President Donald Trump is expected to apply sweep tariffs to US imports, known as “liberation day” on April 2nd. However, if US trading partners decide to fight back with The-for-Tat measures, the global trade war warns that it will speed up inflation and growth and slow down.
No one knows what will happen next. What number will Trump choose for his new tariffs? 10%? 20%? Or is it the 25% rate he charged on steel, aluminum and automobile imports?
Also, questions remain as to whether Trump will apply universal tariffs or collect personal hikes for countries that may be negotiated.
Trump’s trade announcements from February onwards and afterwards have struggled to measure whether his tariffs remain here or are a negotiation tactic to extract income and concessions from economic partners, making investors unsure of the market.
But amidst that uncertainty, Trump’s broad message remained constant. He has long denounced other countries exploiting the United States through trade, casting protectionist agendas as needed to resupply domestic manufacturing and US employment. He also wants to use tariffs to fund future tax cuts.
What will be announced on April 2nd?
Donald Trump’s April 2nd tariff announcement is the latest in a surge in trade salvos launched by the US president since returning to the White House in January.
Details regarding Trump’s “liberation day” trade plan remain unknown, but his administration has pledged to strike the country with obligations equal to tariffs and non-voluntary trade barriers, such as subsidies they levies on US exports.
Trump says he will pour cold water into hope that his announced tariffs will be applied to “all countries” and that only economies with the biggest trade imbalance with the US will be targeted.
However, if tariffs are subject to negotiation and can be reduced over time, it will leave room for wiggling for trade collections of different countries.
What did Trump actually say?
Speaking at the White House on Monday, Trump said his tariffs would be “better” than the policies of US trading partners.
“We’re going to be very good compared to what they are, and the numbers are lower than what they charge us.
Seeking for details, he said, “You’ll see in two days.”
He also reiterated his regular point of talk that the US was exploited by trading partners, saying the measure “produces enormous wealth to our country.”
Trump said on Sunday that tariffs would apply to “all countries,” but he recently said he was “open” to conduct transactions with the country after the April 2nd announcement to avoid tariffs.
Which of the Trump tariffs is set to be effective?
In addition to the drastic tariffs tomorrow, other measures including a 25% tariff in Canada and Mexico and a 25% mandate for all automobile imports are expected to come into effect on April 2.
Other fees have already been in place for several months. On February 3, the Trump administration imposed a 10% tariff on all goods from China, in addition to the various tariffs imposed between Biden and the first Trump administration. Then, on March 5, Trump doubled the tariff rate on Chinese imports to 20%.
Elsewhere, Trump introduced a 25% collection on all steel and aluminum imports on March 11th.
How is the market responding to the announcement?
Trump’s deadlock announcement about tariffs has sent uncertainty through financial markets, and investors have either struggled to determine whether they intend to make his tariff permanent or viewed it as a negotiation tip in future trade negotiations.
Market nerves escalated Sunday after Trump said his tariffs would include “all countries.” Asian stocks fell sharply on Monday in anticipation of further disruption in global trade.
At Toyko, Japan’s Nikkei index lost 4%, while South Korea’s Kospi fell 3%. The European market also experienced selling. The UK’s FTSE 100 fell 0.9%, Germany’s DAX fell 1.3%, while France’s CAC lost 1.6%.
Gold, a traditional safe asset during the market volatility period, rose above $3,100 for the first time, trading at a record high of $3,106.79 per ounce.
Dario Perkins, managing director of financial research firm TS Lombard, told Al Jazeera, “It would be strange if the market responds to Trump’s ‘liberation date’ announcement in a fierce way.
Still, he said, “Most investors buy the idea that hyperglobalization is profitable and efficient for a company, so if you’re looking to reverse it, it’s going to be negative for the international supply chain and the stock market.”
Perkins’ view: “In financial markets, there will be no major negative reactions to financial markets until tariffs begin to cause real damage to the US economy in the form of higher unemployment rates. That’s impossible to ignore.”
How is the country preparing?
US trade partners have already begun to respond to Trump’s tariffs, raising the spiral trade war.
Canadian Prime Minister Mark Carney described Trump’s move as a “direct attack” on Canadian workers.
“We will fight US tariffs with our own retaliatory trade measures that have the biggest impact in the United States and minimal impact in Canada,” Carney said.
Following Trump’s price hikes in steel and aluminum on March 11, Canada, the largest industrial metals supplier in the United States, announced a 25% retaliatory tariff worth $29.8 billion (US$20.7 billion).
Similarly, the European Commission, the EU’s executive arm, said it would levitate US goods up to 26 billion euros ($28 billion) after its announcement on March 11.
For her, Ursula von der Leyen of the European Commission said tariffs were “bad for businesses” and “bad for consumers.”
“The EU will continue to seek negotiated solutions while protecting economic interests,” von der Leyen said in a March 26th X post.
The Japanese Prime Minister said his government will consider “appropriate measures” in response to tariffs.
“Some countries like China may respond with TIT measures, but most will seek bilateral agreements with the US,” Henry Gao, a Chinese trade expert at the University of Management of Singapore, told Al Jazeera.
So GAO said, “The (global economic) situation should stabilize in just over a month. But if dragged beyond that, it could significantly disrupt the global economy and potentially lead to a global recession.”
Will tariffs affect the US economy?
Trump has pitted his trade plans as a US bounty, but his policies have prompted warnings from economists and businessmen about US consumer prices. Approximately half of US consumer goods come from overseas.
For example, in cars, Jennifer Safavian, president and CEO of Autos Drive America, said, “The tariffs imposed today make it more expensive to produce and sell cars in the US, and ultimately lead to higher prices.”
Economists fear that adding tariffs on imports will raise inflation as importers hand over costs to consumers. Data released last Friday showed that consumer sentiment across the United States has fallen sharply in March since 2021.
Goldman Sachs recently raised estimates about the possibility of a US recession over the next 12 months, warning that it rose from the previous 20%, possibly leading to further losses on Wall Street.
For TS Lombard’s Perkins, “The danger is the tariffs combined with Doge’s cost reduction. If you’re designing fiscal tightening and trade restrictions, you need an offset from monetary policy.”
As Government Efficiency (DOGE), led by Elon Musk, is searching federal computer systems to cut taxpayer-funded programs, the Tech billionaires say they are working to reduce public spending to lower the federal deficit.
“The overall goal was to try to get $1 trillion from the deficit,” he said in a joint Fox News interview with President Trump in February.
However, Perkins noted that US interest rate cuts were “impossible” as a result of the inflationary effects of Trump’s trade policy. Perkins said the outcome is that the US economy is facing “dangerous” pressure.