After walkbacks and confusion, U.S. tariffs kick in for dozens of countries

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6 days ago

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President Donald Trump began levying higher import taxes on dozens of countries Thursday, as the economic fallout of his months-long tariff threats has begun to create headwinds for the U.S. economy.
Just after midnight, goods from more than 60 countries and the European Union became subject to tariff rates of 10 per cent or higher. Products from the European Union, Japan and South Korea are taxed at 15 per cent, while imports from Taiwan, Vietnam and Bangladesh are taxed at 20 per cent.
Trump also expects the European Union, Japan and South Korea to invest hundreds of billions of dollars in the U.S.
"I think the growth is going to be unprecedented," Trump said Wednesday afternoon. He added that the U.S. was "taking in hundreds of billions of dollars in tariffs," but he couldn't provide a specific figure for revenues because "we don't even know what the final number is" regarding tariff rates.
Canada and the U.S. have not come to renewed terms after a Trump-imposed deadline of Aug. 1, resulting in a 35 per cent import tax on some Canadian goods. The rate applies to goods not covered by the Canada-U.S.-Mexico Agreement (CUSMA), which governs trade between the three countries.
In addition to generalized tariffs, Trump has also threatened sector-specific duties. Import taxes are still coming on pharmaceutical drugs and Trump announced this week 100 per cent tariffs on computer chips. That could leave the U.S. economy in a place of suspended animation as it awaits the impact.
Trump, including just before midnight on social media, has complained that countries, including allies, "have taken advantage of the United States" in trade over the years. But in the case of Canada and Mexico, it was Trump who signed off on CUSMA in his first term.
Effects expected to play out over months
Trump has promoted the tariffs as a way to reduce the persistent U.S. trade deficit, although many economists believe that indicator alone does not signify economic weakness.
There are signs of self-inflicted wounds for the U.S. economy as a result of Trump's plans, which recovered from the height of the coronavirus pandemic in stronger fashion than other G7 countries, albeit with similar inflationary pressures.
Importers in general purchased more goods before tariffs have gone into full effect. As a result, the $582.7 US billion trade imbalance for the first half of the year was 38 per cent higher than in 2024. Total construction spending has dropped 2.9 per cent over the past year, and the factory jobs promised by Trump have so far resulted in job losses.
"A less productive economy requires fewer workers," said John Silvia, CEO of Dynamic Economic Strategy, in an analysis note. "But there is more, the higher tariff prices lower workers' real wages. The economy has become less productive, and firms cannot pay the same real wages as before. Actions have consequences."
The president's use of a 1977 law to declare an economic emergency to impose the tariffs is under challenge — and potentially headed to the Supreme Court. The impending ruling from last week's hearing before a U.S. appeals court could cause Trump to find other legal justifications if judges say he exceeded his authority.
Still, the stock market has been solid during the recent tariff drama, with the S&P 500 index climbing more than 25 per cent from its April low. The market's rebound and the income tax cuts in Trump's tax and spending measures signed into law on July 4 have given the White House confidence that economic growth is bound to accelerate in the coming months.
The ultimate transformations of the tariffs could play out over months, if not years. Many economists say the risk is that the American economy is steadily eroded rather than collapsing instantly.
"We all want it to be made for television where it's this explosion — it's not like that," said Brad Jensen, a professor at Georgetown University. "It's going to be fine sand in the gears and slow things down."
Even people who worked with Trump during his first term are skeptical that things will go smoothly for the economy, such as Paul Ryan, the former Republican House speaker.
"There's no sort of rationale for this other than the president wanting to raise tariffs based upon his whims, his opinions," Ryan told CNBC on Wednesday. "I think choppy waters are ahead, because I think they're going to have some legal challenges."
Slapdash process
The lead-up to Thursday fit the slapdash nature of Trump's tariffs, which have been variously rolled out, walked back, delayed, increased, imposed by letter and frantically renegotiated. Trump has heralded frameworks to a deal, with few specific details available so far in my cases.
India, for example, saw Trump on Wednesday announce an additional 25 per cent tariffs to be imposed effective Aug. 28, for its buying of Russian oil since the outbreak of war in Ukraine, bringing its total import taxes to 50 per cent.
"Absorbing this sudden cost escalation is simply not viable. Margins are already thin," S.C. Ralhan, president of the Federation of Indian Export Organizations, said in a statement.
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India and the U.S. have had five rounds of negotiations on a bilateral trade agreement but haven't been able to clinch one so far, straining what had been a chummy relationship between the countries in Trump's first term.
The process has been so muddled that officials for key trade partners were unclear at the start of the week whether the tariffs would begin Thursday or Friday. The language of the July 31 order to delay the start of tariffs from Aug. 1 said the higher tax rates would start in seven days.
On Wednesday morning, Kevin Hassett, director of the White House National Economic Council, was asked if the new tariffs began at midnight Thursday, and he said reporters should check with the U.S. Trade Representative's Office.