On Wednesday, President Donald Trump announced the implementation of longstanding reciprocal tariffs on the United States’ trading partners. The newly declared tariffs will be set at approximately half the rate of what other countries impose on the U.S., with a minimum of 10% tax. Trump emphasized, “We subsidize a lot of countries. We’re not taking it anymore.”
In his announcement from the White House Rose Garden, Trump introduced these expansive reciprocal tariffs, asserting that it was time for the United States to benefit economically. Holding up a sign with various charts, Trump provided specific examples: China imposes a 67% tax on U.S. goods, which Trump claims includes currency manipulation, leading the U.S. to respond with a 34% tax on China. Similarly, as the European Union levies 39% against the U.S., Trump stated the U.S. would reciprocate with a 20% tariff. Additional tariffs of 25% on South Korea, 24% on Japan, and 32% on Taiwan were also mentioned.
He remarked, “None of our companies are allowed to go into other countries,” indicating that in many instances, allies might present greater challenges than adversaries.
Furthering his policy, Trump reiterated the imposition of 25% tariffs on foreign-manufactured cars and parts, which were to take effect at midnight. The president attributed the U.S.’s debt issues to the trade deficit, stating, “We’re not taking it anymore.”
Prior to Trump’s election, some economists had warned that the tariff proposals he made during his campaign could lead to inflation. The fluctuation of tariff announcements and the looming prospect of a global trade war have influenced the S&P 500’s dip into correction territory, affected consumer sentiment, and led to recession warnings from major banks and financial entities. This uncertainty has also placed the central bank in a cautious stance regarding adjustments to interest rates.
The concern around these tariffs is that they could lead to higher costs for consumers as companies might transfer the additional expenses of imported goods to them. Americans are still grappling with high prices following decades-high inflation nearly three years ago. The Federal Reserve expects that inflation driven by tariffs might be temporary, but there is worry that reduced business and consumer spending due to price increases could slow economic growth and potentially lead to stagflation, a combination of stagnant economic growth and persistent inflation. Recently, a think tank labeled tariffs as detrimental to the American economy.
This article was originally published on Fortune.com.
