Trump announces sweeping new tariffs to promote US manufacturing,
risking inflation and trade wars
[April 03, 2025] By
JOSH BOAK
WASHINGTON (AP) — President Donald Trump on Wednesday announced
far-reaching new tariffs on nearly all U.S. trading partners — a 34% tax
on imports from China and 20% on the European Union, among others — that
threaten to dismantle much of the architecture of the global economy and
trigger broader trade wars.
Trump, in a Rose Garden announcement, said he was placing elevated
tariff rates on dozens of nations that run meaningful trade surpluses
with the United States, while imposing a 10% baseline tax on imports
from all countries in response to what he called an economic emergency.
The president, who said the tariffs were designed to boost domestic
manufacturing, used aggressive rhetoric to describe a global trade
system that the United States helped to build after World War II, saying
“our country has been looted, pillaged, raped and plundered” by other
nations.
The action amounts to a historic tax hike that could push the global
order to a breaking point. It kickstarts what could be a painful
transition for many Americans as middle-class essentials such as
housing, autos and clothing are expected to become more costly, while
disrupting the alliances built to ensure peace and economic stability.
Trump said he was acting to bring in hundreds of billions in new revenue
to the U.S. government and restore fairness to global trade.
“Taxpayers have been ripped off for more than 50 years,” he said. “But
it is not going to happen anymore.”
Trump declared a national economic emergency to levy the tariffs. He has
promised that factory jobs will return to the United States as a result
of the taxes, but his policies risk a sudden economic slowdown as
consumers and businesses could face sharp price hikes.
Trump was fulfilling a key campaign promise as he imposed what he called
“reciprocal” tariffs on trade partners, acting without Congress under
the 1977 International Emergency Powers Act. But his action Wednesday
could jeopardize Trump's voter mandate in last year's election to combat
inflation. Several Republican senators, particularly from farm and
border states, have questioned the wisdom of the tariffs. U.S. stock
market futures sold off sharply overnight in anticipation of the economy
weakening, after having already dropped since the start of this year.
“With today’s announcement, U.S. tariffs will approach levels not seen
since the Smoot-Hawley Tariff Act of 1930, which incited a global trade
war and deepened the Great Depression," said Scott Lincicome and Colin
Grabow of the Cato Institute, a libertarian think tank.
The president's higher rates would hit foreign entities that sell more
goods to the United States than they buy. The administration essentially
calculated its tariff rates to raise revenues equal in size to the trade
imbalances with those nations. Trump then halved that rate in act that
he described as “very kind.”
The White House says the tariffs and other trade imbalances led to an
$1.2 trillion imbalance last year. Administration officials suggested it
could take an extended set of actions by other countries to bring down
the new tariffs their imports now face, and retaliatory tariffs by those
countries could make the situation worse.
Olu Sonola, head of U.S. economic research at Fitch Ratings, said the
average tariff rate charged by the United States would increase to
roughly 22% from 2.5% in 2024.
“Many countries will likely end up in a recession," Sonola said. "You
can throw most forecasts out the door, if this tariff rate stays on for
an extended period of time.”
The new tariffs will come on top of recent announcements of 25% taxes on
auto imports; levies against China, Canada and Mexico; and expanded
trade penalties on steel and aluminum. Trump has also imposed tariffs on
countries that import oil from Venezuela and he plans separate import
taxes on pharmaceutical drugs, lumber, copper and computer chips.
Canada and Mexico would not face higher rates on what they're already
being charged by Trump in what he says is an effort to stop illegal
immigration and drug smuggling. As of now, goods that comply with the
USMCA North American trade pact would be excluded from those tariffs.
But the 20% charged on imports from China due to its role in fentanyl
production would largely be added to the 34% announced by Trump. The
specific products that Trump is tariffing, such as autos, would be
exempt from the tariffs unveiled Wednesday, as would products such as
pharmaceutical drugs that he plans to tariff at a later date.
Threats of backlash
None of the warning signs about a falling stock market or consumer
sentiment turning morose have caused the administration to publicly
second-guess its strategy, despite the risk of political backlash.
