Introduction to Trump’s Tariff Policy
In his election campaign, Donald Trump once said that "tariff is the most beautiful word in the dictionary". Now, after six months in office, the US President endeavors to implement his specific vision of global trade into reality. With a step that shocked both politics and business around the world, Trump announced on April 2 that he would impose a "basic tariff" of 10% on imported goods to the United States.
Implementation of Tariffs
In addition, goods from around 60 other trading partners would be exposed to so-called mutual tariffs, which were even higher and, as a repayment for the unfair trade policy, meant what Trump described as "worst offender". While the basic tariffs came into force immediately, the US President had to postpone the deadline for mutual tariffs for 90 days in response to turbulence on the financial markets for 90 days after April 2. These now come into force on August 1st, whereby Trump has made it clear that he sticks to the deadline for countries who have not met any new trade agreements with his administration.
Trade Agreements
Days before the deadline, the United States and the European Union agreed on July 27 that European goods that were imported to the United States would be exposed to a basic rate of 15%. This includes the key automotive sector of the EU, which has been exposed to a tax of 25% since Trump took office in early January. The agreement, which must still be signed by all 27 EU members, has already been heavily criticized. The French Prime Minister said this week that the EU had surrendered and described Sunday as a "dark day".
Country-Specific Trade Deals
The United Kingdom was the first country to vote for a trade agreement with Washington in May. British products are subject to a basic rate of 10% with exceptions for some industries. Japan’s exports to the United States are taxed with 15%, including automobiles, an industry that constitutes 30% of Japanese exports to the United States in 2024. With regard to South Korea, the recent negotiations at a basic tariff of 15% have led to all imports from this country-from one of the top 10 USA and an important Asian ally of 25% of 25%. Washington has also completed trade agreements with the Philippines, Vietnam, Indonesia, and Pakistan.
Special Cases
China-the second largest economy of the world-is a special case. Washington and Beijing had raised the other of the other to more than 100% before the interest was temporarily reduced over a period of 90 days. This break will end on August 12th. China has taken an aggressive stance in response to Trump’s brief threat to impose an introduction of 145% for imports, to convey their own tariffs for US goods and to block the sale of important rare earth minerals and components used by American defense and high-tech manufacturers.
Holdouts and Escalation
Brazil is one of the few important economies that carry out a trade deficit with the United States, which means that Brazil imports more from the USA than in the country. Nevertheless, the US President threatens to impose a 50% tariff on the products of Brazil due to political differences. India has drawn Trump’s anger for his huge surplus with the USA and his trade relationships with Russia. As a result, Trump announced on Wednesday that he would carry out a tariff of 25% and an additional "punishment" through the purchase of Russian oil by India, which helps Moscow to finance his war in Ukraine. Canada and Mexico-two of the largest trading partners of the USA-are not spared Trump’s threats of tariffs, although the trade between the three neighbors is subject to the trade agreement of the US Mexico Canada (USMCA), which was negotiated during Trump’s first term in office.
