The President of the United States, Donald Trump, has raised global trade tensions by announcing steep new tariffs on Chinese imports. Trump’s decision to include 104% tariffs on China took effect, resulting in a sharp sell-off in US bonds. This sudden market drop has sparked fears that foreign funds are pulling out of the US assets.
The latest set of US tariffs, including a massive 104% levy on Chinese imports, will be effective from April 9, 2025, leaving markets around the world worried about whether the tariffs would be permanent or whether Donald Trump would negotiate.
In addition to China, Donald Trump has introduced a 26% tariff on Indian exports to the USA, effective from the same date. Key sectors that will be impacted the most include electronics, gems and jewellery, auto parts, and agriculture products.
What are Tariffs and How Do They Work?
Tariffs are taxes charged on goods bought from other countries and are a certain percentage of a product’s value. For example, a 25% tariff on a $10 (£7.59) product means an additional $2.50 (£1.90) charge. The new 104% tariff on Chinese goods would result in an increase in cost to $20+. The companies that import foreign goods are supposed to pay the taxes.
How will New Tariffs Impact the Share Market?
According to Trump, “the new decision is not just about trade, it’s about fairness. We will no longer let nations take advantage of the United States.” The president further stated that his policy will revive America’s lost manufacturing base by forcing companies to relocate to the United States. However, China said it would take resolute and effective measures to safeguard its rights and interests.
Some economists believe that financial markets will see more ups and downs, causing uncertainty over how long Trump will impose tariffs on imports. It might cause a recession if they last a long time.
The financial markets have already reacted with unease, with US stock futures mostly lower. S&P 500 futures decreased 0.41% and Dow Jones Industrial Average futures were off 0.66%. Nasdaq Composite futures increased, though insignificantly, up 0.04%.
Economists Warn of Slowing Growth
Economic experts believe that this move will have an alarming and long-term impact. According to a report, continued trade tensions could reduce US’s GDP by up to 0.5% this year, with global output also projected to decline.
Several economists have pointed out that due to these tariffs, there could be domestic job losses, and have the opposite effect by disrupting supply chains and making U.S. goods less competitive abroad. Nearly three-quarters of Americans expect a price increase in everyday essentials within the next six months. Danish luxury stereo maker Bang & Olufsen stated that it will increase the prices on a few items in the coming weeks to account for the tariffs and other factors.
New Tariffs On Other Countries
Trump’s new tariff package mainly targets goods imported from China, but he has hinted at extending similar measures to other trade partners such as Canada, the UK, India, and Mexico. The 104% tariff will specifically target certain electronics, industrial components, and vehicles, which effectively doubles the cost of these imports for American buyers. Goods imported from the 60 countries which Trump describes as the “worst offenders” are now subject to additional taxes varying from 20- 104% for Chinese products.
After China, Lesotho is subject to the biggest single-nation tariff rate in the new round; the nation’s exports to the U.S. are subject to a 50% duty. Cambodia is the next with imports from that nation subject to tariffs of 49%.
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Conclusion
Donald Trump’s aggressive new tariffs have raised fears of a trade war and introduced a fresh wave of volatility into the global financial system. While the US president believes that these policies are in favour of the US people, early signs suggest that both investors and consumers could face significant challenges ahead.
With more countries preparing their responses, all eyes remain on Wall Street and Washington and how the global economy can weather the storm.
