The most extensive tariffs imposed by US President Donald Trump have officially taken effect, a move that could provoke retaliation and heighten trade tensions, potentially destabilizing the global economy.
The initial 10 percent “baseline” tariff commenced at seaports, airports, and customs warehouses across the United States at 12:01 am ET (04:01 am GMT) on Saturday, marking Trump’s comprehensive rejection of the post-World War II framework of mutually established tariff rates.
Countries such as Australia, Britain, Colombia, Argentina, Egypt, and Saudi Arabia were among the first to be impacted by the 10 percent tariff.
The White House attributed the trade imbalances to a lack of “reciprocity” in relationships and other policies including “excessive value-added taxes.”
A bulletin from US Customs and Border Protection to shippers indicated that there would be no grace period for cargoes already on the water as of midnight on Saturday.
However, the same bulletin offered a 51-day grace period for cargoes that were loaded onto vessels or planes and en route to the US prior to the 12:01 am ET deadline on Saturday. These cargoes must arrive by 12:01 am ET (4:01 am GMT) on May 27 to be exempt from the 10 percent duty.
Additionally, Trump’s higher “reciprocal” tariff rates ranging from 11 percent to 50 percent are set to take effect on April 9. The European Union imports will incur a 20 percent tariff, while Chinese goods will face a 34 percent tariff, increasing Trump’s total new levies on China to 54 percent.
Vietnam, which had benefitted from the diversion of US supply chains away from China due to Trump’s earlier trade war, will now be subjected to a 46 percent tariff. Nevertheless, the country agreed on Friday to engage in discussions for a potential deal with Trump.
Both Canada and Mexico remain exempt from Trump’s latest tariffs, as they are still under a 25 percent tariff concerning the US fentanyl crisis for goods that do not meet the US-Mexico-Canada agreement rules of origin.
‘Pretty seismic’
Michael Strain, director of Economic Policy Studies at the American Enterprise Institute, remarked to Al Jazeera that investors have reacted negatively to the US tariffs.
“This will significantly adversely affect the economic outcomes for workers, households, and businesses,” he noted, adding that this would equate to a tax increase of $400-500 billion this year on American households and businesses.
“The combination of substantial tax increases and tariffs would raise the prices of imported goods that households encounter, likely leading to negative income growth for households… This alone poses a risk of recession in the US,” he stated.
On Friday, China announced it would implement its own 34 percent tariff on US products starting April 10. Beijing also stated its intention to initiate a lawsuit against the US at the World Trade Organization (WTO) and restrict exports of rare earth elements essential for advanced medical and electronics technologies.
Trump cautioned on social media on Friday that “China played it wrong,” indicating it was a move “they cannot afford to make.”
Other significant trading partners are holding back as they assess the ongoing international standoff and fears of a potential recession.
The tariff announcement made by Trump on Wednesday rocked global stock markets, resulting in a loss of $5 trillion in stock market value for S&P 500 companies by the end of Friday, marking a record two-day decline. Prices for oil and commodities plummeted as investors sought refuge in government bonds.
Economists have expressed concerns that the tariffs could hinder growth and fuel inflation.
Kelly Ann Shaw, a trade attorney at Hogan Lovells and former White House trade adviser during Trump’s first term, stated at a Brookings Institution event on Thursday that she anticipates the tariffs will evolve as countries strive to negotiate lower rates.
“This is the most significant trade action of our lifetime,” she said. “This is monumental. It represents a remarkable and significant shift in the way we conduct trade with every country on the planet.”
Trump conveyed on his Truth Social platform that his “policies will remain unchanged.”
Nonetheless, his latest tariffs have certain exclusions. They do not stack on previously imposed 25 percent tariffs affecting imports of steel, aluminum, and automobiles.
Furthermore, temporary exemptions apply to copper, pharmaceuticals, semiconductors, and lumber, along with “certain critical minerals” and energy products, according to the White House.
However, Trump has mandated investigations into copper and lumber, which could result in additional duties soon.
He has also threatened to target other sectors like pharmaceuticals and semiconductors, implying that any reprieve may be short-lived.
