US President Donald Trump has spared few of America's major trading partners. Photo / Win McNamee, Getty Images, AFP
President Donald Trump’s punishing new tariffs on more than 90 countries have snapped into place, the latest escalation in a global trade war that has started to exact a toll on the United States economy.
Few of America’s major trading partners were spared under Trump’s updated slate of duties, which together have sent the average effective US tariff rate to its highest level in nearly a century.
In the hours before the import taxes took effect, the President signalled there would be more to come, as he doubled down on a strategy that has rattled markets, driven up prices and spooked consumers and businesses around the world.
Trump announced the new rates in a series of executive orders he signed last week, some of which formalised the preliminary trade agreements that he had reached in recent days with the European Union and other countries.
The President has long maintained that these levies would help reset trade relationships that he deems unfair, raise new revenue for the US government, spur more US manufacturing and achieve other goals.
Trump’s tariffs have indeed helped generate money — roughly US$152 billion ($255b) in customs collections through July, recent data show — but his policies have not been without consequence.
A growing number of businesses have warned recently that they may no longer be able to stomach the rising costs of key foreign components.
As a result, prices have started to climb.
The latest monthly measure of inflation showed that appliances, clothing and furnishings became more expensive in June.
The economy has grown but at an anaemic pace, and some analysts predict little improvement through the remainder of the year. The labour market has experienced its own strains, with hiring sharply slowing in July.
Olu Sonola, the head of US economic research at Fitch Ratings, said the economy was just “starting to see” the effects of the tariffs that Trump announced in the northern spring, adding that with Trump’s newest duties now in place, Americans would “see that magnified” in coming months.
The tariffs start at 15%, targeting imports from countries including Bolivia, Ecuador, Iceland, and Nigeria. Others, like Taiwan, have a 20% tax applied to items sold to US buyers.
Trump also imposed a much higher 50% tariff on some goods from Brazil. He has cast it as punishment for Brazil’s decision to prosecute his political ally Jair Bolsonaro, the country’s former president, for seeking to stay in power after losing an election.
And today, Trump said he would raise tariffs on India to 50% by late August for buying Russian oil.
The President has signalled he could impose similar penalties on other countries, as he looks for ways to use trade policy to pressure Russia into halting its war against Ukraine.
In general, the duties do not apply to foreign goods that have been loaded onto ships just before the deadline.
Those products in transit won’t be subject to new taxes so long as they enter the US before early October, perhaps opening the door for importers to amass more inventory before the steepest rates cut into their bottom lines.
Many smaller countries’ exports have faced 10% tariffs since the President first announced, then suspended, his initial tranche of policies in April.
Others have staved off eye-watering rates after brokering deals with the US that set their tariffs generally between 15% and 20%.
That includes the 27-member EU, as well as Japan, South Korea and Vietnam.
Each of those governments promised to open its market to US goods, and in some cases they pledged to invest billions of dollars in American industries. But the exact terms of those deals remain murky.
Separately, Trump imposed a 35% tariff on goods from Canada not covered by the existing US-Mexico-Canada trade agreement.
The Canadian levies took effect on Friday. Similarly high rates have been suspended for Mexico while the two sides keep talking. And duties on Chinese goods remain at 30% under an agreement brokered between the superpowers this year, though the truce is set to expire on Tuesday.
The rates that took effect today are unlikely to be the final chapter in Trump’s expanding trade war, which faces a series of legal challenges in federal courts.
He still plans to impose additional tariffs on foreign-made medicines, computer chips, and other products.
Trump said the forthcoming tariffs on semiconductors, which have not been formally announced, would be set at 100%.
The President shared his thinking at a White House event alongside Tim Cook, the chief executive of Apple, which had pledged to invest an additional US$100b in the US. Trump signalled that the taxes may be relaxed on companies seeking to produce more of the critical high-tech chips domestically.
The President also dismissed evidence that his policies may be upsetting the US economy, claiming instead that “costs are way down” and that the country would experience “unprecedented” growth.
He previously insisted that foreigners were bearing the brunt of his tariffs, and he moved last week to fire the top official who oversees the government’s jobs report, claiming without evidence that its data had been rigged to harm him politically.
The President’s new tariffs send the average US effective tariff rate to above 18%, the highest level since 1934, according to the Budget Lab at Yale University.
For American households, those duties may add up to price increases, resulting in an average annual loss of US$2400, the Yale research centre found.
And for the broader economy, it could translate to a drop in output, shaving off half a percentage point in growth starting in 2025.
Mark Zandi, chief economist for Moody’s Analytics, said the tariffs threatened to create an environment that was “very stagflation-esque”, referring to the risk of a stagnant economy with inflationary prices.
That, he said, would add to the challenge facing the Federal Reserve at a time when Trump is demanding lower interest rates.
“Growth is slowing,” Zandi said. “It’s happening, and it’s going to become much more obvious.”
So far, the US economy has sidestepped the most dire predictions of a recession. But many experts say it was always going to be a matter of time before tariffs unleashed real, noticeable effects, especially because many businesses stockpiled imports before the steepest rates took effect.
Matthew Martin, a senior economist at Oxford Economics, said businesses had worked their way through those inventories since the President announced, but quickly suspended, his original slate of steep tariffs in April.
With tariffs climbing again, Marin continued, so will prices: “That is something that’s going to accelerate over the next couple months”.
This article originally appeared in The New York Times.
Written by: Tony Romm
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