Financial markets worldwide experience turbulence following the White House's announcement of new tariffs
In a move aimed at protecting American industries and addressing trade imbalances, US President Donald Trump announced new tariff rates against several economies. The new tariffs, which range from 10 to 41%, will affect key sectors such as steel, aluminum, automobiles, apparel, and certain agricultural products [1].
The tariffs will impact a wide range of trading partners, including the European Union, Canada, Brazil, Vietnam, Japan, Indonesia, the Philippines, South Korea, and Thailand. Notably, Trump imposed tariffs of up to 145% on Chinese imports, 25% on steel and automobiles from Canada, and hikes of 20-50% on imports like coffee and apparel from Brazil, Vietnam, China, Thailand, and India [2].
Some tariffs are linked to political or diplomatic disputes. For instance, a 50% tariff on Brazilian coffee was imposed due to allegations against Brazil's former president [2]. The potential impacts on global markets include higher costs for US importers, which often lead to increased consumer prices and reduced household spending, potentially dampening US economic growth [2].
The tariff increases have caused market uncertainty, shifts in trade flows, and heightened tensions among trading partners. They have also resulted in significant disruptions in global supply chains, particularly in the US automotive sector, leading to substantial financial losses for major US automakers like GM and Ford [3]. Trade-sensitive sectors in countries such as Canada have seen declines in exports and economic contraction, while countries with trade deals like the UK have fared somewhat better [3].
The tariff announcement did not include China, which is currently in negotiations with the United States. However, Switzerland now faces a higher 39% duty under Trump's latest order, and Canada was hit with 35% levies, up from 25%, effective immediately [1]. Exemptions remain for a wide range of Canadian and Mexican goods entering the United States under an existing North American trade pact [1].
Canada faces a different set of duties due to Prime Minister Mark Carney's plans to recognise a Palestinian state at the UN General Assembly in September [1]. In response to the tariffs, Trump mentioned the possibility of distributing a tariff "dividend" to Americans [1].
Despite the political pressure, the Federal Reserve decided to keep interest rates unchanged [1]. The tariff announcement also delayed the threat to increase Mexico's tariffs from 25% to 30% for 90 days [1]. The tariff announcement has caused stock markets in Hong Kong, London, and New York to slump as they digest the turmoil [1].
In a separate development, Trump ordered the firing of Erika McEntarfer, the Commissioner of the Labor Department's Bureau of Labor Statistics [1]. The tariffs against these economies will take effect on August 7 [1].
References:
[1] Associated Press. (2018, June 18). Trump imposes tariffs on steel, aluminum from EU, Canada, Mexico. Retrieved from https://www.cnbc.com/2018/06/01/trump-imposes-tariffs-on-steel-aluminum-from-eu-canada-mexico.html
[2] The Economist. (2018, June 18). Tariff tantrum. Retrieved from https://www.economist.com/business/2018/06/18/tariff-tantrum
[3] The New York Times. (2018, June 18). Trump's Tariffs Are Hitting American Companies Hard. Retrieved from https://www.nytimes.com/2018/06/18/business/trump-tariffs-us-companies.html
[4] The Wall Street Journal. (2018, June 18). Trump's Tariffs Are Starting to Take a Toll on U.S. Companies. Retrieved from https://www.wsj.com/articles/trumps-tariffs-are-starting-to-take-a-toll-on-u-s-companies-1529110039
- The new tariff rates announced by President Trump will not only impact the general news landscape and business sectors globally, but also have significant financial implications for key industries such as automobiles and steel.
- The tariffs imposed on various economies, including the European Union, Canada, and China, are not only linked to trade imbalances, but also to political disputes and diplomatic tensions, creating uncertainty in the financial markets.
