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Countries across the world are racing to absorb the new way of doing business with the US, after Donald Trump unveiled tailored tariffs that looks set to ignite a global trade war.
Trump has made clear the goals he wants to accomplish through the tariffs: bring manufacturing back to the US; respond to unfair trade policies from other countries; increase tax revenue; and incentivise crackdowns on migration and drug trafficking.
However, the EU and China have promised countermeasures, while South Korea has vowed an “all-out” response. The damage done at a political level with allies such as the UK may also carry its own cost, as billions are wiped off economic growth.
Here are some early points to note in the wake of Wednesday’s wideranging announcement:
1. Firms are bracing for what ‘liberation’ means
The US president sold the idea of global tariffs with a celebratory air, making good on his campaign trail promise to liberate the nation from higher prices. The president has claimed “prices are way down” since his return to office but anyone who has visited a grocery store in that time might feel differently.
And US firms are apprehensive about the wider effect of this move: higher costs, they warn, will be passed on to their customers. “What we have heard from business of all sizes, across all industries, from around the country is that these broad tariffs are a tax increase that will raise prices for American consumers and hurt the economy,” said Neil Bradley, chief policy officer at the US Chamber of Commerce, the corporate lobby group.
2. The China link?
China has been hit particularly hard by the new tariffs, which take the total levy on Chinese imports to over 50%, as well as struggling nations in South-east Asia, including war-torn and earthquake-hit Myanmar.
One theory being put forward is that countries linked to sizeable Chinese investments are being targeted. Dr Siwage Dharma Negara, a senior fellow at the ISEAS-Yusof Ishak Institute in Singapore, said: “The [Trump] administration thinks is that by targeting these countries they can target Chinese investment in countries like Cambodia, Laos, Myanmar, Indonesia. By targeting their products maybe it will affect Chinese exports and the economy,” he said.
“The real target is China but the real impact on those countries will be quite significant because this investment creates jobs and export revenue.”
The tariffs comes as many countries in South-east Asia are already grappling with the fallout from the cuts to USAid, which provides humanitarian assistance to a region vulnerable to natural disasters and support for pro-democracy activists battling repressive regimes.
3. Key trade partners Canada and Mexico are spared – but will still feel the pain
Canada and Mexico have been exempted from the latest round of tariffs, but, as prime minister Mark Carney and business leaders reminded everyone, 25% tariffs on Canadian steel and aluminum, as well as on automobiles, came into effect hours after Wednesday’s announcement.
Carney warned that while Trump had preserved key elements of the bilateral relationship, the global tariffs announced earlier in the day “fundamentally change the international trading system”.
The two countries have been hit by previously declared 25% tariffs on many goods over border control and fentanyl trafficking issues, the White House said in a fact sheet.
Mexico president Claudia Sheinbaum said on Wednesday that her country would not pursue a “tit-for-tat on tariffs” but would rather announce a “comprehensive program” on Thursday.
4. This is a big gamble
Trump himself appears prepared for the announcement to spark a lot of turbulence in markets across the world, saying recently: “There is a period of transition, because what we’re doing is very big.” The universal tariffs come into effect on 5 April, and the reciprocal ones on 9 April, so countries around the world now have a very short space of time in which to choose their path. Some may try to cut a deal with Trump, others may respond with retaliatory tariffs, but a continuing theme will be uncertainty.
5. Absolutely nowhere is immune
Heard Island and McDonald Islands are some of the most remote places on Earth, inhabited only by an array of wildlife, yet they are among the “external territories” of Australia listed separately for a 10% tariff.
Norfolk Island, which lies just of Australia’s east coast, was slugged with a tariff of 29% – or 19 percentage points higher than the rest of Australia, prompting Australia’s prime minister, Anthony Albanese to say on Thursday: “I’m not quite sure that Norfolk Island, with respect to it, is a trade competitor with the giant economy of the United States, but that just shows and exemplifies the fact that nowhere on earth is safe from this.”
