On Wednesday, April 2nd, Donald Trump announced his plan to impose 10% tariffs on April 5th on most goods imported into the U.S., and then to add further “reciprocal tariffs” on 185 countries to kick in on April 9th.
Sadly, not a small portion of the American public believes these tariffs are justified and are truly reciprocal. They are anything but.
Let me explain.
Basically, Trump and his so-called experts confuse trade deficits with tariffs – in other words, how much the U.S. sells to a country (exports) compared to how much the U.S. buys from that country (imports). To determine the tariff to impose on each country, they subtract the exports from the imports to determine the “deficit” then divide that deficit number by the exports number and say this percentage is the levy each country charges the U.S. – which they attribute to “unfair trading practices.” To finish, they divide that percentage by two. That result is the tariff they will impose on each country.
The process sounds as convoluted as it is stupid and meaningless. If you want to go into this in more depth, you can check out this more comprehensive explanation by CBC’s Andrew Chang — https://www.cbc.ca/player/play/video/9.6711188.
It is also pretty clear that no one really vetted the list of countries affected. Many of the choices make no sense, as they charge no tariffs at all, and have little or no manufacturing — and in a few cases, no people.
Saint Pierre and Miquelon, a small French territory of islands just off the coast of Newfoundland with a population of around 6,000 is to be hit by an astounding 50% levy. Their economy is primarily dependent on fishing and servicing fishing fleets. The only explanation anyone there has been able to figure out is that once, in 2024, they delivered a $3.4 million catch of halibut to Boston.
Even more ridiculous is the 10% tariff imposed on the Heard and McDonald Islands in Australia, where the residents are entirely penguins and seals – no humans.
Unfortunately, for most countries scheduled to be hit by Trump’s tariffs, the effect is likely to be devastating. This will be particularly true for low-income Asian, African, and South American nations.
Vietnam provides a relevant example. Since the end of the Vietnam War, this tiny, impoverished country has done a remarkable — some would say unbelievable– job of lifting millions of its citizens out of poverty. The YouTube site ColdFusion has documented this success in detail — https://www.youtube.com/watch?v=PzsCQ152FRg.
Vietnam’s economic growth has been achieved without imposing any tariffs on American imports. However, the country has the misfortune of exporting more to the U.S. than they import. To Trump of course, this trade imbalance constitutes a tariff. Based on his nonsensical formula, this tiny, impoverished nation will now face a 46% levy on all of its exports to the U.S, immediately making those exports much more expensive and less competitive — thus inflicting grave harm on Vietnam. Tellingly, a Council of Foreign Relations article states that, “Of all the major economies hit by the Trump administration’s tariff bonanza, Vietnam may be the most exposed and least equipped to respond.”
In the first two days after the tariffs were announced – Thursday and Friday April 3rd and 4th – U.S. stock markets tumbled, with Investopedia saying, “Stocks Just Had One of Their Worst Weeks of This Century.” The S&P 500 fell 10%, its worst two-day stretch since 2020. The Dow had its sixth worst week in the 21st century, falling 2,231 points on Friday, its third-largest one-day point decline on record. In those two days, shares of Apple lost 15.9% of their value, wiping more than half a trillion dollars from their market capitalization.
According to Investor’s Business Daily, Asian and European stock markets also plummeted, suffering the worst decline since the COVID pandemic. To date, the tariff chaos has erased approximately $13 trillion from stocks worldwide.
According to J.P. Morgan, there is now a 60% likelihood of an American recession.
Then on April 9th as Trump’s massive tariffs were due to take effect, he once again changed direction and postponed implementing them for 90 days. He said he postponed them as over 75 of the targeted countries had reached out to discuss the issues he had raised. The 10% reciprocal tariff remained in place.
Of course, this does not mean that Trump’s tariff war has ended. Citing China’s choice to respond to his earlier tariffs with 84% tariff hikes of their own against the U.S., Trump has now raised the trade penalty against them to 145%, effective immediately.
During all this chaos, nothing has changed for Canada, with 25% levies still in place on steel, aluminum, and the non-American vehicle components of Canada-U.S.-Mexico Agreement (CUSMA)-compliant products. Canada stays exempt from Trump’s baseline 10% tariff.
Needless to say, stock markets soared in response to the postponement, with the S&P surging 9.5%, the Dow Jones up 7.9%, and the Nasdaq Composite up a remarkable 12.2%. The markets started falling again the next day, and we can expect them to remain volatile.
Trump remains extremely unpredictable, and tariff threats are still real. There is no guarantee that he won’t add further levies to any nation at any time, while his trade war with China is a particular danger to the world economy.
History has shown that there have been many instances where high U.S. tariffs produced devastating economic effects on the country. Most economists attribute the depth and the severity of the Great Depression in the 1930s to tariffs introduced under the Smoot-Hawley Tariff Act, which was signed into law by President Herbert Hoover. An earlier example was a depression called the Panic of 1893, which was caused in no small part by the 1890 “McKinley Tariff” act of Congress, which was sponsored by soon-to-be President William McKinley, a man Trump appears to idolize.
For the foreseeable future, the world faces the very real prospect of a global recession or possibly even a depression. Will we witness a spiral to the bottom with tariffs raised higher and higher?
Let’s hope that enough Republicans finally break loose of the hold Trump has on them, and that they begin to vote, both in the Senate and in the House, against these tariffs. To date, we have seen four Republican senators — Susan Collins, Lisa Murkowski, Mitch McConnell and Rand Paul – join Senate Democrats to vote 53-47 against the Trump tariffs on Canada, delivering the president his first congressional defeat. While this bill is extremely unlikely to pass the Republican-controlled House, the Senate win may be a beginning.
We are on the edge of an economic precipice.
Daily atmospheric CO2 [Courtesy of CO2.Earth]
Latest daily total (April 9, 2025): 429.12ppm
One year ago (April 10, 2024): 427.35ppm
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