Senior administration officials, who insisted on anonymity to preview
the new tariffs with reporters ahead of Trump's speech, said the taxes
would raise hundreds of billions of dollars annually in revenues. They
said the 10% baseline rate existed to help ensure compliance, while the
higher rates were based on the trade deficits run with other nations and
then halved to reach the numbers that Trump presented in the Rose
Garden.
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President Donald Trump holds a signed executive order during an
event to announce new tariffs in the Rose Garden of the White House,
Wednesday, April 2, 2025, in Washington. (AP Photo/Evan Vucci)
 The 10% rate would be collected
starting Saturday and the higher rates would be collected beginning
April 9.
Trump removed the tariff exemptions on imports from China worth $800
or less. He plans to remove the exemptions other nations have on
imports worth $800 or less once the federal government certifies
that is has the staffing and resources in place.
Based on the possibility of broad tariffs that have been floated by
some White House aides, most outside analyses by banks and think
tanks see an economy tarnished by higher prices and stagnating
growth.
Trump would be applying these tariffs on his own; he has ways of
doing so without congressional approval. That makes it easy for
Democratic lawmakers and policymakers to criticize the
administration if the uncertainty expressed by businesses and
declining consumer sentiment are signs of trouble to come.
Rep. Suzan DelBene, D-Wash., said the tariffs are “part of the chaos
and dysfunction” being generated across the Trump administration.
The chair of the Democratic Congressional Campaign Committee
stressed that Trump should not have the sole authority to raise
taxes as he intends without getting lawmakers' approval, saying that
Republicans so far have been “blindly loyal.”
“The president shouldn’t be able to do that," DelBene said. "This is
a massive tax increase on American families, and it’s without a vote
in Congress. ... President Trump promised on the campaign trail that
he would lower costs on day one. Now he says he doesn’t care if
prices go up — he’s broken his promise.”
Even Republicans who trust Trump's instincts have acknowledged that
the tariffs could disrupt an economy with an otherwise healthy 4.1 %
unemployment rate.
“We’ll see how it all develops,” said House Speaker Mike Johnson,
R-La. “It may be rocky in the beginning. But I think that this will
make sense for Americans and help all Americans.”
Allies brace themselves
Longtime trading partners are preparing their own countermeasures.
Canada has imposed some in response to the tariffs that Trump tied
to the trafficking of fentanyl. The European Union, in response to
the steel and aluminum tariffs, put taxes on 26 billion euros ($28
billion) worth of U.S. goods, including on bourbon, which prompted
Trump to threaten a 200% tariff on European alcohol.
Many allies feel they have been reluctantly drawn into a
confrontation by Trump, who routinely says America's friends and
foes have essentially ripped off the United States with a mix of
tariffs and other trade barriers.
The flip side is that Americans also have the incomes to choose to
buy designer gowns by French fashion houses and autos from German
manufacturers, whereas World Bank data show the EU has lower incomes
per capita than the U.S.
The Chinese government delivered a measured response to the new
tariffs, saying in a statement: “China believes that protectionism
leads nowhere, and trade and tariff wars have no winners. This has
been widely recognized in the international community.”
Canadian Prime Minister Mark Carney said Trump's new tariffs would
“fundamentally change the international trading system." He noted
that the tariffs already in place against his country and those
Trump says he plans to add will be fought with countermeasures.
“In a crisis, it’s important to come together and it's essential to
act with purpose and with force and that’s what we will do,” Carney
said.
Italy’s conservative Premier Giorgia Meloni said Trump's new tariffs
against the EU were “wrong” and Italy would work toward an agreement
with the United States to avoid a trade war that would weaken all
involved.
Basic Fun CEO Jay Foreman, whose company is behind such classic toys
as Tonka trucks, Lincoln Logs and Care Bears, has been working hard
to come up with new ways to cut tariff-related costs like reduce
packaging and eliminate batteries with the products.
But Trump’s announcement that he plans a 34% increase in tariffs on
Chinese imports has solidified his decision to hike prices. Most of
the company’s toys are made in China. He said the Tonka Mighty Dump
Truck will go from $29.99 to $39.99 this holiday season, possibly
even $45.
“There is no other way,” he said.
___
Associated Press writers Anne D'Innocenzio in New York, Rob Gillies
in Toronto and Didi Tang, Paul Wiseman and Lisa Mascaro in
Washington contributed to this report.
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