On Wednesday, former President Donald Trump tripled down on America’s trade policy by doing the unthinkable—announcing that he is abandoning U.S. trade policy. He put a 10% tariff on all imports entering the United States. This decision amounts to one of the largest hikes in U.S. tariffs we’ve experienced in nearly a century. It’s reminiscent of the Smoot-Hawley Act of 1930. The tariffs are particularly targeted at goods from approximately 60 countries and trading blocs with which the U.S. maintains a high trade deficit.
The potential ramifications of Trump’s announcement have already sent shockwaves through international markets and have led to countries around the world responding immediately. The U.S. Treasury Secretary, Scott Bessent, has urged caution, advising Trump to “sit back, take a deep breath, don’t immediately retaliate.” Many countries have already indicated that they plan to retaliate against the new tariffs. These tariffs are hitting some of the most important sectors of our economy including semiconductors, pharmaceuticals, and minerals.
Economic Impact of the Tariffs
Trump’s new tariffs will slap additional duties on several important imports, with China getting hit the hardest. These tariffs on Chinese goods will go up by another 34%, resulting in total tariff rate of 54% on these products. Impact on the European Union The European Union will experience a 20% increase in duties.
Market reactions have been swift and negative. In the wake of the announcement, U.S. stocks then tanked during after hours trading. A wide array of analysts have raised alarms over the economic disaster that would result from these threatened tariff hikes.
“President Trump just finished his tariff speech at the White House and we would characterize this slate of tariffs as ‘worse than the worst case scenario’ the Street was fearing,” – Dan Ives, senior analyst at Wedbush Securities
The International Chamber of Commerce has voiced its apprehensions, warning that these actions pose “a clear systemic risk to the global trading system” if tensions escalate further.
Political Reactions and Legislative Moves
In response to Trump’s trade policy, U.S. senators have voted on a Democrat-led measure aimed at rebuking this latest approach. Representative Greg Meeks from New York plans to use a procedural maneuver to force a vote over the tariffs in the coming days.
While Canada and Mexico will default to the administration’s current trade approach for other nations, Mexican President Claudia Sheinbaum is scheduled to unveil a broad economic plan on Thursday to counteract the impact of Trump’s tariffs. This blueprint is designed to introduce protections that will protect Mexico’s car industry. Further complicating matters, the changing trade environment may bring the industry some of its most serious challenges yet.
“It’s concerning, it’s going to be expensive, it’s going to require us all to make decisions,” – Benjamin Colvin, president and co-founder of Devil’s Foot Brewing
Potential Retaliation and Global Responses
The global trading community is preparing for further retaliatory actions as the countries becoming the target of these new punitive tariffs respond. This is what Bessent’s statements capture — the balancing act that needs to be walked in order to not flare up tensions even more.
“Let’s see where this goes, because if you retaliate, that’s how we get escalation,” – US Treasury Secretary Scott Bessent
Whether in favor or opposition, what’s clear is that Trump has the courage to act boldly. His real target, it seems, are nations he thinks have taken advantage of U.S. trade policies over the years. He has stated that the tariffs will not be fully reciprocal, asserting, “We will charge them approximately half of what they are and have been charging us.”
Though the administration may try to spin these assertions, industry stakeholders are understandably still deeply concerned about how these tariffs will affect consumers and businesses in real life. With good reason, many Americans gained concern over how the impact of these tariffs will raise costs, and in turn drive up prices for American consumers.
“Doing anything rash would be unwise,” – President Donald Trump