The move, which Trump dubbed a “declaration of economic independence,” threatens to upend decades of trade liberalisation and could spark a global trade war.
What are Trump’s new tariffs?
Trump announced two main types of tariffs using emergency powers under the International Emergency Economic Powers Act of 1977:
- A 10 per cent “baseline” tariff on all imports entering the United States, effective April 5.
- Higher “reciprocal” tariffs on about 60 countries with which the US has significant trade deficits, effective April 9. These include:
- China: 34 per cent (on top of an existing 20 per cent, bringing the total to 54 per cent)
- European Union: 20 per cent
- Vietnam: 46 per cent
- Japan: 24 per cent
- India: 26 per cent
- Cambodia: 49 per cent
- Taiwan: 32 per cent
These rates, Trump explained, represent approximately half of what these countries charge on US exports. “We are being very kind,” Trump said. “We will charge them approximately half of what they are and have been charging us.”
Trump also announced the closure of the “de minimis” loophole that allowed goods worth under $800 to enter the US duty-free, primarily affecting Chinese e-commerce companies like Shein and Temu. This change takes effect May 2.
Why is Trump imposing these tariffs?
Trump argues that decades of “unfair” trade practices have hollowed out American manufacturing, undermined critical supply chains, and rendered US defence industries dependent on foreign adversaries.
“Foreign leaders have stolen our jobs, foreign cheaters have ransacked our factories, and foreign scavengers have torn apart our once-beautiful American Dream,” Trump said in his April 2 Rose Garden address. “But it is not going to happen anymore.”
The White House cited several justifications:
- Persistent US goods trade deficits, which exceeded $1.2 trillion in 2024
- Value-added taxes (VAT) imposed by other countries, which the White House claims cost US companies over $200 billion annually
- Intellectual property theft estimated between $225 billion and $600 billion yearly
- Non-tariff barriers that limit US exports to foreign markets
“The United States can no longer continue with the policy of unilateral economic surrender,” Trump declared.
How will these tariffs affect global trade?
The tariffs represent a fundamental challenge to the rules-based trading system established after World War II. Ken Rogoff, former chief economist at the International Monetary Fund, told the BBC: “He just dropped a nuclear bomb on the global trading system.”
The immediate impact has been market volatility, with stock futures plummeting and safe-haven assets like gold rising. Economist Olu Sonola of Fitch Ratings said the measures would bring the US tariff rate to what was in place in 1910, warning that “many countries will likely end up in a recession.”
The Biden administration’s former Treasury Secretary Janet Yellen had previously argued that tariffs “do not raise prices,” stating last year that “I don’t believe that American consumers will see any meaningful increase in the prices that they face.”
However, most economists disagree, warning that the tariffs will increase costs for American businesses and consumers while potentially sparking retaliatory measures from other nations.
How are countries responding?
Several key trading partners have already signalled retaliatory measures:
- China vowed “resolute countermeasures” to protect its interests
- The European Union described the tariffs as a “major blow to the world economy” and said it was preparing countermeasures
- Canada’s Prime Minister Mark Carney said his country would “fight these tariffs with counter measures”
- Japan called the tariffs “extremely regrettable”
- South Korea’s acting president Han Duck-soo has vowed an “all-out” response
US Treasury Secretary Scott Bessent urged restraint, telling other countries to “take a deep breath” and “not immediately retaliate.” He warned that retaliation would lead to escalation.
What comes next?
Trump indicated that these tariffs would remain in place until “the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated.” The executive order allows Trump to increase tariffs if trading partners retaliate or decrease them if countries take “significant steps to remedy non-reciprocal trade arrangements.”
The White House has also signalled more sector-specific tariffs targeting semiconductors, pharmaceuticals and critical minerals in the future.
For businesses worldwide, the tariffs create immediate uncertainty about supply chains and pricing strategies. Many multinational companies may now reconsider their global manufacturing footprints, with Trump hoping they will relocate production to the United States.
“Reciprocal trade is America First trade because it increases our competitive edge, protects our sovereignty, and strengthens our national and economic security,” the White House stated.
Meanwhile, the US Congress shows divided reactions. The Senate has already voted 51-48 to approve legislation that would terminate Trump’s Canadian tariffs, though passage in the Republican-controlled House of Representatives is considered unlikely.
