US President Donald Trump’s sweeping new tariffs have shocked governments and investors, provoking dismay and threats of retaliation.
There have been calls for negotiations to rescind the stiff new import taxes imposed on goods from countries around the world as global stock sagged overnight in response to yesterday’s announcement.
China accused the US of “bullying” and the European Union said it was ready to retaliate, with French officials suggesting measures to hit US big tech companies.
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Yet the calls for making a deal from the EU, the UK and Japan indicated a lack of appetite for escalating trade tensions with the world’s biggest economy and fear that slapping tariffs on US goods will only make things worse.
Trump said that the import taxes, ranging from 10 per cent to 49 per cent, would do to US trading partners what they have long done to the US. He maintains they will draw factories and jobs back to the United States.
“Taxpayers have been ripped off for more than 50 years,” he said. “But it is not going to happen anymore.”
Trump singled out Australian beef imports to the US, saying they would be subject to a “baseline” 10 per cent tariff. Prime Minister Anthony Albanese condemned Trump’s move, saying it was not “the act of a friend”.
Trump singled out Australian beef imports to the US, saying they would be subject to a “baseline” 10 per cent tariff. Prime Minister Anthony Albanese condemned Trump’s move, saying it was not “the act of a friend”.
READ MORE: Tiny Australian island’s tariffs are nearly triple the rest of the country
Trump imposed a 34 per cent levy on goods from China on top of an earlier 20 per cent tariff, as well as a 20 per cent tariff on the European Union, 24 per cent on Japan and 25 per cent on South Korea.
China’s Foreign Ministry spokesperson Guo Jiakun called for trade talks and said that “there are no winners in trade wars and tariff wars, and protectionism is not a way out … It is clear to everyone that more and more countries are opposing the US’s unilateral bullying actions, such as imposing tariffs.”
China, which is a key exporter to the US of everything from kitchenware to clothing, has already announced a raft of retaliatory measures set to raise prices for US consumers.
French President Emmanuel Macron urged businesses to “suspend” investments in the US pending talks with the Trump administration, denouncing a “brutal and unfounded” decision.
“Because what would be the message of having major European players investing billions of euros in the American economy at a time when they’re hitting us?” Macron said before meeting with representatives of key businesses affected by US tariffs, including wines and spirits, food industry, cosmetics, health, metals and aircraft.
European Commission President Ursula von der Leyen denounced the tariffs as a “major blow to the world economy” but held off announcing new retaliatory measures and said the commission – which handles trade issues for the 27 member countries – was “always ready” to talk.
Analysts say there’s little to be gained from an all-out trade war, for the United States or other countries, since higher tariffs can lower growth and raise inflation. The tariffs are not paid by the countries they’re imposed on, but by the companies in the US that buy the goods to sell to Americans. They must decide whether to absorb the new taxes or pass them on to consumers in the form of higher prices.
“If Trump really imposes high tariffs, Europe will have to respond, but the paradox is that the EU would be better off doing nothing,” said Matteo Villa, a senior analyst at Italy’s Institute for International Political Studies.
“On the other hand, Trump seems to understand only the language of force, and this indicates the need for a strong and immediate response,” Villa said. “Probably the hope, in Brussels, is that the response will be strong enough to induce Trump to negotiate and, soon, to backtrack.”
The makers of Italy’s Parmigiano Reggiano cheese say the new tariffs just mean US consumers will pay more, since the protected designation cheese doesn’t really compete with US made parmesan. “Americans continued to choose us even when the price went up” after an earlier round of Trump tariffs in 2019, said Nicola Bertinelli, president of the Parmigiano Reggiano Consortium.
“Putting tariffs on a product like ours, only increases the price for American consumers, without protecting local producers,” he said.
Next target could be US tech companies
Europe’s strategy so far has been to limit retaliation to early tariff rounds to just a few politically sensitive goods such as bourbon and motorcycles in an attempt to push the US to the negotiating table, rather than escalate an all-out trade war that could cripple its export-dependent economy.
Economists say the next target could be US tech companies. They fall into the services category, where the US exports more than it imports to Europe and thus would be more exposed to retaliation.
The EU response, likely to be ready by the end of April, includes the option of a tax on US digital giants, said French government spokesperson Sophie Primas. “We’re going to target the services, for example, digital services which are not being taxed for now and could be, the GAFAM for example,” she said on French radio RTL. That’s a colloquial acronym for Google, Apple, Facebook, Amazon and Microsoft.
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Outgoing German Chancellor Olaf Scholz said the EU won’t be able to limit itself to saying the tariffs are damaging — “we must show that we have strong muscles.”
He added: “But this is with the aim of an agreement, because that is the best for prosperity in the US, for prosperity in Europe and for prosperity in the world.”
British Prime Minister Kier Starmer said the UK government would react with “cool and calm heads”, telling business leaders in London that he hopes to get the tariffs lifted with a trade deal. “Nobody wins in a trade war, that is not in our national interest,” Starmer said.
Japan, America’s closest ally in Asia, plans to closely analyze the US tariffs and their impact, Chief Cabinet Secretary Yoshimasa Hayashi said, while refraining from talk of retaliation.
‘Blow to the world economy’
Financial markets were jolted, with US stock futures down by as much as 3 per cent early on Thursday and a 2.8 per cent drop in Tokyo’s benchmark leading losses in Asia. Oil prices sank more than $2 a barrel. Analysts fished for superlatives to a step that disrupts the global trading order and overturns decades of efforts to lower tariffs through trade talks and free trade agreements.
“The magnitude of the rollout — both in scale and speed — wasn’t just aggressive; it was a full-throttle macro disruption,” Stephen Innes of SPI Asset Management said in a commentary. Deutsche Bank’s Jim Reid called it “radical policy reordering” and said the US now had an average tariff of 25 per cent-30 per cent, the “worst end of expectations” and the highest since the early 20th century.
“This is a game changer, not only for the US economy but for the global economy. Many countries will likely end up in a recession,” Olu Sonola, Fitch Ratings’ head of US Economic Research, said in a report. “You can throw most forecasts out the door, if this tariff rate stays on for an extended period of time.”
‘Minimise damage’
Asian countries that are among the biggest exporters to the US pledged to act fast to support automakers and other businesses likely to be affected.
South Korean Prime Minister Han Duck-soo told officials to work with business groups to analyze the impact of the new 25 per cent tariff to “minimise damage”, the trade ministry said.
China’s Commerce Ministry said Beijing would “resolutely take countermeasures to safeguard its own rights and interests”, without saying exactly what it might do. With earlier rounds of tariffs China reacted by imposing higher duties on US exports of farm products, while limiting exports of minerals used for high-tech industries such as electric vehicles.
Mexican President Claudia Sheinbaum said she would wait to see how Trump’s announcement will affect Mexico, which like Canada was spared for goods already qualified under their free trade agreement with the United States, though previously announced 25 per cent tariffs on auto imports took effect on Thursday.
A 29 per cent tariff imposed on the tiny South Pacific outpost of Norfolk Island came as a shock. The Australian territory has a population of about 2000 people and the economy revolves around tourism.
“To my knowledge, we do not export anything to the United States,” Norfolk Island Administrator George Plant, the Australian government’s representative on the island, told the AP on Thursday. “We don’t charge tariffs on anything. I can’t think of any non-tariff barriers that would be in place either, so we’re scratching our heads here.”
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