Overview of the New Tariffs
On Thursday, U.S. President Donald Trump signed a decree imposing higher tariffs on several countries, disrupting global trade. The new customs duties, announced by the Republican president, will not take effect as initially planned on Friday but within seven days instead. This delay aims to give U.S. customs time to prepare.
Objectives and Impact
The primary goal is to “further address the growing annual trade deficit of goods in the United States” and “protect the United States from foreign threats to national security and the economy,” according to the White House statement.
The new tariffs range from 41% for Syria to 39% for Switzerland, with Argentina at 30%, Bangladesh at 20%, Laos at 40%, and India at 25%. Canada also faces an increase from 25% to 35%, except for products covered by the United States-Mexico-Canada Agreement (USMCA), of which Canada is a part.
Canada and Drug Trafficking
The White House criticized Canada for not cooperating to curb the flow of fentanyl and other illicit drugs, as well as retaliating against the U.S. The statement also mentioned that Mexican cartels are increasingly operating synthetic fentanyl and nitazoxin labs in Canada.
Canadian Prime Minister Mark Carney expressed disappointment with the decision and highlighted Ottawa’s efforts against these drugs and border security.
European Union, Japan, and South Korea
The European Union (EU), Japan, and South Korea, some of the few partners who successfully renegotiated tariffs during the truce announced in April and postponed since, will be subject to 15%, similar to most countries. The United Kingdom, Vietnam, Indonesia, and the Philippines also reached preliminary agreements.
Brazil and Mexico
The U.S. increased tariffs from 10% to 15% for Costa Rica, Bolivia, and Ecuador, while maintaining the previously announced rates for Venezuela (15%) and Nicaragua (18%).
Brazil currently faces a 10% tariff, but it will rise to 50% (an additional 40 percentage points) due to the ongoing trial against former far-right president Jair Bolsonaro, accused of a failed coup attempt.
After speaking with Mexican counterpart Claudia Sheinbaum, Trump granted Mexico a 90-day extension to sign an agreement. Meanwhile, Mexico remains subject to the 25% tariff, excluding goods under the USMCA.
Sheinbaum stated that Mexico reached “the best possible agreement” compared to other nations, and Mexico agreed to eliminate numerous non-tariff trade barriers immediately.
Impact on Global Trade Rules
Wendy Cutler, senior vice president of the Asia Society Policy Institute, stated that “there is no doubt” the decree and recent agreements “shatter the trade rulebook governing international trade since World War II.”
China, excluded from these tariffs as its truce does not expire until August 12, warned against U.S. protectionism, stating it “harms the interests of all parties.”
Most countries previously faced a universal minimum tariff of 10% imposed in April and product-specific tariffs like 50% on aluminum and steel or 25% on automobiles. Starting Friday, a 50% tariff will also apply to copper.
European stock markets opened lower: Paris down 1.16%, Frankfurt 1.24%, London 0.50%, and Milan 1.17%. Asian markets also closed in the red: Tokyo, Hong Kong, Sydney, Singapore, Shanghai, Bombay, Bangkok, Wellington, and Taipei.
Key Questions and Answers
- What is the purpose of these new tariffs? The U.S. aims to address its growing trade deficit and protect national security and the economy.
- Which countries are affected by these tariffs? Numerous countries, including Canada, Mexico, EU nations, Japan, South Korea, and several others, face increased tariffs.
- Why was there a delay in implementing these tariffs? The delay allows U.S. customs to prepare for the changes.
- What is the impact on global trade? These tariffs disrupt global trade, causing uncertainty and potential economic consequences for many countries.
- How have affected countries responded? Some, like Canada and Mexico, have expressed disappointment and highlighted their cooperation efforts. Others, like China, have criticized U.S. protectionism.
