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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe trade war President Donald Trump promised has begun, threatening the world economy and straining the United States’ longstanding alliances in Europe and Asia.
Goods imported from dozens of countries and territories are now going to be taxed at sharply higher rates, and that is expected to drive up the costs of everything from cars to clothes to computers.
These tariffs–which can run as high as 50%–are meant to punish countries for trade barriers that Trump says unfairly limit U.S. exports and cause it to run huge trade deficits.
Even countries with which the U.S. enjoys trade surpluses–meaning it sells to them more than it buys, such as the United Kingdom and Argentina–are being targeted with a minimum tariff of 10%. And the highest tariffs are landing on two tiny territories that trade little with America—the African kingdom of Lesotho and the French possession of Saint Pierre and Miquelon off Canada’s Atlantic coast.
For decades, global commerce abided by tariff rates agreed to by the U.S. and 122 other countries during the 1980s and 1990s. On Wednesday, Trump detonated that arrangement, saying that other countries had exploited the system and “ripped off’’ the United States for years, causing its once-mighty manufacturing base to shrink.
“Our country has been looted, pillaged, raped and plundered,” the president said in the Rose Garden.
Global financial markets recoiled on Thursday. On Wall Street, the Dow Jones industrial average dropped 1,679 points, or nearly 4%, and the U.S. dollar fell against other major currencies–a sign that investors are worried about the U.S. economy.
“This is a game changer, not only for the U.S. economy but for the global economy,” said Olu Sonola, head of U.S. economic research for Fitch Ratings. “Many countries will likely end up in a recession. You can throw most forecasts out the door, if this tariff rate stays on for an extended period of time.”
Trump is doing what he said he’d do
During the presidential campaign, Trump repeatedly talked about imposing a “universal tariff’’ of 10% to 20% on all imports–and the new 10% baseline tariffs fit the description.
He also threatened to hit imports from China with 60% tariffs, and he’s now slapping a “reciprocal’’ tariff of 34% on China–on top of the 20% levies he’d announced earlier this year.
Combine the new tariffs on China with the ones left over from his first term, and from President Joe Biden’s, and the full tax on Chinese goods will now approach 70%, said Julian Evans-Pritchard of Capital Economics.
“It’s extreme, but it aligns with what Trump campaigned on,’’ said Erica York, vice president of federal tax policy at the Tax Foundation.
Nobody knows if the tariffs will prove permanent or if the U.S. will lower or drop them in response to other countries negotiating to reduce their own tariffs and other trade barriers.
U.S. tariff rates are going back more than 100 years
Even before Wednesday’s bombshell, the president had been lobbing tariffs with abandon in his second term. He restored 25% tariffs from his first term on steel and aluminum, imposed 25% levies on cars and light trucks, hit China with 20% import taxes and levied 25% tariffs on some Canadian and Mexican imports.
The Budget Lab at Yale University estimates that his 2025 tariffs–including Wednesday’s–would lift America’s effective average tariff rate to 22.5%. That would be up from 2.5% last year and the highest level since 1909—even higher than the notorious Smoot-Hawley tariffs that Congress passed during the Great Depression.
Before lawmakers ratified the 16th amendment to the Constitution in 1913, introducing a national income tax, tariffs supplied a big share of the federal government’s revenue–more than 90% at times in the mid-1800s. The U.S. moved from tariffs to income taxes to raise more money to finance an expanding government, collect more revenue from the wealthy and make the economy more efficient by reducing trade barriers and encouraging competition.
Trump wants to return to those days and replace income tax collections with tariffs. Last year, tariffs accounted for less than 2% of federal revenue, while 51% came from the income tax and 36% from Social Security and Medicare taxes.
Tariffs expected to damage U.S. and world economies
The Yale Budget Lab estimates that Trump’s 2025 tariffs will increase U.S. consumer prices by 2.3% in the short run, costing American households $3,800 a year.
The tariffs he announced on “Liberation Day” alone will push up prices by 1.3%, the lab calculates–a $2,100 tax on households. Clothing prices will go up 17% as higher import tariffs hit textiles from Southeast Asia and Bangladesh.
The lab says that Trump’s tariffs will reduce U.S. economic growth–which was 2.8% in 2024–by 0.9 percentage points this year.
The damage will also extend to Europe, Southeast Asia and China. “We can expect global economic growth to start plummeting as trade flows decline, prices increase and businesses put off investments,’’ said Wendy Cutler, a former U.S. trade official who is now vice president at the Asia Society Policy Institute.
Trump hits allies and poor countries
Between the so-called reciprocal and baseline tariffs, Trump hit allies and adversaries, rich and poor countries, and those open and closed to U.S. exports.
