President Donald Trump followed through on his threat of global tariffs today. In a White House garden presentation, the President announced “Liberation Day,” declaring that the US would no longer idly accept tariffs from other nations but would match them instead. Trump declared that these tariffs would “make America wealthy again.” He predicted the “golden age of America.”
The Executive Office stated that for “generations,” other countries have “taken advantage” of the US, citing various examples:
- The United States imposes a 2.5% tariff on passenger vehicle imports (with internal combustion engines), while the European Union (10%) and India (70%) impose much higher duties on the same product.
- Countries including China, Germany, Japan, and South Korea have pursued policies that suppress the domestic consumption power of their own citizens to artificially boost the competitiveness of their export products. Such policies include regressive tax systems, low or unenforced penalties for environmental degradation, and policies intended to suppress worker wages relative to productivity.
- China’s non-market policies and practices have given China global dominance in key manufacturing industries, decimating U.S. industry. Between 2001 and 2018, these practices contributed to the loss of 3.7 million U.S. jobs due to the growth of the U.S.-China trade deficit, displacing workers and undermining American competitiveness while threatening U.S. economic and national security by increasing our reliance on foreign-controlled supply chains for critical industries as well as everyday goods.
While many skeptics have challenged the concept of tariffs, the White House declared that tariffs work, pointing to studies showing that Trump’s first-term tariffs “strengthened the US economy.”
The Executive Order stated that “structural asymmetries” will no longer be tolerated. Trump highlighted the various companies that have indicated an increase in investment in the US.
While it is not entirely clear how impacted nations will react to the wide-ranging policy, markets shuddered. Investors and businesses do not like the unknown, as this heightens risk, and there is great uncertainty as to how the policy will evolve.
At the same time, certain Republicans worry that a bad outcome could imperil the midterm elections, which are less than two years away. As both the House and the Senate have thin majorities for Republicans, a loss on either side or both sides of Congress could undermine the Trump administration’s ambitions during the second half of his term.
Meanwhile, US market futures are cratering, with the Nasdaq currently showing an over 800-point collapse and the Dow down by over 900 points.