On April 2nd, Trump announced his reciprocal tariff plan, implementing at least 10 percent tariffs on imports from all countries, an additional 34 percent tax on China, 20 percent tax on the EU, and more. Over the next few days, investors watched as the market took its biggest nose dive since the COVID pandemic in 2020. By the end of the bloodbath, a total of 6.6 trillion US dollars were erased from the market’s value, with speculators fearing for the economic implications of an all out trade war. With their effects looming, let’s take a closer look at the evolution and timeline of these tariffs and their potential effects on the global economy.
January
The imposition of tariffs should not come as a surprise, as Donald J. Trump has been advertising his tariffs on “countries that have been taking advantage of [the US]” during campaign runs, and promised to “tariff and tax foreign countries to enrich our citizens,” during his inauguration speech on January 20. His first day in office, Trump announced that he would implement 25% tariffs on Canada and Mexico starting February 1st. On January 26th, Trump surprisingly threatened 25% tariffs on all Columbian goods, after the Colombian government refused to accept planes carrying deported immigrants. The president, Gustavo Petro, responded with 25% retaliatory tariffs of his own, but quickly conceded and accepted the flights carrying migrants, while Trump reversed his threat not too long after.
February
On February 1, President Trump followed through with his plans and signed an executive order that placed a 25% tariff on all Canadian and Mexican goods, with the exception of Canadian oil and energy exports, which would be taxed at 10%. This large-scale tariff was quickly followed by a one month pause to allow time for negotiations. Trump announced that the tariffs would only be removed once the movement of fentanyl and migrants into the United States came to a halt. Later that month, Trump revived a 25% tariff on all foreign steel and aluminum used in his first term, which received substantial backlash from Canada, the US’s biggest supplier of metals.
March
The beginning of March marked the expiration of the 30 day pause on Trump’s tariffs with the 25% tariffs on Canadian and Mexican goods going into effect, while Trump increased the tariff on Chinese imports from 10% to 20%. In response, Canadian Prime Minister Justin Trudeau imposes tariffs on over 100 billion dollars of American goods, set to go into effect at the start of April. Due to the retaliatory measures from other North American countries, Trump postponed the Canada-Mexico tariffs again for one month, two days after their implementation. All countries affected by these tariffs promise retaliatory actions, with the EU announcing 25% tariffs on American whiskey and other goods, set to go into effect April 1st, but with room for negotiation. On March 24th, Trump declared all countries that purchase oil from Venezuela will encounter a 25% tariff on their exports to America, including Venezuela itself. Later that month, the 25% tariff on all cars and car parts went into effect.
April
On Trump’s tooted, Liberation Day (April 2nd), he officially announced his reciprocal tariffs on all countries, starting at 10%. The stock market reacted wildly, losing trillions of dollars only days after the tariffs were announced, in the worst two-day rout the country has seen in the past five years. China then matched Trump’s additional 34% tariffs, threatening its own 34 % tariff on American goods. The US and China proceeded to raise their threatened tariff percentages higher and higher. The next Wednesday, April 9th, Trump announced a 90 day pause on all higher-band tariffs, with the exception of the 125% tariff on Chinese goods, to allow for negotiations to take place. Both China and the EU mirrored his actions, with Chinese tariffs on US goods raised to 125% and EU tariffs set on their own 90 day pause. Multiple industries and products including smartphones, computers and others. Later that month, one dozen states sued the Trump Administration for using his “whims rather than the sound exercise of lawful authority”, while also “violating Article I of the U.S. Constitution, reserving for Congress only the power to lay and collect taxes and duties”.
Overall, the inconsistency of Trump’s tariff policies have elicited drastic fluctuations in the stock market, and major pushback from economists and politicians alike. According to JP Morgan’s global research predictions, the tariffs stand to lower GDP growth, with the auto tariffs alone set to lower growth down to 1.3%. After April 2nd, the prediction for a recession by the year’s end increased significantly from 40% to 60%, likely to be worsened by retaliatory tariffs and ensuing disruption in the supply chain. However, if the tariffs remain intact, they are projected to bring in at least 400 billion dollars in revenue for the US government, the largest tax increase since 1968, however the American consumers will bear the brunt of the tax with prices for foreign goods skyrocketing.
Not only do the tariffs bring in a steady stream of revenue for the US government, but items exempt from tariffs serve as an insight into America’s vulnerabilities. For example, critical minerals, semiconductors, and other technologies being excluded from the tariffs is acknowledgement of the US’s foreign dependence on foreign countries’ more advanced technological industries. To remain in the arms race and maintain its position as a global superpower, the US depends on other countries to supply the resources necessary for domestic technological innovation. Such weaknesses have already been exploited by countries such as China, and as of April 4th, Chinese export controls have been placed on rare earth minerals and magnets to prevent US access to these vital goods.
One purpose of tariffs is to intentionally shift the US economy away from cheap foreign labor, and instead focus on increased domestic production to achieve the goal of self-sufficiency. These taxes will also provide a significant source of revenue for the US government, to help fund future projects and campaigns while leveling out trade imbalances and increasing national debt. However, tariffs are considered dampeners of economic growth, and with current trends, may lead to a recession, increased tensions with foreign nations, and higher prices for consumers.
With the tradeoffs, are the benefits of tariffs worth its costs?
