Donald Trump’s administration recently announced a historic escalation in tariffs that will hit multiple trading partners. Canada will be hit hardest by this change, paying a new and significant 35% levy on its imports. This new rate, which is up from the former 25% rate, will begin on Friday. At the signing ceremony for the executive order, held in the Roosevelt Room of the White House, Trump dropped a major bombshell. He reiterated his administration’s hardline trade agenda to the packed audience.
The tariffs are a big part of Trump’s overall trade war strategy. To do so, they highlight a U.S. tariff of 19% as applied specifically to Malaysia. That being said, to accommodate negotiations with Mexico, Trump administratively moved the deadline for a tariff agreement with Mexico back another 90 days. This action further underscores his continued commitment to achieving negotiated settlements with our most significant trading partners.
Throughout the ceremony, Trump emphasized his commitment to protecting American industries. He even went so far as to say that tariffs are key negotiating chips to winning better trade deals. The recent amendments demonstrate the fragility of current tensions in global trade relationships and the immense effects potential trade wars have on regional economies.
Trump’s administration confirmed that the new tariff rates would include reciprocal tariffs ranging from 10% to 41% on U.S. imports from numerous countries. This unprecedented departure from standard trade practice raised alarm bells for US trading partners and led to soul searching about the implications these tariffs will have on international markets.
Trump’s actions have drawn attention to China’s fast-fashion capital, Guangzhou, where local businesses are reportedly feeling the effects of the trade war. Escalating tariffs are crashing their market performance and sending stocks tumbling across Asia. Both companies’ shares are tumbling as investors continue to process the impact of increased volatility in global trade dynamics.
“At this point, the reaction in markets has been modest, and I think part of the reason for that is the recent trade deals with the EU, Japan, and South Korea have certainly helped to cushion the impact.” – Tony Sycamore
This troubling state of affairs has further raised important conversations about the impact on certain countries targeted by these tariffs. This is not the first time that Trump has threatened a 25% tax on Indian products. He took a similar step against Brazil, imposing a 10% tariff. Those tariffs had recently been raised to even higher levels of 40% on certain Brazilian imports by a prior order. This unpredictable tariff situation is leading many companies to wonder where U.S.-China trade relations go from here.
In Southeast Asia, Cambodia’s trade sector experienced contentious negotiations. In the process, the simple average tariff rate declined dramatically, to 19%, from a peak of 49%. This change has been greeted with open arms by local industry stakeholders who worry that excessive tariffs would annihilate their livelihoods.
“If the US maintained 49% or 36%, that industry would collapse in my opinion,” – Sun Chanthol
Australian officials were hailing it as good news when Trump’s administration confirmed that the baseline 10% tariff rate would be maintained on Australian products. So surprisingly, you might say, they did not name Australia in the announcement. This move has thus far been heralded as a positive win for Australia, as the world continues to grapple with escalating trade tensions.
Malaysia’s trade ministry announced its intention to reduce the effect of US tariffs on Malaysian exports. The ministry remains committed to working closely with partner agencies. Jointly, they’ll address implementation challenges created by these new trade policy tools.
“We will continue to work closely with relevant ministries, agencies to find ways to mitigate the impact of tariffs on Malaysia’s exports.” – Malaysia’s trade ministry
Meanwhile, countries around the world are responding to Trump’s tariffs. Others are clearly under the impression that these trade levels might be renegotiated at some point in the future. Analysts long market sentiment as being mildly positive about the possibility of fiscal adjustments ahead.
“The market now, I think, has probably taken the view that these trade tariff levels can be renegotiated, can be walked lower over the course of time.” – Tony Sycamore