Egypt Daily News – Trump’s tariffs will announce the widest range of trade restrictions imposed by the United States in a century, a move that will overturn the global trade system established after World War II and create unpredictable economic risks.
Trump’s plans to impose what he described as “reciprocal tariffs” have sparked speculation among investors, executives, government officials, and consumers worldwide about what will happen when he steps up to the podium at the “Rose Garden” conference at the White House at 4 PM local time. Discussions were still ongoing until the last moments, as debates continued on the size and scope of the new tariffs on Tuesday.
Rob Subramanian, the Chief Economist at Nomura Holdings, stated that the lack of details on the structure, size, and objectives of the tariffs so far has put the world in a state of confusion as the announcement date approaches. He wrote in a recent client memo, “The interpretation of the reciprocal tariffs proposed by the Trump administration will vary. While the direct interpretation suggests that the United States will match the tariffs imposed by other countries on American goods, we expect the standards for reciprocal tariffs to be broader than that, and harder to determine.”
The World in the Crosshairs of Tariffs Although Trump’s tariffs have not yet specified the targeted countries, he and his aides have criticized the European Union, Mexico, Canada, Japan, South Korea, Vietnam, and India in efforts to respond to what the U.S. government considers unfair trade practices. Additional tariffs of 20% were imposed on Chinese goods.
The global trade, worth about $33 trillion, faces the risk of seeing exports from countries ranging from Brazil to China fall by 4% to 90%, according to Bloomberg Economics.
The Bloomberg Economics trade policy uncertainty index rose to an all-time high on Tuesday, marking the highest recorded level since 2009.
Economists at Goldman Sachs predicted that the average tariff imposed by the U.S. on all countries would increase by 15 percentage points this year, noting that this would lead to higher core inflation rates, slower economic growth, and increased risk of recession.
A Torrent of Tariffs The expected measures to be announced Wednesday add to steps taken since Trump took office in January. The U.S. administration imposed an additional 20% tariff on all imported goods from China, along with a 25% tariff on a wide range of goods from Mexico and Canada, as well as a 25% tariff on steel and aluminum imports from around the world.
Trump also signed a decision to impose a 25% tariff on car imports and some of their components, which is set to take effect on April 3 in Washington. Additional tariffs are expected on specific sectors such as pharmaceuticals in the coming period.
Trump indicated that the purpose of what he calls “reciprocal tariffs” is to match the tariffs and non-tariff barriers imposed by trade partners on American companies, including what U.S. officials consider a massive trade surplus with the United States, certain taxes, and various fees on specific items. Officials have been working for over a month to comply with his February 13 directive on “fair and reciprocal trade.”
Severe Consequences of Trump’s Decisions Analysts have been relying on various scenarios for months to predict the potential consequences of the ambiguous tariffs. Bloomberg Economics points out that the maximum scenario involves adding 28 percentage points to the average U.S. tariff rates, which would lead to a 4% drop in U.S. GDP and a 2.5% increase in prices over the next two to three years.
Trade partners in all scenarios would face severe consequences. China, the EU, and India are expected to be the most affected countries in terms of exports to the United States, although their economies may adapt. Meanwhile, Canada and Southeast Asian countries will generally be the most affected, according to Bloomberg Economics’ analysis.
The Risk of Stagflation Stagflation, a situation where economic growth slows while price pressures continue to rise, is a source of concern. Shang Jin Wei, a professor at Columbia Business School in New York and former chief economist at the Asian Development Bank, pointed out the similarities with the stagflation period of the 1970s caused by the oil crisis. He stated, “Both situations represent painful periods for the American society, causing crises for many families. But this time, we risk repeating the painful experience due to unnecessary and avoidable political choices.”
However, much depends on unknown factors that are unlikely to be clarified at the “Rose Garden” conference, including the final tariff rate for each product and country, the response of trade partners, and the reactions of companies and consumers.
Reciprocal Responses Trade partners have adopted different strategies so far. China, which has been the focus of Trump’s attention for some time, responded to tariffs by imposing its own tariffs earlier in the year, although these were lower than those imposed by the U.S., and applied to a limited range of American goods. Meanwhile, the EU and Canada reciprocated on the tariffs imposed by Trump on metals.
Several major economic powers have sought to negotiate exemptions from tariffs. Countries like Vietnam pledged to increase imports of U.S. goods in an attempt to address the trade surplus with the U.S. and reduced tariffs on a wide range of imported products.
U.S. stocks recorded their worst quarterly performance in the first three months of this year since 2023, while most stocks from other countries gained during the same period. U.S. Treasury bonds rose by about 3%, partially driven by growing concerns about economic growth. Gold prices reached record levels, while the dollar weakened. Several investors pointed to excessive pessimism and the possibility of trade deals at the right time.
Concerns of Major Corporations Many U.S. companies have expressed concern that Trump’s tariffs open the gates of hell on the global economy will lead to higher costs and reduced profit margins. Foreign CEOs are now considering relocating at least part of their production to the U.S. to avoid the tariffs.
John Denton, a former Australian diplomat who currently serves as Secretary General of the International Chamber of Commerce, said, “Tariffs are certainly worrying the global business community due to the lack of clarity and the increasing risks associated with rebalancing an economy that constitutes about a quarter of global GDP.”
