U.S. President Donald Trump holds a signed executive order on tariffs at the White House on April 2.Leah Millis/Reuters
President Donald Trump is imposing new tariffs on America’s trading partners with an executive order that threatens to fracture global systems of trade, levelling 20-per-cent tariffs on goods from the European Union, 34 per cent on Chinese exports and a minimum 10 per cent on exports from most other countries.
Canada and Mexico, which Mr. Trump has already subjected to a series of import taxes, were exempted from the new measures. But other tariffs on North American trade will remain in place, including a 25-per-cent levy on foreign-made vehicles that will come into effect on Thursday.
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The sweep of new levies constitutes an extraordinary change of economic course by the United States, one that threatens painful price increases for consumers, snarls to supply chains and a risk that other countries will further frustrate the international movement of goods by emulating those policies – even as Mr. Trump promised that his actions will bolster American prosperity and revive the dominance of its industries.
“It’s our declaration of economic independence,” Mr. Trump said, moments before raising a sign that showed the scale of additional tariffs the U.S. will impose on individual countries – 46 per cent for Vietnam, 24 per cent for Japan, 25 per cent for South Korea, 17 per cent for Israel, 47 per cent for Madagascar, among many others.
U.S. President Donald Trump announced a 10% baseline tariff on all imports to the United States and higher duties on some countries. Goods compliant with USMCA are exempt, but other goods from Canada will face levies.
Reuters
Those tariffs will mark an end, the President pledged, to the days of Americans watching “in anguish as foreign leaders have stolen our jobs, foreign cheaters have ransacked our factories and foreign scavengers have torn apart our once-beautiful American dream.”
For generations, the U.S. led the world to freer trade. Now, it has raced to the fore of dismantling a system that, Mr. Trump argues, has impoverished the wealthiest country on Earth. Together, the new measures raise the average U.S. tariff rate from 2.5 per cent last year to 22 per cent, a level last seen in 1910, according to an analysis by Fitch Ratings.
“This is really a fundamental attack on the global economy, the global economic order, everything we all held dear for 75, 80 years,” said Fred Bergsten, the founding director of the Peterson Institute for International Economics.
Mr. Trump’s suite of tariffs constitutes the most protectionist set of policies ordered by a U.S. president in at least a century, he said. The coming months, he warned, will test whether other countries can resolve to maintain trade freedoms, particularly as major exporters such as China seek to divert goods that might otherwise have been destined for the U.S.
“Unless somebody steps up and tries to head it off, things could go into a kind of downward spiral like what happened in the early 1930s,” Mr. Bergsten said.
“What Trump has done just violates every fundamental rule of the world trading system. If people thought there was any semblance left of the World Trade Organization, the General Agreement on Tariffs and Trade system – this just shatters it.”
For Canada and Mexico, Mr. Trump agreed to keep in place an existing regime that assesses no tariffs on products compliant with the U.S.-Mexico-Canada Agreement, and levies of up to 25 per cent on non-compliant goods.
But the U.S. will impose a tariff of 25 per cent on foreign-made cars on Thursday, while keeping levies on steel and aluminum that have been in place since last month. Canada has imposed retaliatory tariffs on $60-billion of U.S. imports.
Mr. Trump, in a “Liberation Day” speech delivered to workers and dignitaries gathered in the White House Rose Garden, gave voice to a litany of trade complaints. He accused Canada of harming the export of U.S. dairy; the European Union of creating barriers to U.S. poultry; Australia of banning U.S. beef; China, South Korea and Japan of overcharging on imports of U.S. rice.
“It’s not a pretty picture, and we don’t like it, and it’s not fair,” he said.
The U.S. calculations of countries’ tariffs charged to the U.S. appeared to be based not on foreign levies at all, but on trade imbalances. The White House-provided list of “countries” affected by new tariffs included the Heard and McDonald Islands, which are uninhabited Australian territory situated between Madagascar and Antarctica.
In Ottawa, Prime Minister Mark Carney promised to respond “with purpose and force” to what he called a fundamental change to the global trading system as other countries weighed their options. The Brazilian Congress passed an “Economic Reciprocity Law” authorizing reprisals while Irish Prime Minister Micheál Martin called for a “proportionate” answer from Europe. Australian Prime Minister Anthony Albanese said the tariffs were not “the act of a friend,” although neither Australia nor Britain said they expected to reciprocate.
U.S. leadership threatened harsh consequences if other countries enact retaliatory measures, with Treasury Secretary Scott Bessent telling Fox News foreign leaders should “sit back, take it in, let’s see how it goes. Because if you retaliate, there will be escalation. If you don’t retaliate, this is the high watermark.”
For Canada, the exemption from the baseline tariff means “it could have been much worse,” Candace Laing, president of the Canadian Chamber of Commerce, said Wednesday. But Canada is hardly exempt, with tariffs on cars, steel, aluminum and other goods that will affect sizable segments of the country’s employment base.
“We need to shore up our own economic security and resilience, invest in our infrastructure, freer trade internally and more trade with other markets,” Ms. Laing said.
Mr. Trump made taxes on foreign-made goods a central part of his election campaign and, soon after returning to office, renamed the highest peak on the continent Mount McKinley, after the protectionist 19th-century U.S. president.
Investment banks have warned that the White House approach is raising the risk of recession. Elsewhere, anxiety has risen. Consumer sentiment has plummeted, while stock markets have shed considerable value in recent months. Some senior Republicans, including a handful of U.S. senators, have publicly opposed the tariffs, warning they could harm the economic interests of American consumers. Several joined with Democrats to pass a Senate resolution Wednesday opposing tariffs on Canada.
Mike Pence, who was vice-president during Mr. Trump’s first term in office, called the tariffs the “largest peacetime tax hike in U.S. history,” saying they would cost the average American household US$3,500 a year.
Other Republicans have said they are willing to give the President time to see whether his policies are effective.
“I’m a free and fair trader. If President Trump is successful in reducing tariffs in other countries, I’m going to say, ‘Amen, praise the Lord,’ ” said Iowa Senator Chuck Grassley. “But if he’s unsuccessful, I’ll say, ‘I told you so.’ ”
Mr. Trump has dismissed economic critics as flatly wrong, blaming the North American free-trade agreement for the loss of 90,000 U.S. factories and five million manufacturing jobs.
“In the face of unrelenting economic warfare, the United States can no longer continue with the policy of unilateral economic surrender. We cannot pay the deficits of Canada, Mexico and so many other countries,” he said.
He argued that his first term in office proved him correct, pointing to the strength of stock markets during a period in which he imposed far more limited tariffs, some of which were later reversed.
Mr. Trump made no reference to the far poorer stock-market performance since his return to the White House, predicting instead that his tariffs would build the U.S. into a new industrial powerhouse.
“This is transforming our nation,” he said. “Our entire nation is going to be transformed.”
With reports from Robert Fife and Tim Kiladze