Trump Slaps ‘Reciprocal Tariffs’ on Friends and Foes
As announced previously, US President Donald Trump unveiled his tariff chart on Wednesday, the 2th of April 2025 at the White House. The new ‘discounted tariff rates’ range from 10% to 50% and is based on the principle of reciprocity. The custom duty charged by the other country for US goods serve as an initial basis, before being augmented by Non-Tariff Barriers (#NTB), Currency Manipulation, Government Subsidies, Labor Exploitation, Lax Environmental Standards, and other tricks of the trade.
Trump justified his ultra-protectionist policy based on a economic analysis report from 2024 which indicated that a global tariff of 10% would add USD 728 million to the US economy, create 2.8 million jobs, and provide 5.7% more in real household income. Prior to the unveiling of the tariff tables, US Press Secretary Leavitt hammered home that the days when other countries took advantage of the US are over!
First of all, the US is charging a baseline 10% tariff on all goods from all countries. Thus, 10% is the minimum threshold and a select number of countries will enjoy the minimum rate, including, Argentina, Australia, Brazil, Colombia, Egypt, El Salvador, Morocco, New Zealand, Peru, Saudi Arabia, Singapore, Turkiye, United Arab Emirates, and the United Kingdom. The baseline tariff will go into effect on 5 April 2025.
At the other end of spectrum, the US will hit the ‘worst offenders’ — which are profiteering from the largest trade surplus with the US — with the some of the highest tariff rates. Some 60 countries are concerned with Lesotho, Cambodia, Laos, Madagascar, Vietnam, and Myanmar being hit the worst. These countries have a brief window until 9 April 2025 to negotiate with the US before these tariffs kick in.
| ‘Worst Offender’ Country | Compounded Tariff on US Exports (Inc. other Trade Barriers) | Discounted Reciprocal Tariff on US Imports |
|---|---|---|
| Lesotho | 99% | 50% |
| Cambodia | 97% | 49% |
| Laos | 96% | 48% |
| Madagascar | 94% | 47% |
| Vietnam | 90% | 46% |
| Myanmar | 88% | 45% |
| Sri Lanka | 88% | 44% |
| Falkland Islands | 84% | 42% |
| Syria | 82% | 41% |
| Mauritius | 80% | 40% |
| Iraq | 78% | 39% |
| Botswana | 76% | 38% |
| Guyana | 76% | 38% |
| Serbia | 76% | 38% |
| Reunion | 74% | 37% |
| Bangladesh | 74% | 37% |
| Liechtenstein | 74% | 37% |
| Thailand | 72% | 36% |
Trump sorted out China and the EU for ‘special treatment.’ The EU and China are the top trading partners of the USA, accounting for 18.5% and 13.4% of US imports respectively. Thus, China will be slapped another 34% while the EU will get 20%. Both EU and China have indicated that they will retaliate with corresponding countermeasures.
However, China was also penalized with a 20% tariff hike earlier this year. Many of the countries hit by the top tariffs are exactly where China have delocalized some of its production as a workaround to US tariffs.
Being part of the same #FTA with the US, Mexico and Canada appear safe from this new round of tariff hike. Previously, both Mexico and Canada experienced a 25% tariff increase. China is using Mexico and Canada to push goods and drugs into the US market and Trump wishes to close that loophole.
Taiwan and Japan will be charged with significant tariffs. The aim is to motivate the Taiwanese semiconductor fabs and Japanese automakers to invest in manufacturing facilities in the USA. As the largest democracy and ‘a great friend’ of the US, India got away with a midrange tariff of 26%.
In the current context, it would appear that the re-authorization the #AGOA might well be in jeopardy. Several African economies are highly dependent on preferential access to the US market and the impact might be quite negative.
Earlier this year, Trump announced that the US will charge a 25% tariff on aluminum and steel in a bid to bring back these factories in the US. It is also worth noting that certain products categories such as #CriticalMinerals and #Pharmaceuticals are exempt from these new ad valorem duties.
Additionally, the US will charge a blanket 25% tariff on all imported automobiles which was warmly welcome by workers in the auto industry. President Trump made sure he invited representatives of the auto workers union for the occasion. Some industry analysts observe that American EV makers such as Tesla might benefit from higher tariff on imported EV.
The objective is to curb the global dominance of China on the emerging #EV market. The tariff on imported vehicle came into effect almost immediately right at midnight on the day of proclamation.
In 2024, the total import bill of the US came up to about USD 3.3 trillion. Therefore, a 10% increase in tariff would bring in roughly USD 330 billion to the Treasury. Analysts estimate the new tariff grid is equivalent to an average rate of 30%, thus the tariff bill might be closer to USD one trillion.
Some observers warn US consumers to brace for a price hike and higher inflation. Several economists are of the opinion that in a trade war, there are no winners. Many stock markets around the world tumble down on Thursday morning in fear of a global trade war.