President Trump’s announcement to wipe out tariffs on American trading partners has widened the rift between the United States and some of its closest allies, reshaping the global economic order.
Trump’s plans he announced Wednesday and calling “mutual” would impose a wave of tariffs on dozens of countries. Among the major economies most affected were the European Union, which faces 20% tariffs under the plan, and China, which absorbs an additional 34% above the existing taxes.
“The scope and scale of tariffs are substantial and confirm the worst fears of free trade supporters,” said Eswar Prasad, a professor at Cornell University’s Dyson School. “Trump is causing a new era of protectionism that echoes around the world.”
Two of the US’s biggest trading partners, Mexico and Canada, will not be subject to new tariffs beyond the previous taxes the president has announced. There are no imported vehicles, vehicle parts, steel, aluminum, and other items not traded under the rules of the US-Mexico-Canada contract.
The new taxes include 10% tariffs in all countries except Canada and Mexico, as well as additional tariffs that apply to duties that other countries apply to US exports and other barriers deemed unfair by the administration.
Asian countries were some of the most difficult hits. Tariffs in Japan and India have risen to over 20%, with countries like Vietnam, Cambodia, Bangladesh and Sri Lanka facing even more steep charges.
Data analytics firm Exiger has calculated that the burden could be the heaviest for Chinese exports, facing an additional tariff of $149 billion. The company called the announcement “a monumental policy shift restructuring its procurement, pricing and geopolitical strategies.”
Multi-faceted attacks have upset global partners.
European allies have announced plans to retaliate against the early wave of tariffs on steel and aluminum. They make it clear that they can respond to growing trade disputes by creating barriers to services like the big technology companies. Others are taking a more waiting approach.
Australian Prime Minister Anthony Albanese said the US, which imposes 10% tariffs on the US, is “unfounded by logic.” But Australia will not compete for retaliation, he said. He said “will not be in the race to the bottom, which leads to higher prices and slower growth.”
In Mexico and Canada there was a sense of relaxed relief in avoiding the new smarts of tariffs. “This is good news for the country,” said Luis de la Carre, Mexico’s top trade economist. “This will help protect access to the US market.”
However, analysts warned against too much optimism as both countries are already facing many taxes imposed recently. Trump said tariffs in Canada and Mexico are intended to curb the flow of fentanyl to the United States.
“He has preserved many important elements of our relationship,” Canadian Prime Minister Mark Carney said. Speaking briefly on the way to the cabinet meeting, Carney added: “We’re going to fight these tariffs and measures.”
A common thread is that many of our American friends are increasingly aware that they are defending against Washington.
Many people question what the ultimate goal is.
Trump has sometimes insisted that he wanted to force companies, including automakers and drug makers, to produce them in the US. He also says the point is simply to correct inequality. He then said tariffs would help pay tax cuts.
Purpose is important for American global partners. If it’s about making the trading system more fair, it suggests openness to negotiations. For example, Europe could mess with car tariffs and try to avoid taking a non-aggressive stance towards the Trump administration.
If it’s about raising funds for American funding, that’s a more challenging starting point for trading partners. In that case, finding an agreement to reduce planned tariffs means reducing potential revenue.
Given uncertainty, American partners are trying to learn as much as possible about what is coming, as they unfold measured responses.
For example, Europe is taking a more positive attitude than many individual countries. It announces plans for retaliation tariffs on a wide range of products in response to the collection of whiskey, motorcycles, produce, steel and aluminum. However, they have already delayed these measures until mid-April, and policymakers have not yet announced exactly how they will respond to the latest tariffs.
Instead, the authorities have made it clear that they are willing to respond by force, including perhaps using recently created tools that can impose penalties relatively quickly, such as tariffs and market access restrictions.
The goal is to gain leverage. EU countries are trying to force Washington to negotiate by throwing the weight of the consumer markets of 27 countries.
However, other geopolitical topics are closely related to trade disputes, making pushing back more difficult.
For Europe, military goals and technical regulations are caught up in conflict. The US wants the European Union to burden more of its own defense, but it also wants to return restrictions on large tech companies, including regulations to ensure content standards are enforced.
The question is how quickly the response will be. For example, European leaders revealed that they would first want to digest the latest tariff details.
“They don’t want to escalate – they want to make a deal,” said Mujitaba Rahman, managing director of Europe at Eurasia Group, a political research firm. However, he added there is a risk that the situation will escalate and that Europe could come after American services in the coming weeks and months.
“You need to bend the reliable economic muscles in this administration,” he pointed out.
Paulina Villegas contributed a report from Mexico City. Ian Austin in Windsor, Ontario. Victoria Kim from Canberra, Australia.