Even Singapore, perhaps the freest-trading economy in the world, is getting slugged with the 10% levies, belying Trump’s claims to be balancing other countries’ protectionist policies, said Scott Lincicome, a trade analyst with the libertarian Cato Institute.
“This is not reciprocal at all,’’ Lincicome said. “Getting to real numbers on foreign trade barriers and their effects on U.S. trade numbers would require lengthy investigations and would take months, if not years, to produce. … They might as well have pulled the numbers out of a hat.’’
Taiwan, a U.S. ally, faces a 32% tariff, not much less than geopolitical rival China’s 34%.
Poor countries also bore the brunt of some of Trump’s most onerous tariffs.
Lesotho, a tiny country surrounded by South Africa, is facing a 50% “reciprocal’’ tariff, for example, even though its annual economic output per person is less than $2,900 (compared to America’s $76,200).
Cambodia, whose annual economic output per person is about $7,200, is absorbing a 49% tariff. That is partly, the White House says, because it has been a conduit for Chinese-made goods eventually headed to the United States to dodge U.S. tariffs on China.
Canada and Mexico got off relatively easy
Trump’s trade policies toward America’s northern and southern neighbors have been erratic. He has twice announced and then suspended or watered down 25% tariffs on Canadian and Mexican goods, ostensibly to get them to do more than crack down on fentanyl and immigrants crossing into the U.S. illegally.
Last month, Trump suspended the 25% duties on Canadian and Mexican goods that comply with the U.S.-Mexico Canada Agreement, a trade pact he negotiated with the two countries in his first term. On Wednesday, the White House said that USMCA-compliant imports could continue to enter the United States duty free.
Once the two countries have satisfied Trump’s demands on immigration and drug trafficking, the tariff on the rest of their imports would drop from 25% to 12%, the White House said.
“The obvious winners were Canada and Mexico,’’ Neil Shearing and Paul Ashworth of Capital Economics wrote in a commentary.
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“ The U.S. moved from tariffs to income taxes to raise more money to finance an expanding government, collect more revenue from the wealthy and make the economy more efficient by reducing trade barriers and encouraging competition.
Trump wants to return to those days and replace income tax collections with tariffs.”
Told ya. It’s all about going back 100 years.
Your understanding of tariffs is woefully flawed. Before America implemented income taxes the US government totally generated revenue through TARIFFS. Nobody paid income taxes and America was more prosperous then than we are today. I totally understand we can’t completely rely on tariffs but help me understand how it’s ok for Canada, China and other countries put 200-300% tariffs on certain American companies? Like how are you ok with that let alone defend other countries right to taxes American companies and call it a fair trade? Ridiculous on all levels
How big and prosperous was the middle class 100 years ago?
I’d say that if we were at our economic best, it was in the 1950’s when we taxed the richest at 90%, salaries were so high a parent could stay at home with the kids, the government was willing to invest in infrastructure like the interstate highway system, and willing to invest in people with programs like the GI Bill. Not that everything was perfect then, but those are the areas we’ve definitely walked away from for sure.
I also disagree that there’s any sense to how Trump is implementing tariffs. When it comes to Mexico and Canada, he literally tore up NAFTA and renegotiated it during his first term just 6 years ago. You’re telling me all these high tariffs are brand new? Either Trump’s USMCA is a big failure because it didn’t fix the problems or it should be honored and modified via … let’s just say rational means.
And the math for how he came up with them? It’s just flat dumb. My high school economics teacher would have thrown me out of class.
https://newrepublic.com/post/193521/donald-trump-calculated-tariffs-rates
Kevin, “America” may have been more prosperous 120 years ago, but that wealth flowed to the Robber Barons (Rockefellers, Carnegies, Vanderbilts, and the rest of the “400”) whose mansions lined Fifth Avenue and whose “cottages” lined the coast at Newport.
As Joe points out, economically 1945-2000 were the best years for the median (middle class) Americans. Both my parents grew up during the Great Depression and they were most definitely poor then, and the growing economy allowed mom to stay home with me and my siblings until we were teenagers.
Again…Google “Smoot-Hawley Tariff Act of 1930”. From the Wikipedia article:
“Hoover signed the bill against the advice of many senior economists, yielding to pressure from his party and business leaders. Intended to bolster domestic employment and manufacturing, the tariffs instead deepened the Depression because the U.S.’s trading partners retaliated with tariffs of their own, leading to U.S. exports and global trade plummeting. Economists and historians widely regard the act as a policy misstep, and it remains a cautionary example of protectionist policy in modern economic debates.”
Two words: Smoot-Hawley. Look it up.
