Trump's Tariff Onslaught Leaves Global Trade In Shambles, Leaving Americans To Foot The Bill

Washington: The global economy is dramatically reshaping as US President Donald Trump's tariff blitz has left a multitude of countries reeling, from impoverished nations like Laos and Algeria to affluent US trading partners such as Canada and Switzerland. As of August 7, these countries will face heavy taxes on their exports to the United States, leading to concerns about the long-term implications of Trump's protectionist policies.

At the heart of this trade war is Trump's ‘Liberation Day’ announcement on April 2, where he declared reciprocal taxes of up to 50% on imports from countries with which the US runs trade deficits and 10% baseline taxes on almost everyone else. Invoking a 1977 law, Donald Trump justified these sweeping import taxes by declaring the trade deficit a national emergency, effectively bypassing Congress.

Importantly, several countries that refused to knuckle under to Donald Trump's demands or found ways to incur his wrath have been hit the hardest. Laos, with an annual economic output of just $2100 per person, faces a daunting 40% tariff, while Algeria's $5600 per capita economy will be slapped with a 30% levy. Brazil too has been targeted with a 50% import tax, largely due to Trump's disapproval of the country's treatment of former President Jair Bolsonaro.

On the other hand, Canada, a long-standing US ally, has been hit with a 35% tariff, partly in response to Ottawa's intention to recognise a Palestinian state. Switzerland, another stalwart ally, faces a 39% import tax, higher than the 31% the US President initially announced.

Some countries have managed to avoid the worst of the tariffs by negotiating deals with the Trump administration. The United Kingdom (UK), for instance, has agreed to a 10% tariff on its exports to the US, a huge increase from the 1.3% rate prior to Trump's trade war. The European Union (EU) and Japan have accepted 15% tariffs, still higher than the low single-digit rates they paid last year.

Americans Footing The Bill

While US President Trump portrays his tariffs as a tax on foreign countries, the reality is that American import companies are bearing the brunt of the costs. The economists at Goldman Sachs estimated that overseas exporters have absorbed only one-fifth of the rising costs from tariffs, while Americans and US businesses have picked up the majority of the tab. The companies like Walmart, Procter & Gamble, and Nike have already hiked prices due to US tariffs.

The trade war has pushed the average US tariff from 2.5% at the start of 2025 to 18.3% now, the highest since 1934, according to the Budget Lab at Yale University. It is further expected to impose a $2400 cost on the average household.

What Will Be The Economic Consequences

As per the experts, the global economy is already showing signs of strain. The US economy contracted by 0.3% in the first quarter of 2025, marking its first decline in three years. China's factory activity fell to a 16-month low, while Taiwan's GDP surged 5.4% on pre-tariff tech exports. Europe saw 0.4% growth before tariffs hit, and Canada is on track to miss GDP estimates.

The global financial markets have reflected the turmoil triggered by the trade war. The European stocks erased gains following the release of US GDP data, and the pan-European STOXX 600 slipped 0.12%. Oil markets took a sharp hit, with US crude dropping 1.89% to $59.30 per barrel, while Brent fell 1.6% to $63.22 per barrel.

The impact of Trump's tariffs is far-reaching, with some countries experiencing short-term boosts while others absorb significant setbacks in key economic indicators. As the trade war escalates, one thing is certain – the global economy will continue to feel the strain.

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