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As expected, US President Donald Trump announced new tariffs on April 2.
This batch of tariffs will hit both the country's closest allies like South Africa and adversaries like China.
At an elaborate ceremony in the White House Rose Garden, Trump said the day would "forever be remembered as the day American industry was reborn."
He added that the duties would bring in trillions of dollars "to reduce taxes and pay down our national debt."
What has Trump proposed?
The tariffs add a 10% tariff on nearly all imported goods from all trading partners. Additionally, reciprocal tariffs would be imposed on imports from dozens of countries.
For imports from the European Union, a new 20% tariff will be set. For individual countries on the list, the rate varies: China 34%, Japan 24%, Vietnam 46%, South Korea 26%, Taiwan 32%.
Goods from Switzerland will be hit with an additional 32% tariff, Israel with 17% and India with 27%.
Russia and Ukraine are not on the reciprocal tariff list.
Certain medical devices, semiconductors, pharmaceuticals and gold are also, so far, exempt from reciprocal customs duties.
The baseline import tariff of 10% will go into force on April 5, leaving little time for negotiating. The higher rates on various countries are set to take effect on April 9.
Both these sets of tariffs come on top of existing US tariffs on China and levies on steel, aluminum, and cars.
How are Americans reacting to the news?
There was a swift reaction from industry groups and economists.
"Many manufacturers in the United States already operate with thin margins," said Jay Timmons, the president of the National Association of Manufacturers. "The high costs of new tariffs threaten investment, jobs, supply chains and, in turn, America's ability to outcompete other nations and lead as the preeminent manufacturing superpower," he added.
Gary Shapiro, head of the Consumer Technology Association, is similarly dismayed.
"President Trump's sweeping global and reciprocal tariffs are massive tax hikes on Americans that will drive inflation, kill jobs on Main Street, and may cause a recession for the US economy," said Shapiro in a statement. "These tariffs will raise consumer prices and will force our trade partners to retaliate."
Speech extract: Trump announces new global tariffs
Former US Treasury Secretary Lawrence Summers said the Trump administration's tariff hikes will shock the economy and boost both prices and unemployment.
"This is the kind of thing you discuss in the way we would usually discuss an oil-price spike or earthquake or a drought, as a supply shock," Summers said on Bloomberg Television's Wall Street Week. "The question is mostly how much damage is going to be done."
With friends like these, who needs tariffs?
These latest tariffs come as the president is ripping up decades of global trade rules and calling for the annexation of Canada, Greenland and a takeover of the Panama Canal.
These new tariffs will lead to uncertainty, supply chain disruptions, more bureaucracy and higher grocery bills, European Commission President Ursula von der Leyen said. Frustratingly, "there seems to be no order in the disorder," she added.
"We are already finalizing a first package of countermeasures in response to tariffs on steel. And we are now preparing for further countermeasures to protect our interests and our businesses if negotiations fail," she said.
Italy's Prime Minister Giorgia Meloni was a bit more conciliatory on Facebook. "We will do everything we can to work toward an agreement with the United States, with the aim of avoiding a trade war that would inevitably weaken the West in favor of other global players," she wrote.
How are investors reacting to the tariffs?
"Overall, the size of the tariffs added to the sense of a push for a radical policy reordering by the new US administration," wrote Jim Reid, a research strategist at Deutsche Bank, in a note to investors. But they "didn’t add much confidence on there being an in-depth strategic implementation plan. "
The new average tariffs on US imports were "a level clearly on the worst end of expectations" and could knock off around 1-1.5% of US growth this year, according to Reid. For China, the 34% is on top of existing rates, meaning Chinese goods will be hit with tariffs of 54%.
The new reciprocal tariffs turned out to be bigger than expected, agreed Neil Shearing, group chief economist at consultancy Capital Economics.
Canada and Mexico got off lightly and will be subject to 25% tariffs but only on things not covered by the United States-Mexico-Canada Agreement. "Other winners include Australia, Brazil and the UK, who will only incur the minimum 10% tariff," Shearing wrote. "In broad terms, China and other countries in Asia have been hit relatively hard."
According to early calculations by Capital Economics, if the tariffs are kept in place, they could reduce GDP in China by around 0.5% relative to the pre-tariff baseline. For the euro zone and Japan, it could mean a hit of around 0.2% of GDP.
Looking ahead into the unknown
Right now, it is impossible to estimate all the effects these tariffs will have on the US and its trading partners. But most observers say that economic growth will slow and there will be no real winners.
For businesses with global supply chains or customers around the world, there is likely to be a lot of uncertainty. Some unintended consequences of these economic policies may take years to quantify.
More immediately, American consumers will suffer as companies raise prices for imported goods. Poorer Americans who spend a bigger part of their income on basic goods will be hit hardest by price increases. Higher prices could push up inflation.
Countries hit by new US tariffs are likely to retaliate with their own duties on American goods, which could lead to even more US tariffs. Depending on how much pain these countries are willing to go through, this retaliation could quickly escalate into a wider trade war.
Edited by: Ashutosh Pandey
