Richard Nixon ended the gold standard, Bill Clinton ratified NAFTA, and Donald Trump—no less ambitious in his aims—on April 2 announced a series of sweeping retaliatory tariffs designed to reorder the global trade system established in the wake of World War II.
Then the color-coded chart, a bet that tariffs will deliver, and ultimately, the legacy of his second term.
The Trump administration will impose a 10 percent tariff across the board on all imports, but even higher individual rates for those nations that his administration deems particularly unfair in their trade practices toward the United States. He had promised previously that reciprocal was a literal term. “Whatever they charge us,” Trump said in February of the coming trade policy, “we will charge them.” Before the event, a senior White House official explained the new arithmetic, telling reporters, “Because the president is lenient and kind to the world, we’re only charging half.”
Trump unveiled the new rates, calculated not just from the tariffs other nations have imposed on U.S. goods, but also currency manipulation and other trade barriers, on the blue, white, and yellow chart that sent stock market futures on Wall Street tumbling.
No one, not adversaries or even allies, was spared. Because China imposed tariffs of 67 percent, the U.S. will impose a “discounted reciprocal tariff” of 34 percent, according to the new schedule that the president held aloft. Similarly, given that the European Union imposes 39 percent, his administration will impose a tariff of 20 percent. The administration released the full list as Trump signed the executive order under the 1977 International Emergency Economic Powers Act.
“Chronic trade deficits are no longer merely an economic problem,” Trump said. “They are a national emergency that threatens our security and our very way of life.” As far as the individual rates are concerned, he added, “it is stunning how high the number has to be to stop the cheating.”
Economists are generally of the opinion that tariffs effectively amount to a tax, as producers pass those costs along to consumers. “Trump’s tariffs will result in higher prices and fewer goods available for sale in the U.S. The higher and more widespread the tariffs, the bigger the reduction in goods and the larger the price increases,” said Norbert Michel of the CATO Institute, forecasting possible inflation, a problem he said there was “very little the Fed can do about.”
This was generally the view of trade policy from the administrations of George H.W. Bush through Barack Obama. But Trump has rejected that orthodoxy and opted to go with his gut belief instead.
While the trade policy was sweeping, the details should not have been shocking to anyone who listened and took seriously the promises Trump has made, not just since entering politics, but throughout his entire career.
“They come over here, they sell their cars, their VCRs, they knock the hell out of our companies,” a much younger Trump said of the trade deficits the United States was then running with Kuwait and Japan during a 1988 appearance on the Oprah Winfrey program. “They are beating the hell out of our country.”
Though a vibe shift, the sentiment is not entirely alien on the right. Trump is the first to impose protectionist policies at such a scale, but his allies insist he is drawing from a well dug by others.
Trump has been making that kind of argument for some time, and the president will get points for consistency from supporters. The question is whether his trade policies can deliver the roaring economy he promised on the campaign trail. Before the announcement, a White House official described the reciprocal rates as “a golden rule for the new golden age.” Wall Street may interpret it as a recipe for a recession.
The president vowed that the new trade policy would bring jobs back, making “America wealthy again,” and the White House had hyped the event as “Liberation Day,” inviting dignitaries that included blue-collar workers and members of Congress.
It is, without a doubt, the most significant change to trade policy in decades, if not more. Whether America craters to recession or rises to the advertised golden age, the tariffs will be Trump’s legacy. Other than an auto worker from Detroit, the president stood alone on stage at the White House.
“This will be a very big moment,” the president predicted. “I think you’re going to remember today. It’s going to be a free nation that we’re dealing with. We’re going to have a very free and beautiful nation. It’s going to be Liberation Day in America, and it’s going to be a day that, hopefully, you’re going to look back in years to come, and you’re going to say, ‘You know, he was right.’”
