US President Donald Trump‘s sweeping reciprocal tariffs, which he announced on Wednesday as a “Declaration of Economic Independence,” will usher in a new era in global trade while fueling inflation and recession concerns for the US economy.
Trump signed an executive order to impose sweeping reciprocal tariffs on over 180 countries, ranging from 10% to 50%, to put an end to trade practices his administration found to have been unfair.
The Trump administration aims to generate nearly $700 billion via these additional tariffs to finance tax cuts for the rich, but economists warn that these will result in higher import costs and raise prices for end consumers while hindering economic growth.
Trump claimed the US is being “ripped off” by all countries, friend or foe, and aimed to revitalize domestic production and reduce foreign dependence via these tariffs. The President signed executive orders to impose tariffs on the auto, steel, and aluminum sectors and tariffs on Canada, Mexico, and China due to alleged fentanyl trafficking and the inflow of undocumented migrants into the US.
The president pointed to countries that have foreign trade deficits with the US, suggesting that they do not buy enough American-made products. US imports reached $4.1 trillion, and exports totaled $3.2 trillion last year, according to the Department of Commerce.
The EU received 20%, China 34%, Vietnam 46%, Taiwan 32%, Japan 24%, India 26%, South Korea 25%, Thailand 36%, Switzerland 31%, Indonesia 32%, Malaysia 24%,
Cambodia 49%, South Africa 30%, Bangladesh 30%, and Israel 17% in reciprocal tariffs.
Some countries, such as Türkiye, the UK, Brazil, Australia, the United Arab Emirates, New Zealand, Egypt, and Saudi Arabia, were subjected to 10% reciprocal tariffs each.
Surprisingly, some of the world’s most sanctioned countries, namely Russia, Cuba, Belarus, and the Democratic Republic of Korea, were not subjected to reciprocal tariffs, while the uninhabited Heard and McDonald Islands of Australia were included.
COST, IMPACT OF TARIFFS
The Budget Lab at Yale estimates that tariffs will cause inflation to rise and cost an average of $3,800 per household in the US.
Anderson Economic Group estimates that Trump’s 25% auto tariffs will add $2,500 to $5,000 on the lowest-cost American cars and up to $20,000 on some imported models. The estimated cost of the auto tariffs on end consumers in the US is $30 billion for the first full year.
Meanwhile, US inflation was last recorded as 0.2% on a monthly basis and 2.8% on an annual basis in February.
According to the Boston Fed, the impact of tariffs on US inflation is expected to cause a 1.4 to 2.2 percentage point increase, further limiting the Fed’s ability to combat inflation.
Consumer confidence in the US has declined since Trump took office on Jan. 20, with the University of Michigan’s consumer confidence index reaching its lowest point since Nov. 2022 at 57.9, while short-term consumer inflation expectations rose to 4.9%, the highest level since the same time.
As for economic growth, Fitch Ratings estimated that the US will grow slower than the 1.7% projected rate in March due to the tariffs, while Oxford Economics projects 1.4% growth this year.
The Department of Commerce said the US economy grew 2.8% last year, marking a stark difference in growth projections for this year since Trump’s second term began in January.
Washington-based think tank Tax Foundation’s analysis showed that Trump’s tariffs are expected to generate $3.2 trillion over the next decade but result in a loss of 0.8% in the country’s gross domestic product (GDP).