WASHINGTON: President Donald Trump’s aggressive tariff plan officially took effect despite warnings and market reactions.
The policy introduces massive “reciprocal” tariffs, targeting dozens of American allies and adversaries with steep import taxes.
Chinese imports now face a minimum 104% tariff after Trump added 50% more due to Beijing’s retaliatory stance.
Trump criticized China’s 34% planned counter-tariffs and responded by dramatically increasing duties on Chinese goods.
His press secretary said these measures aim to restore fairness and support struggling American manufacturers.
Reciprocal Breakdown
The “reciprocal” tariff rates are based on trade deficit formulas that critics argue aren’t truly reciprocal.
Countries like Japan, Vietnam, and South Korea now face tariffs between 20% and 50% under this calculation.
The European Union received a 20% tariff, while China’s total reached 34% before the recent hike.
These numbers exclude Mexico and Canada, which were spared from the most recent wave of tariff increases.
The plan followed a universal 10% import tariff Trump announced days earlier, affecting most global imports.
Market Reactions
Markets reacted swiftly to the news. The Nasdaq and S&P 500 dropped, while the Dow hovered just above zero.
Importers must now pay the tariffs, increasing costs for American wholesalers, retailers, and ultimately consumers.
Businesses overseas also face pressure, as the U.S. may shift supply chains to lower-tariff nations.
Trump defended the policy, saying foreign nations have “ripped off” the U.S. for decades with unfair practices.
He accused China specifically of “leaving us for dead” and insisted Americans would benefit in the long run.
Trade War Escalates
China’s Commerce Ministry called the move “a mistake upon a mistake” and promised to escalate retaliation.
Officials in Beijing vowed to “fight to the end” as tensions between the two economic powers intensified.
Trump’s Truth Social post said China “wants to make a deal” but doesn’t know how to begin negotiations.
Economists fear the tariffs could trigger a global trade war, disrupting supply chains and increasing recession risks.
The mutual tariffs are likely to harm domestic industries and may lead to widespread job losses.
Economic Forecasts
JPMorgan raised the chance of a global recession to 60% if Trump enacts his full tariff plan.
The bank says these are the largest tax hikes the U.S. has seen in 60 years.
They warn of consumer spending drops, weak business confidence, and disruptions in global supply networks.
The nonpartisan Tax Foundation estimates Americans will pay $2,100 more per year due to these tariffs.
Some analysts say the policy could push the U.S. into recession by mid-year if nothing changes.
Potential Stagflation
Boston College’s Brian Bethune warned of “100%” likelihood of stagflation, combining inflation with slowed growth.
He expects consumer prices to spike by May and accelerate through the summer months.
Others are less pessimistic. Morgan Stanley believes Trump will negotiate deals to soften the blow.
Still, those negotiations haven’t materialized, and many countries remain uncertain about U.S. trade commitments.
Trump’s trade adviser Peter Navarro claims the U.S. economy is strong and won’t face a downturn.
Long-Term Impact
Trump previously announced a 25% tariff on steel, aluminum, and car imports and 20% on Chinese goods.
These were maintained during Biden’s term, increasing the average Chinese tariff rate to 20.8%.
China remained America’s second-largest import source in 2024 despite existing tariffs.
The 104% levy could disrupt this trade, but complete decoupling is unlikely in the short term.
U.S. exports to China totaled $144 billion last year, compared to $439 billion in Chinese imports.
Trust and Credibility
Experts say Trump’s tariffs undermine U.S. credibility and free trade agreements with long-time partners.
The Cato Institute criticized the “flimsy justifications” behind the tariffs and the unpredictable approach.
Businesses need stability to operate, and current policy decisions create uncertainty in global trade environments.
Though some nations offered 0% tariffs on U.S. goods in return, Trump declined to match their offers.
He argues non-tariff barriers like labor conditions and tax policies matter more than equal tariff rates.
Global Shifts
Countries like Mexico and Vietnam are gaining as U.S. businesses seek alternatives to Chinese suppliers.
Mexico became the top U.S. import partner in 2023, benefiting from diverted supply chains.
Other Asian nations like Taiwan and South Korea also saw increased exports to the American market.
Still, the new tariff wave could realign trade globally and test longstanding economic relationships.
Unless revised, these measures may lead to prolonged instability in international commerce.
