CONTRARY to his remarks made a day earlier that he will be ‘kind’ on tariffs, President Donald Trump has announced sweeping tariffs on imports from almost the entire world, a move that will intensify the trade war as the world leaders have vowed to retaliate and go for counter measures.
He levied a 10% minimum baseline tariff for all imports into the US, with dozens of countries hit with rates multiple times higher.
Speaking at the “Make America Wealthy Again” event in the Rose Garden, Trump says the US “has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike” for decades and announced huge new tariffs of 34% on imports from China and 20% on imports from the European Union and harsher duties on imports from many countries including 46% on Vietnam , 44% on Sri Lanka and Myanmar, 36% on Thailand, 29% on Pakistan, 26% on India and 24% on Japan.
The motivation of the US President is understandable as he wants to address the ballooning trade deficit, which was the largest in the world at $1.1 trillion in 2023.
Data shows in 2024 the United States had a trade deficit with 92 countries and a trade surplus with 111 countries and trade deficit is highest with three major economic partners – China, Mexico and Vietnam.
Other motives behind the move, as stated repeatedly by the President himself, are ‘rebirth’ of US industries and generation of resources to compensate for the tax cuts that he intends to offer to different segments of the American society.
The US’s relatively low tariff rate, as well as the large and wealthy market it represents, makes it an appealing destination for foreign exporters.
While US consumers may benefit from cheaper imports, the influx of foreign goods increases competition for domestic producers, contributing to the trade imbalance that Trump has promised to reduce.
However, the nature and scope of the tariff plan has made it an issue of “US Vs rest of the world” with serious implications for smaller and third world countries.
As pointed out by the President of the European Union Commission the global economy will suffer massively, uncertainty will spiral and trigger the rise of further protectionism and consequences will be dire for millions of people around the globe.
Asian economies will be hit harder than most by US reciprocal tariffs and they are more dependent on US goods demand than most.
Apart from the negative impact of the move on consumers throughout the world, the move will also adversely affect the American consumer as well as imposition of massive duties on imports means an increase in the prices of all imported goods.
There are also apprehensions that some countries might resort to currency devaluation to offset any negative impact on their exports to the US but the situation will complicate if all or most of the affected countries go for devaluation.
The full impact of the decision on the global economy and the US market will become clear with the passage of time depending on the kind of reaction by the individual countries and possible attempts by countries to sort out the issue bilaterally.
However, it is quite evident that the loss of the lucrative US market for many countries, including Pakistan, will compound their woes.
The United States is a major export destination for Pakistan and its feeble economy apparently cannot absorb the shock of 29% duties.
Pakistan has already devalued its currency heavily during the last three years and there is no scope for further devaluation.
Therefore, our relevant ministries should assess the impact of the move on Pakistani exports on a priority basis, mull over the proposals to neutralize the impact and take up the issue with the Trump Administration.
