During the campaigns for the US presidency, Donald Trump assured to use tariffs as a means to achieve a broad range of goals, including preventing war, reducing trade deficits, improving border security, and subsidizing childcare. During his inaugural address on January 20, 2025, Trump pledged to “immediately begin the overhaul of our trade system to protect American workers and families. Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.”
After the inaugural speech, Trump warned all the countries exporting goods to the US of possible rise in import tariff on reciprocal basis. Along with the rest of the world, he specifically targeted Mexico and Canada, Japan, and the European Union with a hard hit on China. He announced a 25% tariff on all imports from Canada and Mexico unless they took action against illegal immigration and drug trafficking, especially fentanyl. Simultaneously, Trump signed an Executive Order to establish a new 10% baseline tariff on all Chinese imports, accusing China of exporting fentanyl into the US.
He has frequently increased tariff rates to China with new ceilings.Trump escalated an ongoing trade war with China, raising baseline tariffs on Chinese imports to 245%.
On April 2—a day he called “Liberation Day“—Trump signed an executive order imposing a minimum 10% tariff on all U.S. imports effective April 5. Higher tariffs on imports from 57 countries, ranging from 11% to 50%, were scheduled to take effect on April 9 but were almost immediately suspended for 90 days for all countries except China. The 10% tariff remains in effect.
Interestingly, Trump has also imposed import tariffs on Iceland, where only Penguins live with no human beings.The White House’s initial list of impacted areas included the Heard Island and McDonald Islands, a remote uninhabited Antarctic territory of Australia.
Since Japan is an export-heavy economy, Japan’s large automotive sector depends on the United States for 20% of its total exports. Along with a universal baseline 10-percent tariff on foreign imports, separately, Trump imposed a 25-percent tariff on automobiles. Trump’s new tariffs had a sizable effect on the Japanese economy. Analysts estimate that the tariffs could decrease Japan’s GDP by 0.8%
Before his inauguration speech, Trump threatened to impose tariffs on Europe unless it reduced its trade surplus with the US by increasing imports of American cars, agricultural products, and oil and gas. Trump imposed 20% tariffs on all goods coming from the European Union as part of his “reciprocal tariff” policy. However, Trump did not announce tariffs on Russia, due to sanctions related to the Ukraine war.
The tartiff war between US and China has been affecting the industries of the world, especially Southeast Asian countries, where they cannot compete with high tech, cheap to be dumped Chinese products. For example the garment which was supposed to be exported to the US from China would be massively diverted to East Asian Countries. This region is going to be hit hard by the Chinese Tsunami. Not Only garments but also from toys to electric vehicles, solar panels, rubber and other necessary items to high tech products would affect the market in the region. However, China has got a good opportunity by capitalizing and expanding trade relations with east asian countries.
The announcement of “reciprocal tariffs” prompted retaliation from trade partners and triggered a stock market crash. However, some countries have started negotiations with the US on this regard. If other countries agree to slash their rates on American products, there is also a high possibility to equate US tariff rates with them. As of now 130 countries have responded to Trump’s tariffs and have entered negotiations with the White House. This also seems to be one of the inner objectives of Donald Trump’s trade policy to bring other countries on equal rates of lower level. Similarly, some countries have started retaliating against the Trump tariff.
China had already planned retaliatory tariffs. In response, Trump ratcheted up tariffs on Chinese goods to 145%.
The Chinese government also responded by raising its levy on U.S. goods to 125%.China was prepared to face this tariff war with the US as they were prepared for the expected consequences. Last year China exported goods worth US Dollar 3 Trillion and trade balance in its favor of a US Dollar 1 Trillion.
European Union officials have decided to implement retaliatory tariffs on U.S. goods. And they are in response to the steel and aluminum tariffs previously implemented, according to a statement released by officials, “The EU considers U.S. tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy,” the statement said. “The EU has stated its clear preference to find negotiated outcomes with the U.S., which would be balanced and mutually beneficial.”
The U.S.’s neighbors to the north also focused on auto tariffs, implementing a 25% import tax on American-made vehicles.
Japanese government officials have been in talks with Trump since the beginning of the week.
The country seeks to negotiate down the tariff that the U.S. is charging on Japanese imports.
Vietnam’s first attempt at a deal was dismissed by Trump’s trade adviser Peter Navarro early in the week but it reportedly is still trying to negotiate with the administration. Top Vietnamese officials are in process for negotiations with Washington. The US had “a great call” with South Korean probability of a great deal for both countries.
In February 2025, Indian Prime Minister Narendra Modi visited the White House to negotiate tariffs and advance a deal.
Analyses have projected reciprocal tariff measures would have significant economic impacts to India, estimated that India could lose $7 billion annually. After the reciprocal tariffs were announced, South Africa announced that it would start to plan to diversify its export markets, targeting regions in Asia, Europe, the Middle East, and within Africa.
Some economists have argued that the tariffs have the potential to disrupt the global economy by disrupting the balance of payments between the United States and its foreign debtors. By reducing the export trade between the United States and countries targeted by the tariffs and raising the cost of dollar-denominated goods, the US makes it more difficult for those countries to pay their dollar debts.
The expected impact of the threatened 25% tariffs on Mexican and Canadian goods is high. Grocery prices were expected to rise as two-thirds of US vegetable imports came from Mexico. Similarly, the price of other consumable items would also be skyrocketing.
Additionally, the U.S. dollar, traditionally considered a safe-haven asset, weakened amidst the turmoil. Immediately after the new tariff announcement by Trump, the stock markets have declined sharply by trillions of dollars of loss worldwide with more volatiles. Economic forecasters have warned of a recession if the import taxes are not reduced in short order. The tariffs raise the risks of high inflation and economic stagnation, or “stagflation” the longer and higher they stay. The investors and consumers have had loss of faith in the US market.
It would be worth noting that before the announcement of increased reciprocal trade tariffs to the countries of the world, Donald Trump had warned them about the imposition of high tariffs on imported goods. Most countries were not serious about the consequences. However, the 90 day pause on tariffs by the US indicates that there is still room for negotiation to bring down the tariffs from both sides to save the global as well as US economy from unexpected disasters.