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Donald Trump has launched an assault on the global trade order, imposing a barrage of tariffs on US imports in a move that sent financial markets reeling and deepened fears over the world economy’s health.
In measures he billed as a way to “liberate” the US economy, the president said on Wednesday that a levy of 10 per cent would apply to nearly all US imports from April 5.
Trump also revealed sweeping “reciprocal” tariffs on goods from a host of America’s biggest trade partners.
US tariffs on China, the world’s biggest goods exporter, will rise to more than 54 per cent after Trump imposed a further 34 per cent duty on top of 20 per cent levies he placed on the Asian nation this year.
The EU will face total tariffs as high as 20 per cent, while imports from Japan — one of Washington’s closest allies — will face tariffs of 24 per cent.
America’s average tariffs will rise to their highest in decades, Wall Street banks said on Wednesday evening. The reciprocal tariffs are due to take effect on April 9.
Speaking to a packed Rose Garden at the White House on Wednesday, Trump said his measures would raise money to pay for tax cuts and spark a resurgence in domestic manufacturing.
“In the face of unrelenting economic warfare, the United States can no longer continue with the policy of unilateral economic surrender,” he said.
“We have to take care of our people, and we’re going to take care of our people first.”
Trump’s announcement sent US stock futures sliding, with contracts tracking the S&P 500 index down 3.3 per cent and those following the tech-heavy Nasdaq 100 down 4.2 per cent on Thursday morning in Asia.
The S&P 500 has already dropped almost 5 per cent in the first three months of the year on fears that Trump’s tariffs will slow economic growth and set off a new bout of higher inflation.
Investors and analysts said the tariffs would be felt across corporate America. “This is close to the worst case that the market feared,” said Ajay Rajadhyaksha, global chair of research at Barclays. “This will cause damage.”
JPMorgan chief US economist Michael Feroli said the tariffs would significantly increase inflation and cut consumer spending. “This impact alone could take the economy perilously close to slipping into recession,” he said.
Republican House speaker Mike Johnson told Fox Business on Wednesday that tariffs were always going to be “disruptive out of the gates”.
He said he was confident markets would eventually calm as the tariffs forced foreign leaders to “come to the table” and cut their own levies on US goods.
Japan’s Topix fell 3.3 per cent on Thursday, while the yen, often a haven for investors, jumped almost 1 per cent against the dollar.
Gold rose 0.7 per cent to a new record of $3,150 a troy ounce. US and Japanese government bonds — considered among the world’s safest assets — also rallied, pushing yields lower.
The announcement from Trump will escalate trade frictions that have been building since he won November’s election on a populist agenda of economic protectionism.
Analysts said US trading partners would have little option but to retaliate against Trump’s measures, raising the prospect of an economically damaging global trade war.
“‘Retaliation day’ will follow ‘liberation day’,” said Luca Paolini, chief strategist at Pictet Asset Management.
“Governments will look weak if they don’t hit back”, though Paolini said he expected them to “leave the door open” to negotiation. The broad-based tariffs increase the chances of a US recession, he added.
Some items would be exempt from the reciprocal tariffs, according to the White House, including energy and minerals not available in the US, as well as bullion and some goods on which Trump has already put other duties.
Those include steel, aluminium, cars and imports that Trump has signalled he will apply a separate set of tariffs to, including copper, pharmaceuticals, computer chips and lumber.
Mexico and Canada — trading partners Trump has repeatedly attacked in recent weeks — were also spared from the universal tariff. Goods from the two countries that comply with the 2020 trade deal they signed with the US will remain exempt from tariffs.
“It’s bad news for the world, especially the countries that got tariffs, but it’s good news for Mexico,” said Gabriela Siller, head of financial and economic research at Banco Base. “Mexico could end up winning market share despite Trump’s protectionist rhetoric.”
Reporting by Aime Williams, James Politi, Steff Chávez and Alex Rogers in Washington, Harriet Clarfelt in New York, Ian Smith in London and Christine Murray in Mexico City
