President Trump is expected to announce new tariffs on April 2, which could increase trade tensions with key allies and impact market volatility. Analysts project that the tariffs will average around 15% across major U.S. trading partners, potentially leading to recessionary and inflationary consequences.
On April 2, the Trump administration is anticipated to unveil a series of new tariffs, which might intensify existing trade disputes with America’s allies. The President has already created market volatility with tariffs on countries like Canada, Mexico, and China, along with hikes on autos and steel and aluminum products. This week, the administration signaled further sanctions that would apply to all countries rather than specific ones, raising concerns about an escalating trade war. Market indices, like the S&P 500 and Dow Jones, have seen declines in anticipation of these announcements.
In the sphere of international relationships, the European Union (EU) might face significant trade policy shifts. Previously, President Trump criticized the EU, alleging that its formation had the purpose of undermining the United States. He has noted issues such as the trade deficit with the EU in the automotive sector and the EU’s rejection of certain U.S. agricultural products. These grievances could result in heightened tariffs if perceived collusion between the EU and Canada leads to actions detrimental to U.S. interests. Expectations for EU tariffs could potentially rise to about 18% after initial negotiations, as projected by a Deutsche Bank survey.
Regarding China, while President Trump’s initial campaign proposed a 60% tariff, actual measures have included two 10% hikes. These sanctions have been justified as a response to the influx of illicit substances, including fentanyl, from China. However, further tariffs might be introduced to rebalance trade with the nation. Despite current tensions, China’s market sentiment has remained positive, buoyed by technological developments and other internal factors.
In the case of Russia, President Trump has threatened additional sanctions, dependent on the success of ceasefire talks between Russia and Ukraine. Should negotiations falter and if Russia is deemed responsible, the U.S. might impose secondary tariffs on Russian oil exports, potentially restricting international trade involving Russian oil.
Considering the possibility of a universal tariff, President Trump has, up to now, imposed specific tariffs by country rather than across the board. Discussions of global tariffs averaging 15% on all imports could lead to recessionary and inflationary impacts, according to JPMorgan Chase CEO Jamie Dimon. Economists at Goldman Sachs predict such a universal tariff announcement, coupled with potential product and country exclusions, resulting in a net tariff increment of approximately 9 percentage points. There’s also an expected increase in core inflation forecasts and a shift in recession probability.
Sector-level universal tariffs are considered more consistent with World Trade Organization (WTO) rules, as highlighted by Thierry Wizman from Macquarie. Such a stance could align with U.S. revenue-raising goals, potentially allowing for corporate tax reductions, a key priority for the current administration.
The story was initially published on Fortune.com.
