Meanwhile, U.S. tariffs go into effect today. Tariffs are at the highest level since 1938.
The U.S. tariffs levied by President Donald Trump went into effect today, April 9, marking the highest tariffs since 1938 during the Great Depression.
Trump set a baseline of 10% for most trading partners and placed additional tariffs on more than 180 trading partners, including 104% on China, 20% on the European Union, 24% on Japan, 27% on India, and 27% on South Korea to name a few.
According to an analysis by the Tax Foundation, the average tariff on all imports will rise from 2.5% in 2024 to 14.5% now – marking the highest average rate since 1938. Further, they expect tariffs will cause imports to fall by 30%, or more than $990 billion, in 2025.
Over the next decade, if they remain in place, the tariffs will raise an estimated $2.2 trillion in revenue and reduce the US GDP by 0.8%. In 2025, they will raise federal tax revenues by $206 billion, or 0.68% of GDP, marking the largest tax hike since 1982.
These numbers do not include the impact of foreign retaliation. It should also be noted that these numbers are fluid, as the Trump administration has said they are looking to negotiate these tariffs down. To date, that has not happened. In fact, trading partners have ramped up tariffs on the U.S.
China increases tariffs to 84%
China’s State Council Tariff Commission called the new U.S. tariffs a “mistake on top of a mistake” that impacts the stability of the global economic order.
On Wednesday, China hit back by ratcheting up tariffs on the U.S. even higher. It boosted the tariffs on U.S. imports by 50%. Now, in addition to the 34% tariff that was previously announced, U.S. imports face an 84% tariff starting April 10.
“China urges the US to immediately correct its wrong practices, cancel all unilateral tariff measures against China, and properly resolve differences with China through equal dialogue on the basis of mutual respect,” the Tariff Commission said in a statement.
For perspective, the U.S. exported $143.5 billion into China in 2024, while the U.S. imported $438.9 billion in goods from China last year, according to the U.S. Trade Representative.
“Asian countries such as Vietnam, Thailand, Cambodia, and China were heavily dependent on the American market for the export of goods, including clothing and automobiles,” John Murillo, chief dealing officer at B2Broker, a fintech solutions provider for financial institutions, said. “The introduction of new tariffs has definitely undermined their competitiveness.”
They will also increase expectations of higher inflation and an economic slowdown across all regions, he said.
“However, despite the sharp market reaction, China is comparatively well-prepared for a trade war with the USA. The country has been equipping for a possible escalating trade war scenario for many years. Most likely, China will focus on increasing domestic consumption and expanding markets outside the United States,” Murillo said.
EU approves first round of retaliatory tariffs
The EU voted Wednesday to approve the first round of tariffs on the U.S. All countries voted in favor of the tariffs, which range from 10% to 25%, depending on the goods, except Hungary.
The EU did not provide details on which products will be tariffed, or how much the tariffs will be, but they will be on a wide range of goods, according to CNBC. Goods include poultry, grains, clothing, steel, aluminum, eggs, and tobacco, among other goods, according to various sources.
The first round of tariffs will go into effect on April 15 with the next tranche following on May 15.
“The EU considers US tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy. The EU has stated its clear preference to find negotiated outcomes with the US, which would be balanced and mutually beneficial,” the European Commission said. “These countermeasures can be suspended at any time, should the US agree to a fair and balanced negotiated outcome.”
U.S. stocks were mixed on Wednesday with the S&P 500, Dow Jones and Russell 2000 all down slightly, and the Nasdaq up a bit.
