Trump’s decision to impose tariffs against U.S. products imported by both allies and rivals has sparked retaliation, intensifying the trade war that threatens to ignite inflation and raise recession concerns.
The announcement of sanctions on Wednesday has caused turmoil in world markets. Other leaders have condemned the imminent end to an era that has seen liberalized trade shape global order for decades.
Trump has announced that he will impose a 10% tariff for the first time on all imports to the United States and higher duties with some of his biggest trading partners.
Fitch Ratings has reported that the U.S. import tax rate has increased to 22% under Trump from 2.5% and is now at levels not seen since 1910.
Investors absorbed the news of Thursday as stock markets in Beijing and Tokyo plummeted, reaching new multi-month highs. European shares fell dramatically the next morning. Germany was particularly hard hit.
‘SABOTAGE’
China, the second largest economy in the world, has promised countermeasures. China, the world’s No. 2 economy, has pledged countermeasures. The European Union did the same.
Ursula von der Leyen, EU chief, warned that the consequences will be grave for millions of people. She also said that the EU 27 members were prepared to strike back in the event of a failure of the talks with Washington.
Scott Bessent warned that retaliatory measures would escalate the situation. The European Union and Japan were targeted with a 20% tariff. A White House list revealed that even uninhabited islands in Antarctica are subject to tariffs.
“This is not the act of a friendly nation,” said Australia Prime Minister Anthony Albanese. He’s often called America’s “deputy sheriff” in Asia.
Trump claimed the “reciprocal Tariffs” were a response to duties and other non-tariff barriers placed on U.S. goods. Trump claimed the new tariffs would boost manufacturing jobs in America.
Trump said: “Our country has long been pillaged, raped and plundered by nations from around the world. “
Outside economists warned tariffs could slow down the world economy and increase the risk of recession. They said that they could also increase the cost-of-living for an American family.
Canada and Mexico are two of the United States’ largest trading partners. Canada and Mexico already pay 25% on several products, but will not be charged additional tariffs after Wednesday’s announcement.
Nigel Green, CEO of deVere Group, is a global financial advisor. He said: “This what you do when claiming to supercharge the world’s economic engine. These tariffs will increase the prices of thousands of products, from phones to food. This will lead to inflation during a time when it is already persistent. “
ENDING ‘DE MINIMIS’
A White House Fact Sheet states that reciprocal tariffs do not apply to certain goods, including copper, semiconductors and pharmaceuticals, gold or lumber, energy and “certain minerals”.
Trump has signed an executive directive to close the loophole that allowed low-value packages, those valued at $800 or less, to be shipped out of China duty-free. This order will take effect on May 2nd. The White House stated that this move was intended to reduce the amount of fentanyl entering the U.S.
Trump plans to impose additional tariffs to protect semiconductors, pharmaceuticals, and critical minerals. Earlier in the day, the administration announced that separate tariffs to protect auto imports announced by Trump last Thursday, will be implemented on Thursday. Trump has imposed 25% tariffs to protect steel and aluminum and extended these tariffs to nearly $150 billion worth of downstream products.
Fear of tariffs is already affecting manufacturing around the world. However, it has also increased sales of automobiles as well as other imported goods. This is because consumers are rushing to purchase before prices rise.
As new tariffs become a reality, businesses must adapt to the situation because their options are limited. This is not good for customers.
“It is a major problem for Europe. It’s also a catastrophe for American and it’s citizens,” French Prime Minister Francois Bayrou said.