President Trump Announces a New Round of Tariffs

What Happened?

This afternoon President Trump announced ten percent tariffs on all goods imported into the United States. 

All told the tariffs will affect goods from over sixty countries. 

In a statement this afternoon, President Trump said “In the face of unrelenting economic warfare, the United States can no longer continue with a policy of unilateral economic surrender.”

Why it Matters

Most countries targeted by the new tariffs have publicly stated they will retaliate by placing tariffs of their own on American goods coming into their countries.

The net result is likely to be at least a limited tariff war where both American consumers and their counterparts abroad are likely to pay higher prices and face less selection in the goods they purchase.

President Trump claims the tariffs are in response to unfair trade barriers put in place by Europe and China against the United States. Although he didn’t specify exactly what those barriers were. 

While nations like China do sometimes use government subsidies which can distort the market or allow intellectual property theft to take place without punishment, it’s unclear how more tariffs would resolve any of those issues. 

Meanwhile it’s likely American consumers will face increasing prices for a range of goods, and probably less selection too. As tariffs take effect, companies have no choice but to increase prices to offset the tariffs, which is just another word for tax. 

Because some goods will become too expensive to continue to use by suppliers, those items may disappear from store shelves in America leading to fewer options for buyers. 

Historically tariffs have led to a cycle where governments continue to retaliate one after another until the effect on the business climate becomes detrimental. Despite the claims by some of President Trump’s supporters that tariffs will be a major source of government revenue, even if fully implemented the total would still be a small fraction of the U.S. government’s operating budget. 

Use of the term “Liberation Day” by President Trump to describe the new tariffs appears to be purely political. The economic effects are unlikely to result in anything resembling liberation for American consumers. 

It’s possible some nations on the receiving end of U.S. tariffs will be more amenable to change their policies towards America. Europe in particular has hinted that may be the case. 

Should tariffs result in policy changes favorable to the U.S. then the Trump Administration will be able to claim a measure of victory.

How it Affects You

In the short term, American consumers will likely see higher prices on everything from groceries to new cars. 

Whether the tariffs will remain in effect for a long duration or be quickly curtailed remains to be seen.