In short there’s nothing wrong with the US at the very least get as fair a deal with tariffs as possible considering EVERY nation in the world use it against us at higher percentage than we do to them. Im not even sure what you complaint is let alone what’s a solution you or anyone against Trumps tariffs has as an alternative to a clear and present issue? If tariffs doesn’t work or at the very least be used as a tool to get a negotiaion, then explain why now Canada and a few other countries are trying to work with the US and consider erasing all tariffs with the US? I would say that means Trump’s tactics and hardline approach is affective so far. What’s the alternative from the Donkey party? The status quo perhaps?
I’d argue tariffs are a Trump policy, not a Republican policy. But I’m old fashioned like that.
Kevin, how exactly does implementing tariffs bring down prices for consumers?
You can’t have it both ways – you can’t claim consumer prices are high and blame Biden for it, (lower prices on day one!), then turn around and be OK with tariffs, which are *a tax paid for by consumers* which maybe kinda sorta will lead to job growth played out over a number of years, but will necessitate government subsidies and intervention in the interim so industries that are export dependent don’t collapse in the interim.
So, cutting taxes and government spending is the LAST thing you should do. Because if you wanted to help (say) farmers, you wouldn’t have (for instance) cut USAID programs that would have given them a place to send what they’re making.
The entire effort is, like all things Trump, incoherent.
Ok JOE B. let’s dialogue. You’re kind of all of the place with this but hear me out on this. Trumps never ever said “he would lower prices on day one”. He said “he would work to lower egg and gas prices on day one”. The results wouldn’t obvious be recognized until a few months in office. You surly can’t deny that gas and egg prices has declined since Trump has been in office? Now concerning tariffs they aren’t nothing new or invented by Trump. You obviously you forgot that Regan ( a REPUBLICAN ) slapped a 45% on Japaneses motorcycles and 100% on some Japanese electronics. Both George Bush sr and junior used tariffs in some form. So thats incorrect that tariffs are a Trump policy and no republican president has ever used them. Yes there will some discomfort in the markets but will level out. Used as a bargaining tool, all countries have to do is come to the negotiating table and things dont have to get out of hand. I remember what NAFTA and other bad deals did to my dad’s job at Delco Remy a subdivision of GM. Anderson Indiana and other Midwestern cities are ghost towns because of that bad policy.
Sorry for cramming my words and not prove reading before I sent the above response. Currently at work and typing too fast. Hope you understand what im attempting to articulate.
Gas prices are up actually. Link at the bottom.
Is there a place for tariffs? Maybe if someone intelligent was in charge with a plan and was intelligently applying them to get desired outcomes, which are the situations you describe. He’s slapping tariffs on every single country based on a fundamental misunderstanding of how trade deficits work, thinking we need to erase every trade deficit with every country in the world. Explain why we are wasting time with tariffs on Lesotho. There is no plan and no leadership. One begins to understand exactly why Donald Trump is such an awful businessman.
Which is the takeaway other countries are learning. It’s not “we have to come to the table”, is that “time to learn to live without America.” Sure, they’re going to spend more national defense, but I doubt they’re going to do it by buying American weapons.
MEANWHILE, you and I pay the cost. Companies aren’t going to eat the cost. Countries aren’t going to eat the cost. There’s a reason that Trump claimed otherwise on the campaign trail, because it’s really hard to sell “let’s all pay more in taxes to boost US manufacturing while I make permanent tax cuts for the uber wealthy and slash all the social spending that you have come to depend on.”
Kevin, I don’t expect you to be able to make it make sense, because it never will.
https://www.gasbuddy.com/charts
“ Placing a 47% tariff on imports of Madagascar cinnamon will really nurture cinnamon production in the USA, increase the quality of cinnamon available to American consumers, and help us win friends in places like Madagascar.”
https://x.com/nachristakis/status/1908227572413915606?s=61
Hahahahaha. Would be sad if it weren’t crazy.
Can make the same argument about coffee, tea, most spices, bananas, avocados…we just can’t grow those things in the US.
Nope.
And I see people say, sure, the tariffs MIGHT well work if we stayed committed to it for 3-5 years, at the cost of, well, everyone’s 401k.
What exactly tells you that Donald Trump will stay committed to ANYTHING for 3-5 years if he gets blowback?
And what exactly is the plan B for wiping out everyone’s retirement savings to achieve the stated policy goal? We going to increase spending on Social Security? Bring back pensions?
You know neither of those are on the table.
Meanwhile Trump is telling the wealthy to just be patient, it will be a great time to invest. Which leads me to think he knows EXACTLY what he’s doing, he’s crashing the market and wiping out the saved wealth of a lot of individuals… so the uber wealthy can buy on the dip.
Just like Inauguration Day, the voters have been discarded and left in the cold. Y’all voted in an oligarchy and got played big time… you were warned.