per cent, and Nasdaq 100 futures plummeted 4.28 per cent. The sell-off was widespread, with major companies like Apple, Nike, and Walmart—whose supply chains span the globe—seeing significant losses.
“President Trump just delivered his tariff speech at the White House, and we would characterize this series of tariffs as ‘worse than the worst-case scenario’ Wall Street had been fearing,” said Dan Ives, senior analyst at Wedbush Securities. As expected, Democrats voiced strong opposition to Trump’s tariffs throughout Wednesday.
“Republicans are crashing the American economy in real time and pushing us into a recession,” House Minority Leader Hakeem Jeffries said during a news conference. “This is not Liberation Day; it’s Recession Day.”
Rep. Greg Meeks of New York, the top Democrat on the House Foreign Affairs Committee, announced plans to force a vote on the tariffs in the coming days through a procedural manoeuvre that could bypass leadership and trigger a floor vote. His previous attempts to force a vote on tariffs had been blocked by GOP leadership.
American Businesses Brace for Impact of Tariff Hikes
The new tariff increases are expected to drive up costs for US-based importers, and these costs are likely to be passed down to American businesses. Many companies are preparing for the consequences of Trump’s latest trade actions.
“It’s concerning, it’s going to be expensive, and it’s going to force us all to make tough decisions,” said Benjamin Colvin, president and co-founder of Devil’s Foot Brewing in Asheville, North Carolina, during a news conference with fellow business owners on Wednesday.
Colvin noted that his company, which specialises in craft sodas and zero-proof cocktails, has already faced rising production costs since the introduction of tariffs on aluminum and steel.
The impact of the new tariffs will be far-reaching, affecting a wide range of industries, including grocery stores, which rely on imported goods.
“Our food system is deeply connected to global markets — including products like bananas or seasonal items that aren’t grown in the United States — which helps keep prices affordable and ensures American consumers have access to safe, nutritious food year-round,” said Leslie Sarasin, president and CEO of The Food Industry Association, in a statement on Wednesday.
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