Trump’s Tariffs Send Shockwaves Across Global Economy (1)

President Donald Trump imposed the steepest American tariffs in a century as he steps up his campaign to reshape the global economy, sparking threats of retaliation and a selloff in markets around the world.

Trump announced Wednesday he will apply at least a 10% tariff on all exporters to the US, with even higher duties on some 60 nations, to counter large trade imbalances with the US. That includes some of the country’s biggest trading partners, such as China — which now faces a tariff of well above 50% on many goods — as well as the European Union, Japan and Vietnam.

“For years, hard-working American citizens were forced to sit on the sidelines as other nations got rich and powerful, much of it at our expense,” Trump said during an event in the White House Rose Garden to unveil the so-called reciprocal tariffs. “Now it’s our turn to prosper.”

The move marks a dramatic follow-through on Trump’s long-held trade grievances, one that risks triggering retaliation from other countries and upends calculations for businesses and consumers at home. China and the EU, America’s largest trading partner, both said they were preparing to take countermeasures in response.

The US president has embraced tariffs as a tool to assert US power, revive manufacturing at home and extract geopolitical concessions — counter to the decades-old consensus that lower trade barriers help to foster ties among nations and prevent conflicts. Economists say the near-term result of his measures will likely be higher US prices and slower growth, or perhaps even a recession.

“There is still much uncertainty — and room for negotiation,” Maeva Cousin and Rana Sajedi of Bloomberg Economics wrote in a research note. “This could create sizable stagflation risks for the US economy, and pose major challenges to partners reliant on US demand.”

GLOBAL REACT: Trump Puts Tariffs Over 20% in Stagflation Risk

Global financial markets were hit by a sweeping selloff after Trump’s announcement, with US equity futures slumping as much as 4%. Stocks linked to global trade bore the brunt, with Apple Inc. down about 7%.

Meanwhile, gold hit an all-time high and the Japanese yen, traditionally a haven, soared. Ten-year Treasury yields fell toward the closely watched 4% level, their lowest since October, and a Bloomberg gauge of the dollar tumbled more than 1%.

Read More: Fear Grips Markets as Trump Tariffs Raise Risks to Global Growth

Less than three months after returning to the White House, Trump has already erected trade barriers that are bigger by some measures than those imposed in the notoriously protectionist 1930s. Bloomberg Economics calculates that the effective tax rate the US now charges on more than $3 trillion of imported goods may climb to around 23% — higher than any point in more than a century.

A statement published Wednesday by the United States Trade Representative explained the Trump administration calculated its raft of new tariffs primarily based on existing trade balances. Countries running a trade surplus with the US faced a flat 10% rate regardless, as did nations where trade was roughly even.

There’s a small difference in the tariff rates first announced by Trump and more than a dozen of those listed in the annex that accompanied the White House executive order. For countries like South Korea, Myanmar, Pakistan and India, the rates in the annex are about 1 percentage point higher than the initial announcement.

The 10% baseline charge on everyone takes effect after midnight Saturday. The higher duties on targeted countries — which replace, rather than add on top of the 10% rate — are due to kick in on April 9, the White House said.

Read More: List of Reciprocal Tariffs by Country

For now, the new measures don’t include Canada and Mexico, which are embroiled in a separate on-and-off tariff dispute with the US. They also won’t apply to some products that are subject to separate duties tied to so-called Sec. 232 investigations such as autos, semiconductors and lumber.

The reciprocal tariffs were “much worse than we feared,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. There’ll be “huge implications for rerouting of trade,” she said.

The president, who’s sought to frame his trade plans as a boost for his blue-collar voters, was joined in the Rose Garden by union members and workers from various industries — including a retired autoworker who spoke on stage. Later, Trump brandished large boards during his 48-minute address to display each nation’s new rate.

Trump, left, and autoworker Brian Pannebecker during the tariff announcement in the Rose Garden of the White House.

Photographer: Kent Nishimura/Bloomberg

China, the top US economic rival and chief target of Trump’s first-term trade war, is in his crosshairs again.

The country will get charged a 34% reciprocal tariff rate, according to the White House documents — stacked on top of 20% duties Trump already imposed this year tied to fentanyl trafficking. That means many Chinese imports face tariffs well above 50% — high enough to wipe out most US-China trade by the end of this decade, based on estimates by Bloomberg Economics.

