17 hours ago
6
Donald Trump’s announcement of a long slate of new tariffs on the US’s trading partners has caused chaos in global markets and threatens a global trade war and US recession.
Long trailed on his election campaign, Trump’s plans were even more sweeping than many had predicted: a baseline 10% tariff on all imports and higher tariffs for key trading partners, including China and the EU.
Though the tariffs won’t go into effect for a few more days, global markets have been reeling from the announcement of what’s to come.
Here’s a breakdown of what the tariffs are and how they’ve affected the economy since Trump’s announcement.
The new tariffs
Trump’s new tariffs are twofold. First, all imported goods will be subject to a 10% universal tariff starting 5 April. Then, on 9 April, certain countries will see higher tariff rates – what Trump has deemed “reciprocal tariffs” in retaliation for tariffs the countries have placed on American exports.
Keep in mind that tariffs are paid by American companies that are importing goods like wine from Europe or microchips from Taiwan.
Some of the highest tariffs will be put on imports from Asian countries, including China, India, South Korea and Japan. EU exports will also have a 20% tariff.
How did the White House calculate its reciprocal tariffs? The administration said that it looked at the trade deficit between the US and a specific country as a percentage, and then considered that to be a tariff. So, for example, the value of US goods that are exported to China are 67% of the value of the Chinese goods that are imported into the US.
The White House calls this definition a “tariff” placed on American goods, though a deficit and a tariff are not the same thing.
It then halved the “tariff” and used that percentage to represent the new levy that the US would place on goods from that country.
Canada and Mexico are notably absent from the list, despite being targets of a proposed 25% tariff. The White House said that goods covered under an existing trade agreement between the two countries will continue to have no tariffs.
Targeting key trading partners
Trump and his economic advisers argue that the tariffs will strengthen US manufacturing while also lowering barriers other countries put on American goods. But the US has long been in a trade deficit, importing more goods than exporting.
While increasing domestic manufacturing and relying less on foreign suppliers could strengthen the US economy in the long run, economists say that Trump’s tariffs are too aggressive and uncertain for them to actually encourage domestic investment. Instead, companies have said they will pass the cost of the tariff onto consumers.
Fear on Wall Street
Markets immediately plummeted when exchanges started trading Thursday morning, as Wall Street reacted to the new levies.
Wall Street has been slumping for the last month as Trump introduced new tariffs and teased the ones he announced on Wednesday. All three exchanges went into correction territory in March, meaning that the indexes fell more than 10% from their recent peaks.
The tariffs have also hit stock markets abroad. The UK’s FTSE 100 saw its worst day since August 2024, while markets in Japan, Hong Kong and Germany also tumbled.
Leaders around the world expressed shock and frustration over the new tariffs. Ursula von der Leyen, president of the European Commission, called the tariffs “a major blow to the world economy”.
“The global economy will massively suffer,” she said Thursday. “Uncertainty will spiral and trigger the rise of further protectionism. The consequences will be dire.”
The new tariff has also made the US dollar fall in value in relation to other major currencies.
The strength of the US dollar is an important measure of how the US economy is seen by investors, relative to other economies. That the dollar has been falling shows that investors see instability in the US economy that is likely to last.
