The President’s “Liberation Day” announcement of reciprocal tariffs provides some relief for Canada and Mexico (relative to expectations) but a more challenging situation for most other countries and the U.S. economy itself.
All countries will face a 10% tariff effective April 5, under the authority of the International Emergency Economic Powers Act. And, effective April 9, reciprocal tariffs will apply to about 60 countries that run large trade deficits with the U.S., while all others will continue to pay the 10% baseline duty. The tariffs will remain in place until the President deems progress has been made in reducing the bilateral trade deficits and in resolving barriers on U.S. exports, as well as aligning “with the United States on economic and national security matters”. So, some walk-back of the tariffs is possible, though this will likely take time and tense negotiations. The flipside is that the President can also increase tariffs if countries retaliate. The European Union, which was hit with a 20% reciprocal tariff, has said it will try to negotiate lower tariffs initially, but, if unsuccessful, could counter with a “strong plan”.