President Donald Trump yesterday announced across-the-board tariffs for most of the world’s countries, in a development that sent stocks and financial markets tumbling worldwide.
Trump’s decision to impose the blanket tariffs is being viewed as a watershed moment in global trade and the era of globalization. It is surely the largest increase in tariffs since the 1930s during the Great Depression.
The latest round of tariffs will go into effect April 9th, per the announcement.
The Financial Markets’ Reaction
Immediately, financial analysts questioned the wide variety of tariff rates imposed, as they appeared to be randomly calculated with different percentages from as low as 10% to as high as 49%, depending on the country.
In making his tariff announcement, Trump billed April 2nd as “Liberation Day” and said that the tariffs would help restore U.S. manufacturing and bring back factory jobs. In addition to financial turmoil on Wall Street, several key U.S. manufacturers including automobile manufacturer Stellantis North America and appliance manufacturer Whirlpool announced immediate layoffs as a result of the tariffs.
For their part, major banks such as JP Morgan Chase predicted immediate economic contractions with some estimates putting the risk the U.S. economy slips into recession at over 50%.
What’s Trump’s endgame with the tariffs?
Billing the tariffs as “retaliatory” due to foreign countries’ tariffs on the U.S., Trump hopes to get tariffs on U.S. exports reduced. For now, foreign nations have not taken the bait. Canada and Mexico, for example, avoided any immediate retaliatory action in the hopes a deal is reached. Wall Street, through down as much as 5% during midday trading, has so far avoided a larger collapse due to investors pricing in potential deals between the U.S. and other nations to avoid a full-blown trade war.
The Office of the U.S. Trade Representative (USTR) put out an announcement outlining the calculations for this round of tariffs, which can be viewed here. Major economists expressed some level of disbelief on the calculations, and questions remain.
In another uncertain move, the latest round of tariff rules appeared to close the so-called “de minimus exemption”, which we previously reported on. The exemption applies to goods being imported into the U.S. worth less than $800 and was used by major Chinese shippers to avoid tariffs in the past. The move to close that loophole could cost U.S. consumers and limit the shipments of cheaper goods into the U.S.
What comes next?
Congress has begun debating a response to the tariffs with the Senate passing a resolution disapproving of the tariffs, and two key senators introducing a bill to require Congress to approve all tariffs within 60 days of being imposed. However, for now, no bills have the support necessary to become law or override a potential veto by President Trump.
At MoreThanShipping.com, we will keep you posted on further developments regarding these tariffs as we know they are top of mind for every shipper.
