Genesis
During the 2024 US Presidential Elections campaigns, President Trump committed to tax cuts funded by tariffs on countries benefiting from US trade deficits. US International Trade Association showed China led with $295bn, Mexico $172bn, Vietnam $124bn, Ireland $87bn, Germany $85bn, Taiwan $74bn, Japan $69bn, South Korea $66bn, Canada $64bn and India $46bn. Tariffs were expected to protect US companies from unfair competition and lead to higher employment and GDP.
Trump and Tony Schwartz in 2015 authored the ”The Art of the Deal”. Tariffs shock and awe therapy may anchor bilateral trade and national interest negotiations with Game Theory credible threats.
Studies in 2024 indicated that a 10 percent global tariff would grow the US economy by $728 billion, create 2.8 million jobs, and raise real family incomes by 5.7 percent. In 2025 US global tariffs have risen from 2 percent to 24 percent which is the highest since the 1890 McKinley Tariff of 29.6 percent.
America First.
Executive Order (EO) 14150 outlined US trade priorities. On 1st February, Trump invoked IEEPA against porous borders, immigrants, and drugs to impose a 25 percent tariff on Canada and Mexico with the Canadian energy attracting10 percent. He raised tariff on China to a total of 20 percent tariff to curb government subsidization of excess industrial capacity in EVs, solar panels and batteries.
Also Read: Impact for Kenya and Its Economy on the 10% Tariff on Its Exports to the U.S.
On 11 February 2025, Trump raised tariffs on steel and aluminum to 25 percent to protect the US from dumping. On 26 March 2025, Trump invoked imposed 25% tariff on imported vehicles and parts. He wants the US to reshore resilient domestic industrial base, hedge against geopolitical shocks, create jobs and foster national security.
Liberation Day.
Executive Order EO-14257 on 2 April 2025 applied a global baseline 10 percent tariff. For BRICS, Brazil was slapped with 10 percent, Russia zero but has existing sanctions, India 26 percent, China 34 percent but this now stands at 245 percent, and South Africa 30 percent. Asian countries were led by Cambodia at 59 percent, Vietnam 46 percent, Bangladesh 37 percent, Thailand 36 percent, Indonesia and Taiwan 32 percent, Pakistan 29 percent, South Korea 25 percent and Japan 24 percent.
MENA was led by Syria 41 percent, Iraq 39 percent, Libya 31 percent, Algeria 30 percent, Tunisia 28 percent, Jordan 20 percent and Israel 17 percent. SSA was led by Lesotho at 50 percent, Madagascar 47 percent, Mauritius 40 percent, Botswana 37 percent, Angola 32 percent and Côte d’Ivoire 21 percent. Non-EU European countries had Liechtenstein and Serbia lead at 37 percent, Bosnia and Herzegovina at 35 percent, North Macedonia 33 percent, Moldova, and Switzerland 31 percent. The EU was handed 20 percent. LATAM fared well with Nicaragua at 18 percent and Venezuela 15 percent. Trump announced 90 days pause on tariffs for all countries except China on 9 April 2025.
Retaliations.
Canada retaliated with C$29 bn worth of tariffs on 4 March 2025.Canada imposed 25 percent tariffs on US steel and aluminum on 13 March 2025.It further imposed 25 percent on non-USMCA motor vehicles and parts. The EU suspended its 25 percent retaliatory tariff worth €21 billion for 90 days to negotiate. Mexico and other countries have opted for dialogue.
Also Read: U.S. Tariffs: We Want Your Raw Materials, Not Your Finished Goods
China on 4 February 2025 retaliated with 15 percent and further on March 4. On April 4, it rose to 34 percent, on April 9 to 84 percent and April 11 to 125 percent. Its retaliation today stands at140 percent, export control of 12 Critical Minerals and Materials (CMMs) and 43 companies, unreliable entity list of 29 companies, 3 investigations and import suspension of multiple agricultural products for 9 US exporters.
Consequences.
WTO forecast global trade to contract by negative 0.2 percent. Trade will plummet in North America but remain robust in Asia. Tariffs will overturn the UNCTAD and WTO anchored global trading system. Globalization will recede amidst fragmentation of trade blocs including USMCA which will be hosting 2026 FIFA World Cup.
UNCTAD expects global GDP to decline to 2.3 percent well below the 2.5 percent threshold which signals global recession. JP Morgan projects 60 percent probability of US recession, Goldman Sachs 45 percent and Morgan Stanley 40 percent. IMF had projected EU growth at zero percent, but this may worsen despite Germany’s bazooka fiscal policy and ECB rate cuts. China jumbo expansionary fiscal and monetary policies will be watered down.
The global stock markets crash on April 3 saw the Nasdaq Composite lose 1,600 points, S&P 500 lost 6.65 percent, Dow Jones fell 3.98 percent and Russell 2000 fell 6.59 percent. Brent crude slumped to $62.7/barrel on April 8. OPEC+ producers on 3 April raised combined oil output by 411k bpd pushing down crude prices as crude demand and global GDP contract.Net oil importer countries will benefit from lower oil prices.
Tariffs have put a wedge between the EU and US and seriously threaten NATO’s historical bonds. Japan, Taiwan, and South Korea will increasingly reassess their US relationships. NATO countries are increasing their military expenditures to between 2 to 5 percent of GDP. Trade wars may trigger catastrophic military confrontations and global supply chain disruptions. EU (NATO) versus Russia impacts minerals, staple foods, plus oil and gas like Iran versus Israel. China versus Taiwan and South China Sea affects manufactured products, processed Critical Minerals and Materials plus computer CHIPs. North Korea versus South Korea distresses manufactured products.
The FED expects US stagflation in 2025 with GDP declining to 1.7 percent, unemployment rising to 4.4 percent and PCE inflation to 2.7 percent. This means the FED will pause or hike its Federal Funds Rate to curb inflation thereby strengthening the Dollar due to flight to safety to USD denominated assets. A Strong Dollar, elevated FFR and SOFR means depreciation of EMDEs currencies, imported inflation, funding freeze from prohibitive cost of debt, higher USD load defaults and higher Mark to Market losses on rising Eurobonds yields as bond prices falls.
Follow our WhatsApp Channel and X Account for real-time news updates.
