US President Donald Trump said on Monday he would be “very kind” to trading partners when he announced additional tariffs this week to address what he said were unfair trade imbalances, risking global unrest.
Trump, who has been making unprecedented use of presidential power since taking office in January, said he could announce exactly what “reciprocal tariffs” will be imposed as early as Tuesday night. Republican billionaire Trump has stressed the need for reciprocity as the world’s largest economy has been “looted by every country in the world” and has promised a “liberation day” for the United States.
But he told reporters on Monday, “We will be much better, we will be much kinder in comparison.” Critics have warned that the strategy risks a global trade war, triggering a chain reaction of retaliation from major trading partners such as China, Canada and the European Union (EU).
China, South Korea, and Japan have already agreed to strengthen free trade with each other. But Trump said he was not concerned that his actions would push allies toward Beijing, saying the TikTok deal could also be tied to Chinese tariffs. White House press secretary Carolyn Levitt said Wednesday that the goal is to announce a “country-based tax.” However, Trump has committed to imposing separate, region-specific taxes.
The uncertainty has rattled markets, with major European and Asian indexes closing lower, although the Dow and broad-based S&P 500 have posted gains. Market “nervousness” intensified on Sunday after Trump said his tariffs would include “all countries.”
The Wall Street Journal reported that advisers are considering a global tax of up to 20 percent that would affect nearly all U.S. trading partners. Trump has been vague, saying his tax would be “much more generous” than taxes already imposed on American products.
Financial pain
Trump’s tax hikes are fueling fears of a US recession. Goldman Sachs analysts have raised their 12-month recession probability to 35 percent from 20 percent. This reflects “low growth forecasts, declining confidence and statements from White House officials indicating a willingness to tolerate economic pain.” Goldman Sachs has also raised its forecast for underlying inflation through the end of 2025.
China and Canada have imposed retaliatory tariffs on US goods, while the European Union (EU) has announced its own measures starting in April. Vietnam said it has cut import duties on a range of goods, including cars, liquefied natural gas and some agricultural products. Japan has said it will set up about 1,000 “consultation centers” for businesses affected by US tariffs.
International Monetary Fund (IMF) Chief Kristalina Georgieva told a Reuters program on Monday that Trump’s taxes were causing concern for now, but their global economic impact did not have to be dramatic. Ryan Sweet of Oxford Economics said Trump expects to “target some of the biggest criminals” and said to “expect the unexpected.”
In addition to the reciprocal country taxes, Trump is also likely to announce additional sector-specific taxes, such as on pharmaceuticals and semiconductors. He had already announced auto taxes that would take effect on Thursday.
Economists expect the next wave of sanctions to target the 15 percent of partners that have persistent trade imbalances with the United States. US Treasury Secretary Scott Besant has called those partners the “Dirty 15.” The United States has its largest goods deficits with China, the EU, Mexico, Vietnam, Taiwan, Japan, South Korea, Canada, and India.
Moment of existence
US trading partners are rushing to reduce their exposure. News reports suggest India may reduce some tariffs. European Central Bank (ECB) President Christine Lagarde told France Inter radio on Monday that Europe, facing an “existential moment,” must move towards economic independence.
Separately, British Prime Minister Keir Starmer spoke with Trump about “productive talks” towards a UK-US trade deal, while German Chancellor Olaf Scholz said the EU would respond firmly to Trump but was open to compromise.
Greta Pisch, a former official in the Office of the US Trade Representative, said it was “entirely possible” to quickly reduce or stop the new tariffs. Washington suspended heavy tariffs on imports from Mexico and Canada for a month in February after the North American neighbors began talks.
