The global economy entered a new era Friday: the era of Donald Trump’s tariffs. August 1, 193 days after his return to power, will be remembered as the date on which the Republican president realized one of his most long-held aspirations: ushering in a new trade order marked by tariffs imposed on exports to the United States from some 200 countries. A point of no return. And a complete challenge to the globalization that Washington instigated for decades for its own benefit and that Trump now considers unfair to his country’s interests.
It marks the culmination of months of threats and backtracking, of meetings against the clock, and trade battles conducted by letter. Finally, the August 1 deadline was being seriously discussed, and while the hours passed and the world tried to figure out what the rules of the game would be from now on, the White House reserved one last shock for the 11th hour Thursday: a decree with unilateral tariffs on some 70 countries with which the United States hadn’t had the time, or the urgency, to negotiate. All of these tariffs, both new and old, will take effect on August 7.
The list of those 70 countries is varied and it is tempting to assume it was governed by whim. There are countries, such as Afghanistan, New Zealand, and Ecuador, that received 15%. Others, such as Taiwan and Sri Lanka, for example, received 20%. Iraq and Switzerland? 35%. Myanmar and Laos took the brunt: 40%.
Some of these partners are getting the same percentages set by Trump on April 2, when he declared his trade war on the world from the White House, before backtracking and announcing a truce. Others, like Lesotho, which received a 50% tariff four months ago, breathed a sigh of relief with a lower tax (15%, in this case). The decree also included another piece of news, specifically designed to harm China: all imported goods “with a stopover” in other countries are subject to a 40% tariff.
In addition to surprise, Trump’s new tariff era promises to be marked by uncertainty, not only regarding the consequences that aggressive U.S. trade policy could have on the economy far beyond the United States, but also about the very rules of this new game.
There are still many unresolved questions about how things will work from now on, both for countries that already have their own pacts — which are actually frameworks for action with many details yet to be fine-tuned — and for those that have failed to reach an agreement with the United States in the time since Trump announced the first of the truces in his trade war.
In total, 34 trading partners have at least reached preliminary agreements during successive ceasefires: the first lasted 90 days, was due to expire on July 9, and was postponed again until this Friday amid unconfirmed suspicions that Trump would once again back down.
The list of those countries includes the United Kingdom, Vietnam, Japan, the Philippines, South Korea, and Pakistan, as well as the 27 members of the European Union, which received a 15% tariff last weekend, with no compensation, and, almost more damaging, the feeling that Trump had outbid them in a negotiation they had gone into underprepared.
China and Mexico given more time
There are two other important countries — the great rival, China, and Washington’s main trading partner by volume of business, Mexico — that form their own club: those to which Trump has given more time to continue negotiating. In the case of Beijing, it was earlier this week, after two days of intense talks in Stockholm, that an extension of the truce between the two powers was assumed to be in place, although, like everything else in this matter, it remained pending Trump’s approval.
In the case of Mexico, the announcement that its southern neighbor was dodging the blow came in extremis. It was Thursday at noon in Washington, and followed a phone call between Trump and President Claudia Sheinbaum. The former blamed the extension on the “complexities” of the bilateral relationship. The latter celebrated that things had remained as they were (25% of the “fentanyl taxes” on goods not subject to the USMCA free trade agreement) and that her government’s “strategy of a cool head, composure, and a firm defense” of its “principles” had worked for her.
Meanwhile, envoys from Canada, another preferential partner, continued negotiating against the clock under the sword of Damocles of a 35% tariff, communicated by letter — also under the even more unjustifiable pretext of combating fentanyl trafficking into the U.S. — to Prime Minister Mark Carney. Trump warned Thursday that Ottawa’s decision to recognize the Palestinian state at the next UN General Assembly would further diminish the possibility of a pact, which ultimately never came about. Canada ended the day, also by decree of the White House, with the dreaded 35% tariff on products not included in the USMCA, which in 2020, with Trump’s approval, established a North American free trade area.
Canada, which had negotiated vigorously albeit unsuccessfully, thus joined the group of countries that had received fresh threats from Trump as the deadline loomed. On Wednesday, the U.S. president signed a decree formalizing a 50% tariff on Brazil, the highest in the world, for non-trade reasons. He wanted to punish the country, with which the United States has a trade surplus, for the coup trial the Supreme Court is holding against former president Jair Bolsonaro, a friend of Trump. India, for its part, also received a 25% tariff on Wednesday.
And the rest? All those countries without enough weight to warrant a seat at the table with U.S. negotiators, nor the honor of appearing on Thursday afternoon’s final list, will receive a universal tariff similar to the one that remained in effect in April: 10%. In the hours before the deadline, it remained unclear whether it would escalate to 15% or 20%.
The world map left behind by this accumulation of impositions, postponements, and exceptions resembles a patchwork quilt — in this case, patches of uncertainty. However, one thing is clear. Starting this August, the United States will see an increase in import tariff revenues, which it didn’t count on a year ago and which, according to Trump, will balance an “injustice” he is determined to reverse.
According to calculations by the Yale University Budget Lab, a leading institution on this topic, as of July 28, the average effective tariff imposed by Washington was 18.2%, the highest since 1934, during the golden age of American isolationism. This represents a huge jump from the 2.4% rate before Trump took office and caused revenue to triple in July compared to the same month last year, reaching $28 billion.
Beyond these immediate gains, the question remains of what effects Trump’s aggressive trade policy will have on the U.S. economy. His allies are already declaring victory, arguing that those who predicted that it would be seriously harmed should eat their words: it is true that the worst effects of the tariffs have not yet materialized, and that the U.S. economy is showing enviable resilience.
There are, however, worrying signs. The latest inflation figure, for example. It rose three-tenths of a percentage point to 2.7%, driven by goods most sensitive to tariffs. Models also point to a slowdown in growth. “Looking at the first half of the year as a whole, there’s more than a hint of stagflation, that dreaded combination of slow growth and inflation,” Jason Furman, a former White House economic adviser under Obama, wrote in The New York Times Thursday.
And that is the biggest unknown of the new era of Trump tariffs, which the economy entered Friday. Will it bring with it a global recession? Or will it be the dawn, as Washington’s tariff hawks claim, of a “new golden age for the United States”? It’s too early to tell, and at this point, given the frequency of these changes of heart, no one dares to venture a conclusive answer.
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