\n<\/p>\n
President Trump announced what could be one of the most drastic economic policy changes in decades on Wednesday, when he substituted America\u2019s longstanding system of taxing imports with a new tariff system of his own devising.<\/p>\n
The president said the tariffs would reverse decades of what he called unfair treatment by the rest of the world and result in factories and jobs moving back to the United States.<\/p>\n
\u201cThe markets are going to boom\u201d and \u201cthe country is going to boom,\u201d Mr. Trump said on Thursday, as global financial markets suffered their biggest rout in years. He added that other countries \u201chave taken advantage of us for many, many years.\u201d<\/p>\n
Economists\u2019 estimates have been far more grim, with most predicting that the president\u2019s sweeping tariffs and likely retaliation will slow U.S. economic growth, push up costs for consumers and make life difficult for businesses that depend on international supply chains.<\/p>\n<\/div>\n<\/div>\n
The president\u2019s measure is both consequential and complicated.<\/p>\n<\/div>\n<\/div>\n
Mr. Trump announced two big tariff plans that apply to most of the world. One component is a \u201cbase line\u201d tariff of 10 percent that will apply broadly to nearly all U.S. imports, except for products coming from Canada and Mexico.<\/p>\n
The second measure is what the president is calling a \u201creciprocal\u201d tariff. That levy will apply to 57 countries that Mr. Trump says have high tariffs and other unfair economic practices that have hurt American exporters. He said this is a reciprocal tariff because it will match the way other countries treat the United States.<\/p>\n
But the tariff that Mr. Trump announced is not actually based on other countries\u2019 tariffs or other economic barriers to U.S. trade. The number is calculated based on the U.S. trade deficit, which is a measure of the difference between what the United States sells to a country and what it buys from it.<\/p>\n
The reciprocal tariffs range from 1 percent to 40 percent and will be added to the 10 percent base line tariff.<\/p>\n<\/div>\n<\/div>\n
The 10 percent tariffs will go into effect on Saturday, and the reciprocal rates next Wednesday.<\/p>\n
The tariffs put a heavy burden on some of America\u2019s biggest trading partners, including China, Japan, Germany, India, South Korea, Taiwan and Vietnam.<\/p>\n
Notably, Canada and Mexico were not included. Mr. Trump hit those countries with a 25 percent tariff on many of their exports last month, though he also provided an exception for products that qualify for the trade agreement he signed in 2020, the United States-Mexico-Canada Agreement. The countries are also subject to tariffs Mr. Trump has applied globally on cars, steel and aluminum, and the administration appears to have decided that America\u2019s closest neighbors did not need further tariffs.<\/p>\n
But the new tariffs will hit other allies with substantial levies. European goods will face a 20 percent tariff, Japanese goods will face 24 percent and South Korean products 26 percent.<\/p>\n
Because of the way the tariff was calculated, Asian countries that send the United States a lot of exports but don\u2019t buy much in return will see some of the highest rates.<\/p>\n
Chinese exports face an extra 34 percent tariff. That is on top of a 20 percent tariff Mr. Trump applied in recent months and other levies from his first term. As a result, some products from China will face a tariff of 79 percent.<\/p>\n<\/div>\n<\/div>\n
Vietnam \u2014 where many companies moved their factories after Mr. Trump put tariffs on China in his first term \u2014 will now face a 46 percent tariff on its exports, while Cambodian exports will be taxed at 49 percent.<\/p>\n
The White House also did not apply tariffs to Russia, North Korea, Cuba and Belarus, arguing that these countries are already subject to heavy sanctions. But U.S. imports from Russia were $3 billion last year; small compared to many countries, but far larger than tiny countries like Lesotho and the Falkland Islands, which Mr. Trump chose to hit with substantial tariffs.<\/p>\n
The president and his advisers say their goal is to make the tariffs so painful that they force companies to make their products in the United States. They argue that this will create more American jobs and push up wages.<\/p>\n
\u201cIf you want your tariff rate to be zero,\u201d Mr. Trump said outside the White House on Wednesday, \u201cthen you build your product right here in America.\u201d<\/p>\n<\/div>\n<\/div>\n
One of the biggest questions is whether the president sees these tariffs as a negotiating tactic, and would be willing to remove them in return for concessions from other countries.<\/p>\n
The administration has given mixed signals on that front. It seems unlikely that the president will remove the 10 percent base line tariff he has issued globally. And if the administration is truly looking for U.S. trade deficits with other countries to be eliminated, that may be difficult, if not impossible.<\/p>\n
But in the executive order he signed, the president said that if countries eliminate their unfair trade practices, or the U.S. trade deficit with them drops, the reciprocal tariffs could be rolled back.<\/p>\n
Howard Lutnick, the commerce secretary, described other countries\u2019 trade barriers as \u201cthe monster that needs to be slayed.\u201d<\/p>\n
\u201cOur teams are talking to all the great trading partners today,\u201d Mr. Lutnick said Thursday on Bloomberg Television. \u201cIt is time for them to do deep soul-searching on how they treat us poorly and how to make it right.\u201d<\/p>\n<\/div>\n<\/div>\n
Mr. Trump said Wednesday that each nation\u2019s tariff rate would be calculated based on \u201cthe combined rate of all their tariffs, non-monetary barriers and other forms of cheating.\u201d But it turned out<\/a> that their methodology revolved around something more straightforward: the gap between what America exports to a country and what it imports.<\/p>\n