Late Thursday, one-time presidential frontrunner Donald Trump announced the broad outlines of a new tariff plan aimed at as many as 40 countries. He called for a 15% tariff on goods from countries that the United States runs a trade deficit with. This smart policy shift is slated to go into effect on August 7, instead of the expected Friday implementation. The announcement, which comes right before the August 1 trade policy deadline, is yet another indication that U.S. trade policy is on the move.
The new tariff floor is focused on countries that contribute to an overall trade deficit with the U.S. This controversial decision stems from the International Emergency Economic Powers Act. Under this extreme national security framework, the Trump administration will levy targeted tariffs on countries determined to be economic threats and trade offenders.
Details of the Tariff Changes
At first, that meant exclusively targeting countries where the U.S. had a trade surplus, hitting them with a 10% tariff. This rate is not part of the revised tariff structure anymore. This means South Korea and Japan will immediately be subject to the highest 15% tariff rate. In doing so, they join a host of other nations subject to these economic penalties.
Canada faces a unique situation. Tariffs on non-exempt goods will increase to 35% as of Friday at 12:01 am ET. In an additional consideration, Trump had threatened to escalate tariffs on Mexico to 30% starting at the same time. Mexico managed to negotiate a continuation of the current 25% tariff rate for the next 90 days.
These three countries are a unique anomaly in this new tariff world. Unlike their American counterparts, they ended up not raising their tariff rates at all last Friday.
Tariff Rates Across Different Nations
The new tariff structure exposes the calibrations, estimations, projections, and downright guesses that undergird an intricate rate schedule for every other country. More than a dozen countries currently face tariffs exceeding the newly established 15% rate, either due to existing trade agreements or specific directives from Trump himself.
In neighboring countries such as Laos and Myanmar, people are being subjected to high tariffs of 40%, with Syria’s rate at a high 41%. Even an outlier like Switzerland only has a 39% average tariff. Countries such as Nicaragua, Pakistan and the Philippines have much lower tariffs averaging 18% – 19%.
These rates are a reminder that international trade relations should never be an all-or-nothing game. Economic pressures and diplomatic negotiations are key in determining the economic conditions for importation.
Legal Challenges and Skepticism
Trump’s tariff plan hasn’t been without its critics. Legal experts and judges have expressed skepticism regarding the rationale behind declaring an economic emergency as justification for imposing these tariffs. Judge Raymond Chen raised a pertinent question during one such consideration:
“Can the trade deficit be an extraordinary and unusual threat when we had trade deficits for decades?” – Judge Raymond Chen
This request highlights continuing worries over the legality and justification of using emergency powers to make sweeping changes to trade policy.
