The most extensive tariffs ever imposed by US President Donald Trump went into effect on Saturday, which could lead to retaliation and escalating trade tensions that could hurt the global economy. A 10 percent “baseline” tariff came into place past midnight, hitting most US imports except goods from Mexico and Canada as Trump invoked emergency economic powers to address perceived problems with the country’s trade deficits.
The trade gaps, said the White House, were driven by an “absence of reciprocity” in relationships and other policies like “exorbitant value-added taxes.”
Around 60 trading partners, including China, Japan, and the European Union, are expected to face even higher rates tailored to each economy on April 9. Already, Trump’s sharp 34-percent tariff on Chinese goods, set to kick in next week, triggered Beijing’s announcement of its own 34-percent tariff on US products from April 10.
In addition, Beijing stated that it would sue the United States at the World Trade Organization and restrict the export of rare earth elements, which are utilized in high-end electronic and medical technology.
However, as they digested the escalating international standoff and concerns about a recession, other significant trading partners held back. On Friday, Trump posted on social media a warning that China "played it wrong" and that this was something that "they cannot afford to do." Markets collapse
Friday's freefall on Wall Street followed similar declines in Asia and Europe. Additionally, economists have expressed concern that the tariffs may impede growth and fuel inflation. However, Trump stated on his platform for Truth Social that his "policies will never change." However, some of Trump's most recent tariffs are notable exceptions.
They are not combined with the recent 25 percent tariffs on steel, aluminum, and automobile imports. Copper, pharmaceuticals, semiconductors, lumber, "certain critical minerals," and energy products were also temporarily spared, according to the White House. But Trump has ordered investigations into copper and lumber, which could lead to further duties soon.
He has threatened to hit other industries like pharmaceuticals and semiconductors as well, meaning any reprieve might be limited.
Without a North American trade agreement, Canada and Mexico face separate duties of up to 25% on goods entering the United States.
Risk of retaliation: Even though Trump's deferred deadlines give countries time to negotiate, Oxford Economics warned this week that "if they can't get a reprieve, they are likely to retaliate, as China already has." Maros Sefcovic, the EU's trade chief, said the bloc, which faces a 20% tariff, will act "calmly, carefully phased, unified" and give time for talks. But he said it “won’t stand idly by.”
Germany and France have said that the EU could respond by taxing tech companies in the US.
After Trump announced tariffs of 24 percent on goods made in Japan, the prime minister of Japan urged a "calm-headed" approach. While imports from the Southeast Asian manufacturing hub are subject to extraordinary US duties of 46 percent, Trump stated that he had a "very productive" conversation with Vietnam's top leader. Since returning to the presidency, Trump has hit Canada and Mexico imports with tariffs over illegal immigration and fentanyl, and imposed an additional 20-percent rate on goods from China.
This year, the additional tax on Chinese goods will reach 54% on April 9. Trump’s 25-percent auto tariffs also took effect this week, and Jeep-owner Stellates paused production at some Canadian and Mexican assembly plants.
According to the Center for Strategic and International Studies, Trump's new global levies represent "the most sweeping tariff hike since the Smoot-Hawley Tariff Act," which was a 1930 law that sparked a global trade war and exacerbated the Great Depression. Oxford Economics estimates the action will push the average effective US tariff rate to 24 percent, “higher even than those seen in the 1930s.”