Trump's new global tariffs take effect with new threats

WashingtonDonald Trump's reciprocal tariffs, which have been sowing panic in the markets for months, went into effect early Thursday morning. The free trade that Washington fostered for decades, and which earned it its economic hegemony, collapsed in a matter of seconds when the clock struck 12:01 on the East Coast. "It's midnight! Billions of dollars in tariffs are flowing into the United States," Trump celebrated at Truth Social five minutes past midnight.

"The only thing that could stop America from becoming great is a far-left court that wants to see our country fail," Trump added, after emphasizing how "billions of dollars, much of it coming from countries that have taken advantage of the United States for many years, laughing all the while."

(Real) Consequences of Tariffs

The United States is fully embarking on a Trumpian shift in trade policy this Thursday. However, the first signs of this new phase of the US economy appear to be at odds with the economic boom the president has so often preached. In the first six months of the Republican tariff experiment, inflation has soared to 2.7%, consumer spending has cooled, and the latest employment data has been weaker than expected. Only 73,000 new jobs were created last June, a figure well below the 110,000 analysts had expected. This snapshot only includes the incipient effects of targeted tariffs, such as the 50% tariff on steel or the universal base tariff of 10%, which has been in effect since April. A more complete picture is expected to show a greater inflationary effect and higher prices, which will primarily affect consumers.

From now on, US commercial ports and customs will have to take into account the tariffs affecting various countries in their calculations. On the one hand, there are the unilateral tariffs for those 70 countries that failed to agree on a new tax. On the other hand, there are the new tariffs negotiated with 34 trading partners, including the 27 countries of the European Union. Until Trump says otherwise, European goods will be taxed at 15%. In the background, the echoes of just this week he threatened to raise them to 35%..

In a third group are China and Mexico, which have gained a little more time to continue negotiating. Beijing's deadline is August 12th, while it continues to suffer from the 30% tariffs and other tariffs on specific products. Mexicans have more room to maneuver, since Trump has given them until October. Thus, tariffs on Mexican products remain the same as in recent months: only those products outside the USMCA will be levied. Fortunately for American consumers, the pause will prevent their shopping baskets from exploding in a matter of weeks: a good portion of the fresh produce that ends up on American supermarket shelves comes from Mexico.

Despite the talk of trade agreements, the reality is that the new tariffs are more of a kind of new framework. This is demonstrated by the fact that many countries remain willing to negotiate new exceptions for their products. Without the release of any document outlining all the details, those involved have already begun to offer divergent interpretations. In the European case, Trump is already speaking of the $600 billion the EU has promised to invest in the US as if it were a blank check, while the European Commission has the problem of not being able to dictate to companies and shareholders where to invest the money.

Chips, the new target

True to his tradition of launching bombshell announcements just before deadlines, Trump has threatened to impose a 100% tax on chips and semiconductors before his measures come into effect. global tariffs. The only exception will be for companies that already manufacture in the US or that commit to doing so. "We will impose a very high tax on chips and semiconductors. But the good news for companies like Apple is that if they are manufacturing in the United States, or are committed to doing so, there will absolutely be no charge," the president assured.

The CEO of the iPhone manufacturer, Tim Cook, was also in the Oval Office where he announced a commitment to invest $100 billion in the US. This figure is in addition to the $500 billion investment the company already announced in February following criticism from Trump. As is customary with the new administration's trade policy, the president has not provided further details. It is not known how many chips will be affected by the tax or which countries it will affect.

All of this is increasing pressure on US companies that rely on chip imports from Asia to begin moving their manufacturing to the United States. Trump is betting on a strong-arm approach as the main incentive for companies to relocate to his country, at the expense of the risk of raising the price of cell phones, televisions, and similar products. During the pandemic, the chip shortage caused car prices to rise and also contributed to a surge in inflation.

The president has also taken the opportunity to threaten new tariffs on India for its oil purchases from Russia. The country led by Narendra Modi already faces up to 50% taxes on its imports, after the White House signed an additional 25% tariff on Wednesday as a pressure measure. Trump did not rule out that China could face a similar scenario if it, too, continues to buy crude oil from Moscow. "It could happen, depending on how, it could happen," he said. Beijing is one of the few countries that has secured an extension to continue negotiating the new tariffs. However, it doesn't have much of a timeframe, as the deadline is August 12th. In the meantime, the 30% tariff will continue to apply. Mexico, on the other hand, has managed to maintain the pause until October, by which time it should be able to close some kind of agreement if Trump doesn't postpone the deadline again.