Level Day has arrived: who can expect which measure?

Today is the day. This afternoon at 3 p.m. American time (9 p.m. in the European evening), President Donald Trump will finally tell in the Rose Garden of the White House how America will fight with countries that have « deposited » America in Trumps. He sees it as a necessary correction on decades of unfair trade relationships and an end to the time when other countries lifted the United States. Liberation Day, according to the President of the United States. The day that global free trade comes under heavy pressure, according to almost everyone minus Donald Trump and his team.

1What is going to happen today?

Nobody knows exactly, because there would have been quite a bit of discussion within the economic team of Trump about the exact design of trade measures. But it seems that Trump will make it known tonight what his policy of ‘reciprocal taxes’ will look like. These taxes are intended to match the taxes, or other trade -limiting measures, of other countries. According to Trump, import duties, but also taxes, VAT, currency manipulation and other rules are also being looked at. They will be provided with a ‘appropriate’ reciprocal rate, whereby the question is whether one uniform import levy will concern per country, or charges per sector or even product group.

2Who are the taxes directed against?

The taxes will be aimed at countries with which the United States has a trade shortage (they import more from those countries than they export). Last year the US had a trade deficit of a total of around 1,200 billion dollars (1,112 billion euros).

Trumps Minister of Trade Scott Bessent called the countries with which the US has the greatest shortages already the ‘Dirty 15So, the ‘dirty fifteen’. This includes China, Mexico, Vietnam, Taiwan, Japan, South Korea, Canada, India, Thailand, Switzerland, Malaysia and European countries such as Italy and Germany. With the Netherlands, the US has a trade surplus of more than 50 billion dollars.

Inflation will increase sharply as a result of the price increases, economists expect

All those countries will be confronted with import duties if they export goods to the US. How high they will be is still unclear. There are talk of taxes of 10 to 20 percent, but that can vary per country and even per sector or product category.

Trump himself said last Sunday that he is planning to release reciprocal taxes on ‘all countries’. A day later he said to the question whether it was a universal rate or taxes in individual countries: « They are reciprocal. So what they also charge us, we charge them, but we are nicer than they were. The amounts will be lower than what they have charged to us, and in some cases they can be considerably lower. »

3Why does Trump want this?

He says he wants to release America from an unfair treatment by other countries, but that is not the only thing. The most important goals for Trump are two or actually three-part. In the first place, he wants to make the US economy stronger and more independent of trading partners. By making import more expensive, he wants to favor American goods. That should yield jobs, and that is electorally important for Trump. He also does not fail to call on companies from all over the world to move their production to the US. After all, they will avoid the import taxes.

Secondly, he needs income to be able to implement a gigantic package of promised burden lighting. By taxing imports with taxes, America picks up hundreds of billions a year, is hope. Trumps trade advisor Peter Navarro calculated the proceeds from the taxes at $ 600 billion a year.

Finally, Trump also seems to use import duties as a means for further negotiations. For example, he threatened to impose his neighboring countries Canada and Mexico of 25 percent, but they were temporarily off the table when both countries promised to fight migration and drug trafficking. Even now, the taxes could be used of other negotiations. It is precisely this uncertainty that financial markets were in a minor in recent weeks. Investors see the profits evaporate through the taxes and economic growth are decreasing, which led to lower prices. The demand for gold also increases, a sign that investors are looking for safety.

4What has Trump has done so far, in terms of import duties?

The import duties of 25 percent on products from Canada and Mexico have been postponed, but could still enter into the beginning of April. Furthermore, Trump introduced a 10 percent rate on all imports from China, and he doubled that at the beginning of March. Since 12 March, the US also applied an import tax of 25 percent to steel and aluminum, a levy that was also applied in Trumps first term. And in March, Trump also announced that he would levy 25 percent on products from countries that involve oil or gas from Venezuela – because of, among other things, the « tens of thousands of criminal gang members » that Venezuela would have sent to the United States. Those taxes should also go into this Wednesday.

5Who pays those rates?

De Facto is a yield from import duties a burden increase for the American consumer. After all, rates are levied when products enter the US, by the American customs. At that time, products are therefore made more artificially more expensive. The goods then find their way in the American economy, where the taxes are added to the cost price. Goods from outside the US are therefore many percent more expensive, the bill for this is passed on to the American consumer. Inflation will also increase sharply as a result of the price increases, economists expect.

Investors see the profits evaporate through the levies and economic growth are decreasing, which led to lower prices

In theory, countries that export to the US can also take care of part of the levies by reducing the delivery price to the US with (part of) the tax rate. However, it is unlikely that many exporters will do that: the margins on many products are often so low that it cannot considerably reduce the cost of products economically.

6How will the rest of the world react?

That too is highly uncertain. Many countries that have already been affected by import duties have already taken or announced countermeasures. Economists emphasize that taxes she imposes herself are getting the hardest, so it is unwise to hit too fast. Politically, however, it may be wise to give something back, if only to force negotiations with Team Trump. Europe has prepared a package of measures that focuses primarily on typical American sectors. Commission President Ursula von der Leyen announced on Tuesday against countermeasures that focus on tech services. However, Trump has already said that it will once again answer new import -reducing measures with even higher levies from the US.

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