Donald Trump, former President of the United States, has announced a new round of tariffs aimed at several countries as part of his strategy to enhance the US economy ahead of the 2024 presidential election. In progression, Trump posted the following sequence on Truth Social. In a series of such posts, he shared each letter’s screenshots showing import tariffs as high as 20% to 30% on products from Libya, Iraq, Algeria, Moldova, Brunei and the Philippines. These tariffs will go into effect on August 1.
His Federal Register announcement signals that Trump remains committed to further expansion of tariffs in terms of supporting American producers. The former president isn’t just trying to grab headlines this time—he’s laying the groundwork to restake his platform for the 2024 primary. This action comes at a time of significant socio-economic reckoning. Trump has talked frequently and forcefully about the need to protect US industry and jobs, particularly against the backdrop of national economic challenges.
These tariffs are one piece of a much larger, coordinated strategy against Mexico, China — and our own neighbor, Canada. Combined, these countries made up 42% of all US imports for FY 2024. Mexico remains the clear number one for U.S. imports. This past year, according to data from the US Census Bureau, it set a remarkable record of $466.6 billion in exports.
Implications of New Tariffs
Tariffs—which are the customs duties charged on certain imported merchandise—are one of the most well-known weapons in the administration’s trade arsenal. Trump’s recent letters signal a shift in trade policy that could affect both domestic and foreign markets. Imposing these new levies will increase costs for consumers. This is because many local manufacturers would stand to gain from increased foreign competition.
A wealthy country’s economists should generally be opposed to using tariffs. Others contend that saving American jobs and industries is a matter of national defense. Others counter that these measures start trade wars and lead to retaliation by the affected countries. Unsurprisingly, financial markets reacted in extremely mixed ways. Upon the initial announcement by Trump of these new tariffs, US indexes almost immediately cut into their early day gains as investors weighed the economic ramifications.
Uncertainty has led to risk aversion among investors, they stress. Consequently, gold prices (XAU/USD) spiked off a recent multi-week low. The US Dollar (USD) benefited from increased safe-haven demand immediately after the announcement. This is yet another example of the complicated dance between US domestic economic policy and foreign market response.
Economic Context and Future Outlook
The Federal Open Market Committee is shortly due to publish the minutes from its June meeting. At the same time, the rhetoric around interest rates and economic policy is starting to intensify. Previously, Trump has been quite vocal about his desire to see Federal Reserve Chairman Jerome Powell fired. He’s worried that interest rates are too high.
“Our Fed Rate is AT LEAST 3 Points too high. ‘Too Late’ is costing the U.S. 360 Billion Dollars a Point, PER YEAR, in refinancing costs. No Inflation, COMPANIES POURING INTO AMERICA. ‘The hottest Country in the World!’ LOWER THE RATE!!!,” – Donald Trump
This glorious quote is indicative of the greater truth regarding Trump’s understanding of monetary policy. He is a loud supporter of lower interest rates to stimulate economic growth and attract foreign capital.
These next few months will be important, as Trump doubles down on his economic platform heading into the general presidential election. If passed, his proposed tariffs would create havoc in our trade relations. They will determine the public mood on questions of trade policy and management of the economy more generally.
Reactions Across Political Lines
What goes unexamined is how Trump’s tariff announcements have created the most unusual bedfellows on both sides of the political spectrum. Supporters portray this as a necessary, bold step to ensure that American jobs and industries are protected. In contrast, skeptics warn it will poison America’s foreign relations while increasing costs for American consumers.
Political analysts suggest that Trump’s focus on tariffs may resonate with voters concerned about job security and economic stability in an increasingly competitive global market. The administration doubles down on protectionism. This would almost certainly trigger retaliatory actions by countries targeted, making international trade relations even more contentious.