Trade war almost inevitable now that Trump does not save any country with high import duties

Every country has its own input levy. Until Donald Trump held up a cardboard sign in the rose garden of the White House after about half an hour on Wednesday during his speech, it was unclear how he would impose announced ‘reciprocal’ taxes on products from other countries for weeks. According to American media within his own government, it would have been discussed to the last day whether there would be one universal levy, or whether he would vary per country.

So the latter. With a height of taxes that make a shock go through the world, are higher than other government leaders and expected many economists and that will bring an era of globalization. On that cardboard sign that Trump was handed over by commercialmisters Howard Lutnick, the taxes were listed that dozens of countries will have to pay.

For products from all countries, a basic tax of 10 percent will apply to the American borders, Trump announced on the day he himself had referred to as Liberation Day. Even for countries that have little or no commercial surplus with the US or even a trade deficit, such as Great Britain and Brazil.

Many countries are affected by much higher import duties. The largest trading partners, the EU and China, receive taxes of 20 and 34 percent. For China, this is on top of levies that have already been imposed by the US. Japan (24 percent) and the fast -growing India (26 percent) also look forward to high taxes. The EU countries took into account rates somewhere between 10 and 25 percent, so this levy is high within that bandwidth.

The Trump government seems to unleash a trade war with its most important trading partners, who had already announced before ‘Liberation Day’ that they will resist taxes by the US. Presumably they will first try to breathe new life into current negotiations to reduce taxes, but the question is whether they will get a lot of hearing at Trump. « If you want a rate of zero percent, then you just have to produce your product here in America, » he told foreign manufacturers.

That makes a scenario more likely that many economists have been warning for months, in which taxes are answered by the US with taxes by other countries. According to their calculations in all countries, certainly also the US, economic growth will clap and some countries can be poured into a recession. Consumers will see the new levies implemented in higher prices that they have to pay in the store. Inflation then rises again. Companies see their purchasing costs increases and their production chains are seriously disturbed. The uncertainty will increase, companies will hesitate where they can invest best in the world.

South-East Asian countries such as Vietnam, Laos and Cambodia are the hardest affected with taxes of 46, 48 and 49 percent. Since Trump, they had already entered into a trade conflict with China in his first term, the fallback place for many factories from China and their economies have grown rapidly in recent years. Mexico and Canada – who were previously threatened by Trump with 25 percent levies that were postponed again – are missing on the list that the White House announced yesterday.

It remained unclear when the taxes go into other countries. Trump himself immediately said at midnight. American media such as CNN soon reported that sources around the government said the rates will apply from 9 April. That would give time to other countries to quickly conduct negotiations to reduce their levy. In the decree that he signed on Wednesday, Trump states that he is introducing the taxes due to a national economic emergency.

The previously announced taxes on cars of 25 percent did start tonight. As with the steel and aluminum taxes set last month (also 25 percent), manufacturers do not now also receive these ‘reciprocal’ taxes. This also applies to chips, medicines, copper and wood, sectors for which he has previously announced separate rates.

Mild

Trump called his ‘reciprocal’ taxes in his speech mild. According to him, they are half of what other countries on taxes and other commercial measures to US exporters. He waved on stage with a thick book, which, according to him, contained an investigation of what other countries have done to the US for years.

On the day of his inauguration, he had commissioned various ministries by decree how American companies are disadvantaged by other countries by not only import taxes, but also currency manipulation, export subsidies and non-financial trade limits (for example through restrictions on US products due to health or environmental requirements). His government also includes the VAT that is raised by Trump that is levied in many countries as a tax on American products. Even though domestic producers who are just as much like their American competitors.

For each country, his government would have determined the disadvantage of American exporters and he would now be ‘nice’ by charging only half back. The book has not yet been shared with the outside world.

« Some countries will get angry, » said Trump. « Yes, certainly, because we never charged these countries. » He called other countries as ‘foreign cheaters’ and ‘foreign scavengers’. « Our best friends were even worse than our enemies ». But he said too, he did not blame the government leaders of other countries. « It is the fault of all presidents for me who have admitted this. »

With his own ‘rates calculation’, Trump completely ignores the rules that have been established in recent decades within the World Trade Organization (WTO). He has now devised his own and uncontrollable way to take the world in the field of trade and has been putting the international economic system carefully built up since the Second World War. According to many economists, the increased freer trading trade in many countries has led to the fact that products can be produced in countries that can do the most competitive at the lowest costs.

Factories back

Trump wants to get factories back in the US and thus create jobs for workers. That seems to be his main purpose with the adjustment of these new taxes. He once again proud of how companies such as Apple, TSMC, Hyundai and Johnson & Johnson have already promised him to put dozens and sometimes even hundreds of billions in new factories in the US.

Trump had a car worker tell them next to him how he had seen Michigan Auto factories close in his home state and now sees capacity running through departure of production abroad and by foreign competition. This Bob already said that they can see production returning and expected that new factories will open again within three or four years. Trump promised him it will go much faster.

« We are going to produce the cars and ships, chips, planes, minerals and medicines that we need here in the US, » said Trump. He criticized other countries that « they have stolen our jobs ». « Our factories destroyed » and « killed the American dream ». And so Trump said to his audience, in which, in addition to his cabinet, many workers from the steel and the car industry were: « We are now going to do to them what they have done to us. I can’t express it simpler ».

In his speech, he emphasized much less on the hundreds of billions that some of his advisers think they can pick up on taxes for the American treasury. That is often seen as a different purpose of his trading policy. With these proceeds, income tax could be reduced and reduced the national debt.

His trade consultant Peter Navarro calculated that earlier this week at 600 to 700 billion a year. Various American economists subsequently found an unrealistic estimate in a first reaction, partly because the economic damage of the taxes would not be included in these calculations. However, first calculations from Economic Adviesbureau Capitol Economics on Wednesday evening indicated that at rates of this amount that amount could indeed be received.

Negotiations

Other countries will now have to determine their position quickly. Do they try to seduce the Trump government to conduct negotiations, do they express threats to get the Americans at the table or do they immediately come up with comparing measures? « I already know that I will get kings, presidents, prime ministers on the phone, all of whom will ask for exceptions, » said Trump himself.

The expectation is that the EU and other countries will not respond immediately, but first to deliberately deliberate. In a television interview, Trump’s Finance Minister Scott Bessent called on them not to come directly with it. « I would not try to revenue, » he said. « As long as you don’t do that, your taxes will not go up. » But whether negotiations still feel like it, he also left in the middle.

In the run -up to Liberation Day, many government leaders kept their powder dry. For example, Ursula von der Leyen, president of the European Commission, said European Parliament on Tuesday: « We have the power to negotiate. We have the power to push back. All instruments are on the table. »

It could be very restless in the financial markets. After the announcements of Trump on Wednesday shortly after closing the American scholarships, the futures already dived down considerably by 2 percent or more. The uncertainty in the economy and at the stock exchanges does not seem to be gone for the time being, not even now it is clear how hard Trump uses the trade war.

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