The Tariffs: Rates and Affected Goods
President Trump has enacted new "reciprocal tariffs" ranging from 10% to 41% on a wide array of goods from dozens of countries, effective August 1, 2025.
Canada:
The tariff on Canadian goods not covered by the USMCA has been increased from 25% to 35%. This is a targeted measure, with the White House citing Canada's "inaction" on fentanyl and illicit drug trafficking. The new tariffs are expected to hit a broad range of sectors, including lumber, steel, aluminum, and automobiles. Goods that comply with the USMCA trade agreement are exempt.
Mexico:
Mexico received a temporary reprieve with a 90-day extension on the new tariffs. This allows for further negotiations, with the U.S. seeking commitments on drug trafficking and other trade issues.
European Union:
The EU and the U.S. have reached a framework agreement that sets a 15% tariff on most EU exports, including cars, pharmaceuticals, and semiconductors. This deal averted a far higher tariff of 30% that was initially threatened. Some "strategic" goods like aircraft and certain chemicals are subject to "zero-for-zero" tariffs.
Highest Rates:
The steepest tariffs are reserved for countries with significant trade deficits or a perceived lack of strategic alignment with the U.S. These include:
Syria: 41%
Laos & Myanmar: 40%
Switzerland, Iraq, and Serbia: 35%
Other Notable Rates:
India: 25%
Taiwan: 20%
United Kingdom: 10%
Brazil: 10%
Global Reactions and Retaliation
The tariffs have triggered a range of reactions, from sharp condemnation to negotiated compromise.
Canada:
Canadian Prime Minister Mark Carney expressed "disappointment" and stated that the government would "act to protect Canadian jobs, invest in our industrial competitiveness, buy Canadian and diversity our export markets." He pointed out that Canada accounts for only 1% of U.S. fentanyl imports. A mayor in a major Canadian city even called for a "buy nothing from USA" campaign. Canada is also reportedly considering its own retaliatory tariffs on U.S. steel and aluminum.
European Union:
The EU managed to secure a more favorable deal, avoiding a full-blown trade war. However, the agreement was not without criticism. Senior French officials called it an "unequal and unbalanced agreement," while German Chancellor Friedrich Merz welcomed the deal for providing stability to businesses, despite the remaining 15% tariff burden.
Asia:
Some countries, like Thailand and Cambodia, have hailed their new tariff rates as a "major success" after reaching deals with the U.S. Taiwan, a key player in the semiconductor industry, is still negotiating to get its 20% tariff rate lowered.
Economic Forecast
Economic analysts and institutions are providing a mixed outlook on the tariffs' long-term effects.
Domestic Impact:
The Penn Wharton Budget Model projects that the tariffs could reduce long-run U.S. GDP by about 6% and wages by 5%, with a middle-income household facing a lifetime loss of about $22,000. While the tariffs are generating significant revenue for the government, they are also expected to lead to higher prices for consumers and put a squeeze on U.S. factories that rely on imported parts.
Global Impact:
The International Monetary Fund (IMF) recently upgraded its global growth forecast for 2025 to 3%, suggesting that the impact of the tariffs may be less severe than initially feared. The IMF cited early stockpiling ahead of the tariffs and a weaker U.S. dollar as factors cushioning the blow. However, it warned that risks remain if trade tensions worsen and retaliatory tariffs become widespread, potentially disrupting global supply chains.
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