Washington:
Donald Trump’s “Liberation Day” is coming. The US President has promised to restore the “golden age” of American wealth and independence by rolling out a set of massive tariffs that he says will free the United States from dependence on foreign goods. The action targeting countries that have persistent trade gaps with America is set to be announced on April 2, Wednesday, a day the White House dubbed “Liberation Day”.
The American President is expected to shake up global markets and economies. It may also affect the lives of common Americans by further straining the family budgets as the next round of import taxes may raise the prices of several household commodities. The details of Trump’s move are still sketchy, but most economic analyses say that average US families would have to absorb the cost of his tariffs in the form of higher prices and lower incomes.
But an undeterred Trump is inviting CEOs to the White House to say they are investing hundreds of billions of dollars in new projects to avoid the import taxes.
What Exactly Is Trump Planning To Do?
Donald Trump wants to impose import taxes, including “reciprocal” tariffs that would match the rates charged by other countries and account for other subsidies. These duties are likely to target around 15 per cent of the United States’s trading partners, dubbed “Dirty 15” by Treasury Secretary Scott Bessent. Parties on the list with which America has notable trade deficits include the European Union, South Korea, Brazil, China, Mexico, Vietnam, Taiwan, Japan, and India, among other countries.
America has already imposed a range of import levies on China, Canada and Mexico and has put forth a 25 per cent tariff on any country that imports oil from Venezuela, even though the United States also does so.
Imports from China are being charged an additional 20 per cent tax because of its role in fentanyl production. Trump has imposed separate tariffs on goods from Canada and Mexico for the stated reason of stopping drug smuggling and illegal immigration. Trump also expanded his 2018 steel and aluminum tariffs to 25 per cent on all imports. He is also poised to introduce 25 per cent auto tariffs this week.
“This is the beginning of Liberation Day in America,” Trump said.
“We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they’ve been taking over the years. They’ve taken so much out of our country, friend and foe. And, frankly, friend has been oftentimes much worse than foe.”
In an interview Saturday with NBC News, the Republican billionaire said it did not bother him if tariffs caused vehicle prices to rise because autos with more US content could possibly be more competitively priced.
“I hope they raise their prices, because if they do, people are gonna buy American-made cars…I couldn’t care less because if the prices on foreign cars go up, they’re going to buy American cars,” Trump said.
The President has said that he will be flexible with his tariffs, saying he will treat other nations better than they treated the United States. But he still plans to tax plenty of imports, including pharmaceutical drugs, copper and lumber.
Some of Trump’s aides believe the tariffs could act as tools for negotiation on trade and border security, while others suggest that the revenues from import duties could help in reducing the federal budget deficit. Commerce Secretary Howard Lutnick believes that they will force other nations to show Trump “respect.”
What New Tariffs Can Mean For The Global Economy?
Trump’s new import duties are seen as the most expansive US trade restrictions in a century and threaten to upend the postwar global trading system, posing difficult-to-predict economic risks. The lack of clarity of the structure, size and targets of the duties has left global markets in turmoil.
Around $33 trillion in global trade is in the crosshairs, and countries from Brazil to China face between a 4 per cent to 90 per cent drop in their exports to the US, according to a report by Bloomberg Economics.
The average US tariff on all countries will likely rise by 15 percentage points this year, according to Goldman Sachs Group Inc economists, who warned that the move would raise core inflation, weaken growth and escalate the risk of a recession.
Most foreign leaders see the tariffs as destructive for the global economy, even if they are prepared to impose their own countermeasures.
The Chinese government said Trump’s tariffs would harm the global trading system and would not fix the economic challenges identified by Trump. “There are no winners in trade wars or tariff wars, and no country’s development and prosperity are achieved through imposing tariffs,” Foreign Ministry spokesperson Guo Jiakun said.
China, Japan, and South Korea have also agreed to jointly respond to the US tariffs during their first economic discussions in five years on Sunday. The countries agreed that Japan and South Korea will import semiconductor raw materials from China, while China wants to procure chip products from Japan and South Korea.
Canadian Prime Minister Mark Carney said American levies had ended the partnership between his country and the United States, even as Trump on Friday talked about his phone call with Carney in relatively positive terms. Canada has already announced retaliatory tariffs.
French President Emmanuel Macron also said the tariffs were “not coherent” and would mean “breaking value chains, creating inflation in the short term and destroying jobs. It’s not good for the American economy, nor for the European, Canadian or Mexican economies.” Yet Macron said his nation would defend itself with the goal of dismantling the tariffs.
Mexican President Claudia Sheinbaum has avoided the tit-for-tat responses on tariffs, but she sees it as critical to defend jobs in her country.
The head of the European Commission, Ursula von der Leyen, has also said that the EU has a “strong plan” to retaliate against Trump’s tariffs, but would prefer to negotiate first.
What Trump Tariffs Can Do To the American Economy?
Trump tariffs would do nothing good for the American economy, according to a report by Associated Press. Quoting economists, the report said tariffs would get passed along to consumers in the form of higher prices for autos, groceries, housing and other goods.
It stated that corporate profits could be lower and growth more sluggish. However, Trump had maintained that more companies would open factories to avoid the taxes, though that process could take three years or more.
According to the report, economist Art Laffer estimated the tariffs on autos, if fully implemented, could increase per vehicle costs by $4,711, though he said he views Trump as a smart and savvy negotiator.
The investment bank Goldman Sachs estimated the economy will grow this quarter at an annual rate of just 0.6 per cent, down from a rate of 2.4 per cent at the end of last year.
White House trade adviser Peter Navarro told “Fox News Sunday” that the auto tariffs would raise $100 billion annually and the other tariffs would bring in about $600 billion per year, or about $6 trillion over 10 years.
As a share of the economy, that would be the largest tax increase since World War II, AP quoted Jessica Riedl, a senior fellow at the Manhattan Institute, a conservative think tank, as saying.
Mayor Andrew Ginther of Columbus, Ohio, said on Friday that tariffs could increase the median cost of a home by $21,000, making affordability more of an obstacle because building materials would cost more.
Tariffs Can Be Short-Lived
It is also possible that the tariffs are short-lived if Trump feels he can cut a deal after imposing them.
“I’m certainly open to it, if we can do something,” Trump told reporters. “We’ll get something for it.”