Opinion: Trading in a world shaped by Trump: How to deal with it?

Authored by: Iris Groenendijk & Vera den Adel

What tariffs is Trump imposing?

President Trump's announcement includes several key components that warrant careful analysis:

1. National Emergency Declaration: According to Trump, the U.S. is in a state of national emergency due to the persistent trade deficit, which he attributes to unfair trade practices such as non-reciprocal tariff structures. Trump argues that urgent corrective action is necessary.
2. Reciprocal Tariff Policy: The US will impose a 10% ad valorem duty on all imports starting April 5. Additionally, there is a list of trading partners facing even higher tariffs. Certain goods are exempt from these tariffs, as outlined in Annex II of the order. Tariffs will only apply to non-US content if at least 20% of a product’s value originates from outside of the US.
3. Additional Tariffs: Beginning April 9, significantly higher tariffs will affect specific trading partners:
   1. European Union: 20%
   2. China: 54% (including previous tariffs)
   3. Vietnam: 46%
   4. Thailand: 36%
   5. Japan: 24%
   6. Cambodia: 49%
   7. South Africa: 30%
   8. Taiwan: 32%
4. Modification and Enforcement: The Secretary of Commerce and U.S. Trade Representative may recommend adjustments if tariffs fail to reduce the trade deficit. Retaliatory actions from trading partners can trigger further tariff increases. However, if countries align their trade policies with U.S. interests, tariffs may be reduced.

International response assessment

The fact that President Trump announced tariffs was not a surprise – by now, it is well known that he is a big fan of the concept. However, the scope of the tariffs and the announcement itself has come as a shock to many. The timing of the announcement—just after U.S. markets closed—suggests strategic market considerations by the administration on how the market would react. Even the U.S.’s closest trading partners were not spared. The Dutch Rabobank even speculated that ChatGPT might have had a part in drafting the list.

International responses have varied significantly, reflecting diplomatic calculations and economic exposure:

• EU: The president of the European Commission reacted at 5 a.m. local time, stating that the EU is ready to react to the tariffs. She emphasised that the world economy will suffer, with serious consequences for millions of people. The EU has expressed disappointment with the U.S. position and pledged a unified response. Several European nations echoed this sentiment.
• China: Accused the U.S. of ‘’unilateral bullying’’ and pledges to take firm countermeasures to safeguard its interests and rights.
• Japan: was caught off guard, as it already has relatively low tariffs. Officials vowed to continue to seek an exemption and remain hopeful.
• South Korea: Launched an emergency task force, allocating government resources to tackle the trade crisis.
• Australia: Only facing 10%, will not respond with retaliatory tariffs, as it refuses to ‘’join a race to the bottom’’. However, the country acknowledged this was not a friendly action.
• India: Is still hesitant and stated that it is carefully examining the implications of the various measures.
• Brazil: Is still evaluating retaliatory measures.
• Cambodia: A spokesperson of the ruling political party stated, ‘’As a small country, we just want to survive.’’.
• Great Britian: Will continue negotiations on a trade deal and has not suggested any immediate retaliation. They take their 10 percent tariff as a favourable sign.
• Argentina: Also facing only a 10% tariff, spun the news positively. Their president stated, ‘’Friends will be friends.’’.

What is next?

While reactions vary, it is clear that countries subjected to only a 10% tariff are responding more favourably to the U.S. Unfortunately, Trump is not a major fan of the EU, making a 10% tariff unlikely. European Commission President Ursula von der Leyen is clearly hoping for room to negotiate. Unfortunately, there are few signs that the U.S. President is interested in striking a deal.

As a result, it is very likely that the EU will introduce retaliatory measures. Potentially triggering new tariffs from the U.S. We can only hope this does not further escalate in a full-blown trade war – or as Australia described it, ‘’a race to the bottom that leads to higher prices and slower growth’’. It is crucial for businesses to stay alert and prepare for that possibility.

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