The latest measures bring average US tariffs on all Chinese products to as high as 65%, according to economists. That rate includes existing tariffs from the first Trump term that were maintained by the Biden administration.

Trump also announced he would end duty-free shipping of small parcels from China under the so-called de minimis exemption.

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In the first official response from Beijing, the Ministry of Commerce condemned the US levies and pledged to hit back with unspecified measures. It called on the US to “immediately lift its unilateral tariff measures and to properly resolve its differences with its trading partners through dialogue on an equal footing.”

Other Asian export powerhouses are also facing a hit, with reciprocal rates in the mid-20% range on close American allies Japan and South Korea, and almost double that for Vietnam — one of the fastest-growing US trade partners.

Initial comments from the governments of countries like Thailand suggested they were adopting a more conciliatory tone.

Facing the 36% reciprocal tariff imposed by Trump, Thai Prime Minister Paetongtarn Shinawatra offered to negotiate and “adjust our taxes to be more reasonable.” Japan’s trade minister called the actions taken by the US extremely regrettable, saying his country will continue to push the Trump administration for an exemption.

“Asian countries in particular look like they are in the line of fire,” said Wendy Cutler of the Asia Society Policy Institute.

The EU, which is working on emergency plans to shield its economy from Trump’s tariffs, is subjected to a 20% levy. “We’re preparing for further countermeasures to protect our interests and businesses if negotiations fail,” European Commission President Ursula von der Leyen said in a video address Thursday.

France is pushing for the EU to hit US tech companies in response to Trump’s tariffs, a move that would broaden the trade war to the vast services sector and the digital economy. The US has argued against Europe’s aggressive approach on taxes and regulations of American behemoths like Amazon, Google and Meta.

Read More: France Eyes US Big Tech in EU Retaliation to Trump’s Tariffs

Trump is taking a historic gamble, with risks including a worldwide trade war marked by tit-for-tat strikes that destabilize supply chains and hurt US exporters. Speaking after the president’s announcement, his Treasury secretary urged other countries not to fight back.

“I wouldn’t try to retaliate,” Scott Bessent told Bloomberg Television. “As long as you don’t retaliate, this is the high end of the number.”

Trump indicated he would consider lowering the tariff rates if trade partners took measures that help US exports. He urged foreign leaders to “terminate your own tariffs, drop your barriers” and “don’t manipulate your currencies.”

The president declared a national emergency tied to the size of the trade deficit, a move that allows him to use special powers to impose the tariffs. The administration is aiming to collect hundreds of billions of dollars in revenue from the new levies, helping to fill government coffers ahead of its push to cut taxes on Americans.

Trump and his trade advisers argue the tariffs will encourage companies to shift manufacturing operations to the US, rebuild the country’s industrial base and create jobs. In the interim, they have asked the public for patience, saying that any short-term economic pain will be worth it to reshape the economy.

That dynamic could become a political problem for Trump. Any gain from a restructured US economy could take years or longer to materialize. But the pain from tariffs could arrive quickly in the form of higher prices, many economists warn.

With consumer confidence already faltering, that could be a tough sell to Americans weary of inflation — one of the key issues that helped propel Trump to the White House.

“This is a game changer, not only for the US economy but for the global economy,” said Olu Sonola, head of US economic research at Fitch Ratings. “Many countries will likely end up in a recession. You can throw most forecasts out the door, if this tariff rate stays on for an extended period of time.”

(Adds Apple shares in seventh paragraph. A previous version removed a map with erroneous percentage)

--With assistance from Shawn Donnan, Augusta Saraiva, Amara Omeokwe, Hadriana Lowenkron, Cecilia Yap, Suttinee Yuvejwattana, Toru Fujioka, Alex Tanzi, Andrew Langley, Yoshiaki Nohara, Erica Yokoyama, Jorge Valero, Alexander Weber, Alberto Nardelli, Annmarie Hordern, James Mayger and Ben Westcott.

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Josh Wingrove in Washington at jwingrove4@bloomberg.net;
Skylar Woodhouse in Washington at swoodhouse15@bloomberg.net

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Jordan Fabian, Paul Abelsky

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