President Donald Trump threatened to demolish much of the global economy’s structure and start wider trade conflicts on Wednesday by announcing extensive new tariffs on almost all U.S. trading partners, including a 34% tax on imports from China and a 20% tax on imports from the European Union.
In response to what he described as an economic emergency, Trump said in the Rose Garden that he was slapping a 10% baseline tax on imports from all countries and raising tariff rates on dozens of countries that have significant trade surpluses with the United States.
The president used combative language to criticise a global trading system that the United States helped create following World War II, claiming that “our country has been looted, pillaged, raped, and plundered” by other countries. He claimed that the tariffs were intended to increase American manufacturing.
The move amounts to a massive tax increase that may cause the international order to collapse. It disrupts the alliances formed to preserve peace and economic stability and sets the stage for what might be a painful shift for many Americans as middle-class necessities like housing, cars, and clothes are predicted to become more expensive.
Trump claimed he was taking action to restore fairness to international commerce and generate hundreds of billions of dollars in new revenue for the US government.
He claimed that for over 50 years, taxpayers have been taken advantage of. “However, it will no longer occur.”
To impose the tariffs, Trump proclaimed a national economic emergency. Although he has stated that the taxes will bring factory jobs back to the United States, his proposals run the risk of causing an abrupt downturn in the economy because they may result in significant price increases for both businesses and consumers.
By using the 1977 International Emergency Powers Act to impose what he dubbed “reciprocal” tariffs on trading partners without the approval of Congress, Trump was carrying out a major campaign pledge. However, his move on Wednesday would put Trump’s mandate to fight inflation from the last election in jeopardy.
Numerous Republican senators have questioned the tariffs’ wisdom, especially those from border and agricultural areas. U.S. stock market futures, which had already fallen since the beginning of this year, saw a steep overnight sell-off in anticipation of a weaker economy.
Scott Lincicome and Colin Grabow of the libertarian think tank Cato Institute stated, “With today’s announcement, U.S. tariffs will approach levels not seen since the Smoot-Hawley Tariff Act of 1930, which incited a global trade war and deepened the Great Depression.”
The president’s higher charges would impact foreign companies that export more items to the US than they purchase. In essence, the administration set its tariff rates to increase revenues proportionate to the trade imbalances with certain countries. In a gesture he called “very kind,” Trump subsequently cut that rate in half.
According to the White House, last year’s gap was $1.2 trillion as a result of tariffs and other trade imbalances. According to administration officials, retaliatory tariffs from such nations might exacerbate the issue, and it may require a comprehensive set of measures from other nations to lower the increased levies their goods already face.
According to Olu Sonola, head of Fitch Ratings’ U.S. economic research, the average tariff rate levied by the US will rise from 2.5% in 2024 to over 22%.
Sonola predicted that a recession will hit many nations. “If this tariff rate remains in place for a long time, you can disregard the majority of forecasts.”
The additional duties will follow recent announcements of increased trade penalties on steel and aluminium, charges against China, Canada, and Mexico, and 25% taxes on vehicle imports. In addition, Trump has levied tariffs on nations that purchase oil from Venezuela and intends to slap separate import duties on computer chips, timber, copper, and prescription medications.
Canada and Mexico would not be subject to higher fees than those already imposed by Trump in what he claims is an attempt to curb drug smuggling and illegal immigration. Currently, the duties would not apply to products that adhere to the USMCA North American trade agreement.
However, the 34% Trump promised would be largely supplemented by a 20% tax on imports from China because of its involvement in the production of fentanyl. The duties announced Wednesday would not apply to specific products that Trump is tariffing, such cars, or to goods like pharmaceutical medications that he intends to tax later.
Backlash threats
Despite the possibility of political blowback, the administration has not openly questioned its approach in response to any of the warning indicators of a collapsing stock market or a decline in consumer morale.
In order to give reporters a sneak peek at the new tariffs before Trump’s address, senior administration officials insisted on anonymity and claimed that the taxes would generate hundreds of billions of dollars in revenue per year.
They claimed that the higher rates were based on the trade deficits with other countries and were then cut in half to get at the figures that Trump displayed in the Rose Garden, while the baseline rate of 10% was in place to assist guarantee compliance.