President Trump's announcement to wipe out tariffs on American trading partners has widened the rift between the United States and some of its closest allies, reshaping the global economic order.
Trump's plans he announced Wednesday and calling “mutual” would impose a wave of tariffs on dozens of countries. Among the most important US trading partners affected are the European Union, which faces 20% tariffs under the plan, and China, which absorbs an additional 34% in addition to existing taxes.
The new tariffs represent a “major blow to the global economy,” said Ursula von der Leyen, president of the European Commission. “The global economy will be very painful. Uncertainty will swirl and trigger the rise of further protectionism.”
Mexico and Canada, which have particularly close economic ties with the United States, are not subject to new tariffs beyond the previous taxes announced by the President.
The new taxes include 10% tariffs in all countries except Canada and Mexico, as well as additional tariffs that apply to duties that other countries apply to US exports and other barriers deemed unfair by the administration.
Asian countries were some of the most difficult hits. Tariffs in Japan and India have risen to over 20%, with countries like Vietnam, Cambodia, Bangladesh and Sri Lanka facing even more steep charges.
Data analytics firm Exiger has calculated that the burden could be the heaviest for Chinese exports, facing an additional tariff of $149 billion. The company called the announcement “a monumental policy shift restructuring its procurement, pricing and geopolitical strategies.”
Multi-faceted attacks have upset global partners.
“The outcome will be disastrous for millions of people around the world,” von der Leyen said in an early morning statement Thursday. “There doesn't seem to be an orderly obstacle, and there doesn't seem to be a clear path to the complexity and chaos being created.”
European allies have announced plans to retaliate against the early wave of tariffs on steel and aluminum. They make it clear that by creating barriers to services like major technology companies, if negotiations are potentially unsuccessful, they will respond to an increase in trade disputes with further measures.
The EU response is relevant. Overall, 27 countries probably constitute America's most important economic ties. They alone send almost a fifth of American imports, and European consumers are a huge market for American services.
Others are taking a more waiting approach.
Australian Prime Minister Anthony Albanese said the US, which imposes 10% tariffs on the US, is “unfounded by logic.” But Australia will not compete for retaliation, he said. He said “will not be in the race to the bottom, which leads to higher prices and slower growth.”
In Mexico and Canada there was a sense of relaxed relief in avoiding the new smarts of tariffs. “This is good news for the country,” said Luis de la Carre, Mexico's top trade economist. “This will help protect access to the US market.”
However, analysts warned against too much optimism as both countries are already facing many taxes imposed recently. Trump said tariffs in Canada and Mexico are intended to curb the flow of fentanyl to the United States.
“He has preserved many important elements of our relationship,” Canadian Prime Minister Mark Carney said. Speaking briefly on the way to the cabinet meeting, Carney added: “We're going to fight these tariffs and measures.”
A common thread is that many of our American friends are increasingly aware that they are defending against Washington.
And many people question what the ultimate goal is.
Trump has sometimes insisted that he wanted to force companies, including automakers and drug makers, to produce them in the US. He also says the point is simply to correct inequality. He then said tariffs would help pay tax cuts.
Purpose is important for American global partners. If it's about making the trading system more fair, it suggests openness to negotiations. Europe, for example, was able to mess with car tariffs and prevent it from taking a non-aggressive stance towards the Trump administration.
If it's about raising funds for American funding, that's a more challenging starting point for trading partners. In that case, finding an agreement to reduce planned tariffs means reducing potential revenue.
Given the uncertainty, American allies are trying to learn as much as possible about what is coming, as they unfold measured responses.
For example, Europe is taking a more positive attitude than many individual countries. It announces plans for retaliation tariffs on a wide range of products in response to the collection of whiskey, motorcycles, produce, steel and aluminum. However, they have already delayed these measures until mid-April, and policymakers have not yet announced exactly how they will respond to the latest tariffs.
Instead, the authorities have made it clear that they are willing to respond by force, including perhaps using recently created tools that can impose penalties relatively quickly, such as tariffs and market access restrictions.
The goal is to gain leverage. EU countries are trying to cast weight on the bloc's consumer market to force Washington to negotiate.
However, other geopolitical topics are closely related to trade disputes, making pushing back more difficult.
Military goals and technical regulations, for example, are caught up in broader debates about trade.
Countries that want to push back new tariffs, including Japan, South Korea and Europe, deal with the risks of America pulling back from its long-standing military role. Trump has urged the country to pay more burdens for their defense.
Trump also hopes that Europe is particularly aiming for a sales tax system in the EU, including regulations that will dial back restrictions on large tech companies to ensure content standards are enforced.
The question is how quickly American trading partners respond. For example, European leaders revealed that they would first want to digest the latest tariff details.
But they also make it clear that if everything else fails, they will fight back.
“They don't want to escalate – they want to make a deal,” said Mujitaba Rahman, managing director of Europe at Eurasia Group, a political research firm. But he added, “You have to bend the reliable economic muscles in this administration.”
Paulina Vilgas Contributed with a report from Mexico City. Ian Austin From Windsor, Ontario. and Victoria Kim From Canberra, Australia.
