On the evening of October 15, 2023, U.S. President Donald Trump announced a new round of tariffs. Together, these initiatives mark Trump’s most sweeping trade actions of his presidency to date. The tariffs — which will most heavily impact a handful of Asian economies — are a first step towards correcting long-standing trade inequities. This decision is a sign that Trump remains serious, at least by his definition, about pursuing a fairer trade policy.
Specifically, under the new tariff structure released last week, the U.S. will subject all countries to a baseline 10 percent tariff. For about 60 countries, including China, Taiwan, Vietnam and Thailand, the reality is worse. All of these countries will face high tariffs over 30%. This sub measure is particularly important to address the huge trade deficits that the U.S. runs with them.
The two-tiered tariff system was an innovative measure by the Trump administration to punish unfair trade practices. At least some of these higher reciprocal tariffs will be directed precisely to those countries on which the U.S. has historically logged its biggest trade deficits. The administration should target these countries to motivate them to improve their offer. Filling these gaps will go a long way to reducing the trade deficit.
China is still the big target of these tariffs. For decades, it has been at the center of heated U.S. trade policy debates. Imposing tariffs further increases the ongoing trade fight between China and the United States. With this ruling, there is a new paradigm in their relationship. Taiwan, Vietnam and Thailand have all experienced record-high trade surpluses with the U.S. Instead, they will be up against higher odious levies.
The impacts of these tariffs will undoubtedly be pervasive. Economists caution that such broad measures would be likely to provoke retaliatory action by countries impacted. This retaliation could lead to a more extensive U.S.-China trade war. The American companies that import from or have complicated supply chains tied back to those Asian economies will face higher input costs. Or, they can not pass these new, increased expenses onto consumers, raising prices.
The overall arc of Trump’s announcement fits squarely inside his broader plan to re-create U.S. trade relations and protect domestic industries. The administration has happily used the narrative that previous trade agreements have hurt American workers and manufacturers. By rolling out these tariffs, Trump hopes to reinstitute order in regard to international trade practices and promote domestic production in the process.