A New Global Trade Order Takes Shape
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What are the new U.S. tariffs and their global impact?
Global markets reel after the U.S. unveils sweeping tariffs. We'll look at how world leaders are reacting as China and the EU promise to hit back.
President Trump's announcement of universal tariffs on the whole world, including the European Union. is a major blow to the world economy.
How will the auto industry be affected by the U.S. tariffs?
And the auto industry stares down major changes as 25% U.S. tariffs on foreign-made cars and parts go into effect. It's Thursday, April 3rd. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. The world is waking up to the new realities of trade after President Trump yesterday unveiled a suite of protectionist measures that he justified by citing his emergency economic authority.
Chronic trade deficits are no longer merely an economic problem. They're a national emergency that threatens our security and our very way of life. It's a very great threat to our country.
Among the moves that Trump announced were a 10 percent baseline tariff on all global imports, which will go into effect on Saturday. And for countries that the White House considers bad actors on trade, they'll be hit instead with a so-called discounted reciprocal tariff.
What are discounted reciprocal tariffs?
New duties amounting to 24 percent for Japan, 20 percent for the EU and above 40 percent for select countries in South and Southeast Asia. Well, here to put these measures into context, I'm joined by Journal Europe finance editor Alex Frangos and Asia editor Deborah Ball. Alex, let me start with you. Explain these discounted reciprocal tariffs for us. What's the math behind them?
I'll try. But basically what the White House has come up with is a formula not based on what the tariffs are imposed by other countries, but taking The goods trades deficit of a country and dividing it by the amount of goods that the U.S. imports from that country and getting a percentage and then chopping that in half and saying this is what our reciprocal tariff will be. The logic that the White House is giving for this is that the trade imbalance contains all of the various indicators. tariffs and non-tariff barriers that other countries impose that the White House sees as negative for the U.S.
How will Southeast Asia be impacted by the new trade policies?
With a huge global effect, Deb, you're there in Singapore. I'm curious if you could just weigh in on the significance of this policy pivot we're witnessing, one that really hits Asian countries particularly hard.
Yes, the Southeast Asian countries got hit, Vietnam very hard. China has all told their tariffs are now up to about 70% of goods going into the U.S. on top of the previous tariffs. So I think we feel that there could be a pretty significant rewriting and rewiring of supply chains that have been running through China. Southeast Asia, a lot of countries had moved away from China, out of China and into areas in particular like Vietnam. There was a massive move after the first round of Trump tariffs in his first term. And now Vietnam has huge tariffs. So I think the impact on the Chinese economy will be significant. This is hundreds of billions of dollars worth of exports that are now being tariffed.
So we think basically this will be kind of a diversion of a lot of these trade routes into other countries. What's unclear is where they could go, which countries could provide a bit of a safe harbor with lower tariffs as well. So there'll be a lot of very painful conversations going on in boardrooms around the world, as well as among policymakers in Asia.
What is the historical context of U.S. tariffs and their intended effects?
Lots of big decisions being made around the world, Alex. But back to the U.S., Trump saying he wants to bring America back to how its economy functioned before 1913, a date that got a lot of play in that speech in the Rose Garden yesterday, the year when the U.S. really began to undo its longstanding policies of protectionism.
Yeah. I mean, he sees tariffs as a revenue generator that can make up for income taxes. The question is whether that works in the modern world, because what happens when you impose a tariff is people try to avoid it. And so they don't want to pay the tax. And especially if you make the tax very, very high, like they've done with China, it just doesn't make sense to do those trades anymore.
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Chapters
6 chapters
1
What are the new U.S. tariffs and their global impact?
0:03–0:24
2
How will the auto industry be affected by the U.S. tariffs?
0:24–1:25
3
What are discounted reciprocal tariffs?
1:25–2:28
4
How will Southeast Asia be impacted by the new trade policies?
2:28–3:40
5
What is the historical context of U.S. tariffs and their intended effects?
3:40–5:41
6
How are world leaders reacting to the new U.S. trade policies?
5:41–13:41