(CP) NEW YORK: Reported by Mia Thompson.
Financial markets are experiencing turbulence following President Donald Trump’s announcement of increased tariffs on imports from numerous countries, including many U.S. allies, prompting fears among business owners globally.
In a speech from the White House Rose Garden on Wednesday, Trump unveiled a 10 percent tariff on all imports set to take effect Saturday, along with additional tariffs of up to 50 percent on select goods starting April 9. Additionally, a 25 percent tariff on imported vehicles came into effect Thursday at midnight.
The implementation of these tariffs caused stock markets to plummet, with major indexes in Asia and Europe initially falling, although some managed to recover during their trading sessions. U.S. markets opened lower, with the S&P 500 dropping over 3 percent and the tech-heavy Nasdaq composite index declining more than 4 percent shortly after the market opened on Thursday.
Economists predict that the rollout of these new tariffs will cost American consumers and businesses billions of dollars this year, threatening to drastically reshape the economic landscape. The overall U.S. tariff rate, which was 2.5 percent last year, is expected to surge to approximately 22 percent—levels not seen in over a century, according to Olu Sonola, head of U.S. economic research at Fitch Ratings.
“This is a significant shift, not only for the U.S. economy but for the global economy,” he stated. “Many countries are likely to enter a recession, and current economic forecasts may no longer be relevant if these tariffs remain in place for an extended period.”
In response, other nations have vowed to retaliate. China announced it would counter Trump’s “typical bullying” with unspecified measures, while the European Union indicated it is preparing its response, as allies and adversaries alike reacted to what Trump termed a “Liberation Day” tariffs initiative.
Most governments have refrained from detailing specific countermeasures, opting instead to respond with “cool and calm heads,” as articulated by British Prime Minister Keir Starmer. However, beneath this diplomatic veneer lies significant anger and anxiety over the potential for economic turmoil.
“This abrupt and unprincipled decision raises questions about the reliability of the U.S. as a partner,” remarked Susannah Patton, director of the Southeast Asia Program at the Lowy Institute, an Australian think tank. “It reinforces China’s narrative that the U.S. is an unpredictable partner.”
Treasury Secretary Scott Bessent advised countries against hasty responses, cautioning that immediate retaliation could lead to escalation.
Uncertainty is creating chaos for business owners, particularly those who have spent years expanding manufacturing operations in countries like Mexico, Vietnam, and India to mitigate the tariffs imposed on Chinese goods during Trump’s first term. Now, imports from these countries, along with many others, are set to become significantly more expensive.
Small-business owner Anjali Bhargava expressed her concern on Wednesday evening as she calculated the increased costs for ingredients in her spice blends and chai mixes sold at retailers like Whole Foods. She anticipates a 26 percent price hike on tea from India, a 36 percent increase for turmeric from Thailand, and a 46 percent rise on cinnamon and ginger from Vietnam.
“I’m honestly stunned,” said Bhargava, 48, who established her business in 2014. “I may have to rely on the ingredients I currently have and consider closing down. But what happens next? I’ve incurred substantial debt to sustain my business through the pandemic and foster growth.”
The magnitude of the tariffs has particularly shocked U.S. allies.
“The administration’s tariffs lack logical justification and undermine our nations’ partnership,” said Australian Prime Minister Anthony Albanese, whose country faces a relatively lighter 10 percent tariff. “This is not the action of a friend.”
The European Union, facing a 20 percent blanket tariff, is poised to respond if negotiations with Washington falter, according to European Commission President Ursula von der Leyen. She characterized the tariffs as a “major blow” and emphasized the lack of order amid the chaos.
The EU is finalizing its first round of retaliation against U.S. steel tariffs and is preparing further countermeasures to safeguard its interests and businesses if discussions do not succeed. “It’s not too late to address these concerns through negotiations,” she added, acknowledging the disappointment felt by many Europeans towards their longstanding ally.
The tariffs are particularly burdensome for China, the world’s second-largest economy, which has been a primary target of Trump’s criticism due to its nearly $1 trillion trade surplus with the U.S. last year. The new 34 percent tariff on Chinese goods adds to the existing 20 percent levy imposed previously, amid accusations that Beijing has not done enough to curb the flow of fentanyl into the U.S.
Some industries welcomed the administration’s announcement. The American Petroleum Institute praised Trump for excluding oil and natural gas from the new tariffs, while the American Iron and Steel Institute commended his efforts on behalf of American workers.
Conversely, an industry group representing restaurants and the food sector warned that the tariffs would lead to higher prices and increased pressure on businesses. Additionally, some Democrats criticized Trump for using tariffs as a political tool that could harm the economy.
Major labor unions supported the tariffs but argued that more must be done to protect workers. The president of United Steelworkers International stated that import taxes should be accompanied by policies aimed at boosting domestic production and job creation, while the AFL-CIO president criticized the administration for undermining trade union workers’ rights.
The extent of disruption caused by the sweeping tariffs for allies will depend on enforcement and potential exemptions, analysts noted. The White House has outlined carve-outs for certain industries, such as semiconductors—vital for artificial intelligence and high-performance computing—as well as pharmaceuticals, which may offer relief for partners like Taiwan and South Korea.
Despite these exemptions, semiconductor stocks experienced significant declines, including a more than 5 percent drop for AI and 3D graphics chipmaker Nvidia and over a 7 percent decrease for Taiwan Semiconductor Manufacturing Co., the largest contract chip manufacturer globally.
Companies with extensive overseas manufacturing operations, such as Nike, which has factories in Vietnam and other parts of Asia, also faced substantial declines, with shares falling over 10 percent. The White House confirmed that goods from Vietnam will now be subject to a 46 percent tariff.
Shares of Dollar Tree, a discount variety chain that imports many of its products, also dropped more than 10 percent, while retail giant Target saw a decline of 9 percent.
Reporters Shepherd and Hendrix contributed to this article from Singapore and London, respectively, with additional reporting from Chie Tanaka in Tokyo, Lyric Li in Seoul, Rebecca Tan in Singapore, Kate Brady in Berlin, and Ellen Francis and Beatriz Ríos in Brussels.