U.S. President Donald Trump’s reciprocal trade tariffs on major U.S. trading partners took effect from midnight, eastern time, on Wednesday, marking an escalation in a brewing trade war between the world’s biggest economies.
China was by far the worst hit by Trump’s new tariffs, with total U.S. tariffs on Chinese goods now amounting to 104%. Trump, at the eleventh hour, made good on his threat to hike tariffs on China by an additional 50%, following Beijing’s retaliation.
Reciprocal tariffs against other major economies include a 20% duty against the European Union, a 24% duty on Japan, a 46% tariff on Vietnam, a 25% duty on South Korea and a 32% tariff on Taiwan.
Trump’s tariffs are largely aimed at countries with the highest share of U.S. imports, and which all have large trade surpluses with the world’s biggest economy. The U.S. President claimed that these deficits represented unfair trading practices, and that his tariffs were aimed at rectifying a anti-U.S. trade. Trump also imposed a baseline 10% tariff on all U.S. imports, which took effect last week.
The U.S. President revealed plans for his reciprocal tariffs last week, with his planned rates being largely worse than markets had feared. Trump’s 104% tariff on China is far greater than the 60% duty he had threatened when campaigning for the Presidency in 2024.
Wednesday’s tariffs come after Trump’s 25% tariff on all automobile imports took effect last week. It was not immediately clear whether Trump’s sectoral tariffs will be in addition to his reciprocal duties.
Trump says more tariffs coming soon, not a tax on Americans
Speaking at a National Republican Congressional Committee dinner on Tuesday evening, Trump said that he also planned to announce a “major tariff” on pharmaceutical imports “very soon.”
The U.S. President claimed that other major economies had cheated the U.S. with their large trade surpluses, but that now it was the U.S.’ turn to “do the rippin’.”
Trump claimed that his tariffs were already yielding about $2 billion worth of federal revenue daily, and dismissed claims that the tariffs will be a tax on Americans.
But Trump’s tariffs are likely to be borne by local companies, who are then expected to pass them onto consumers.
Fears of such a scenario ramped up uncertainty over the U.S. economy, with markets now pricing in a greater chance of a recession in 2025.
The Federal Reserve is also expected to cut interest rates sooner and by a bigger margin to offset the economic impact of Trump’s tariffs.
Trump’s administration claimed that over 50 countries had approached the U.S. to begin trade negotiations, after he unveiled his reciprocal tariffs last week. But several countries, mainly China, also outlined plans for retaliation against the U.S. measures.
Japan was seen sending delegates to the U.S. to open trade talks this week.
Source : Investing