Trump announces sweeping new tariffs to promote US manufacturing, risking inflation and trade wars

WASHINGTON (AP) — President Donald Trump on Wednesday announced far-reaching new tariffs on nearly all US trading partners — a 34 per cent tax on imports from China and 20 per cent on the European Union, among others — that threaten to dismantle much of the architecture of the global economy and trigger broader trade wars.

Trump, in a Rose Garden announcement, said he was placing elevated tariff rates on dozens of nations that run trade surpluses with the United States, while imposing a 10 per cent baseline tax on imports from all countries in response to what he called an economic emergency.

The president, who said the tariffs were designed to boost domestic manufacturing, used aggressive rhetoric to describe a global trade system that the United States helped to build after World War II, saying "our country has been looted, pillaged, raped, plundered" by other nations.

The action amounts to a historic tax hike that could push the global order to a breaking point. It kickstarts what could be a painful transition for many Americans as middle-class essentials such as housing, autos and clothing are expected to become more costly, while disrupting the alliances built to ensure peace and economic stability.

Trump said he was acting to bring in hundreds of billions in new revenue to the US government and restore fairness to global trade.

"Taxpayers have been ripped off for more than 50 years," he said. "But it is not going to happen anymore."

Trump declared a national economic emergency to levy the tariffs. He has promised that factory jobs will return to the United States as a result of the taxes, but his policies risk a sudden economic slowdown as consumers and businesses could face sharp price hikes.

Trump was fulfilling a key campaign promise as he imposed what he called "reciprocal" tariffs on trade partners, acting without Congress under the 1977 International Emergency Powers Act. But his action Wednesday could undermine the voter mandate last year to combat inflation that helped return him to the White House after a four-year hiatus, a choice that could carry tremendous economic risks for the public. Several Republican senators, particularly from farm states, have questioned the wisdom of the tariffs.

"With today's announcement, US tariffs will approach levels not seen since the Smoot-Hawley Tariff Act of 1930, which incited a global trade war and deepened the Great Depression," said Scott Lincicome and Colin Grabow of the Cato Institute, a libertarian think tank.

The president's higher rates would hit foreign entities that sell more goods to the United States than they buy, meaning the tariffs could stay in place for some time as the administration expects other nations to lower their tariffs and other barriers to trade that it says led to a US$1.2 trillion trade imbalance last year.

The new tariffs will come on top of recent announcements of 25 per cent taxes on auto imports; levies against China, Canada and Mexico; and expanded trade penalties on steel and aluminium. Trump has also imposed tariffs on countries that import oil from Venezuela and he plans separate import taxes on pharmaceutical drugs, lumber, copper and computer chips.

None of the warning signs about a falling stock market or consumer sentiment turning morose have caused the administration to publicly second-guess its strategy, despite the risk of political backlash.

Senior administration officials, who insisted on anonymity to preview the new tariffs with reporters ahead of Trump's speech, said the taxes would raise hundreds of billions of dollars annually in revenues. They said the 10 per cent baseline rate existed to help ensure compliance, while the higher rates were based on the trade deficits run with other nations and then halved to reach the numbers that Trump presented in the Rose Garden.

The 10 per cent rate would be collected starting Saturday and the higher rates would be collected beginning April 9.

Trump removed the tariff exemptions on imports from China worth US$800 or less. He plans to remove the exemptions other nations have on imports worth US$800 or less once the federal government certifies that is has the staffing and resources in place.

Based on the possibility of broad tariffs that have been floated by some White House aides, most outside analyses by banks and think tanks see an economy tarnished by higher prices and stagnating growth.

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