Trump’s Tariffs and its Effects on Global Trade
Tariffs have been a key component of global trade for decades. They allow authorities to protect local manufacturers and producers from foreign competition, encouraging consumers to purchase locally made products. However, high tariffs can lead to higher prices on imported goods, with customers being the main bearers of the cost.
Just recently, tariffs have become the spotlight in many political conversations, as U.S. President Donald Trump has placed aggressive tariffs since assuming office. Trump used the tariffs to boost domestic manufacturing and protect jobs, but they also led to an all-out trade war with other major market players.
Understanding the impact of the tariffs is crucial for many business owners around the globe. Trump’s tariffs can significantly impact profit margins and supplier relationships, especially in an increasingly volatile global market. Staying informed about the constant tariff policies and preparing for their possible effects can mitigate risks and remain competitive.
Understanding Trump’s 2025 Tariff Policy
Trump’s trade war with China, which began during his first term in 2018, escalated when he returned to office. The administration raised the baseline tariffs on Chinese imports by a whopping 145%, affecting around $430 billion worth of products to the USA.
Trump already said this would substantially go down, but the Chinese government has already hit back by imposing a 125% tariff on American imports and restricting exports of critical minerals to the USA.
However, China isn’t the only country affected by this trade policy. Canada and Mexico, the USA’s bordering countries and crucial trade partners, were also caught in a trade war. Trump imposed 25% tariffs on Canadian and Mexican imports entering the country (only 10% on energy, oil, and petroleum), leading to the two countries answering with retaliatory 25% tariffs on US exports. Trump also placed 25% tariffs on all steel, aluminum, and auto imports.
The rest of the world isn’t safe either. Dubbed “Liberation Day,” Trump announced reciprocal tariffs of up to 10% for imports from 90 nations and another 10% tax applied to every item entering the USA. But this has been paused for 90 days, and many are uncertain what will happen after the pause period.
Immediate Economic Impact of Trump’s Tariffs
· Price Increase and Cost Burdens
One immediate impact of Trump’s import levies is a price increase in imported goods throughout the United States. The additional costs of importing different products, including electronics and food, are often passed down to consumers and smaller businesses. For instance, prices of grocery items in the country rose by 0.4% from last month, with egg prices increasing by 5.9%.
· Retaliatory Tariffs
China is ready to engage in a tariff war. Mexico and Canada aren’t backing down. Other countries, despite many of them negotiating for exemptions, might also consider putting retaliatory tariffs on different US exports.
This can lead manufacturers to reevaluate their business strategies and explore alternative regions for sales as their products become less competitive in foreign markets.
· Global Trade Disruption
Due to the uncertainties brought by Trump’s tariffs, manufacturers worldwide faced disruptions in production and order flows. Numerous German and British businesses produced less than usual in the past month because of the increased levies. Meanwhile, South Korea’s exports for the first 20 days of the month declined by 5.2% compared to the same period last year.
This signals a drop in confidence, especially for manufacturers who rely on American consumers for sales. Some companies responded by changing where they obtain materials or export their products.
In addition, the World Trade Organization (WTO) reports that if the suspended reciprocal tariffs are enacted, global merchandise trade growth will drop by 0.6%. This could grow to 1.5% if the uncertainty due to the levies spreads in the coming months.
· Surge in Warehousing and Logistical Delays
Many businesses order or produce in bulk and store them in domestic warehouses to avoid potential tariff-related expenses after the deadline. For instance, AMD and Nvidia rushed production of their GPUs to ship to the US before Trump assumed office.
As businesses choose to stockpile critical materials and goods, storage capacity in various warehouses is stretched to the limit, driving warehousing and international freight forwarding costs up.
Conclusion
The effects of Trump’s on-and-off tariff policy are being felt far and wide. Consumer prices and warehouse and logistics costs are increasing while other countries retaliate. Staying on top of the tariff is a proactive approach to surviving an economy where policies can change instantly. Partnering with a trusted logistics company in the Philippines, like Excelsior, can give your business a competitive advantage in the market. Their strategic insights and customs expertise can help their clients mitigate the effects of potential disruptions and have peace of mind despite the volatile global trade environment.
