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

WASHINGTON (AP) — President Donald Trump has announced far-reaching new tariffs on nearly all U.S. trading partners — including a 34% tax on imports from China and 20% on the European Union, among others. Trump placed the elevated tariff rates on dozens of nations that run meaningful trade surpluses with the United States, while imposing a 10% baseline tax on imports from all countries. The president 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 and plundered” by other nations. The action kickstarts what could be a painful transition for many Americans, who could find middle-class essentials such as housing, autos and clothing more costly.

WASHINGTON (AP) — President Donald Trump on Wednesday  (April 2, 2023) announced far-reaching new tariffs on nearly all U.S. trading partners — a 34% tax on imports from China and 20% 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 meaningful trade surpluses with the United States, while imposing a 10% 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 and 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 U.S. 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 jeopardize Trump’s voter mandate in last year’s election to combat inflation. Several Republican senators, particularly from farm and border states, have questioned the wisdom of the tariffs. U.S. stock market futures sold off sharply overnight in anticipation of the economy weakening, after having already dropped since the start of this year.

“With today’s announcement, U.S. 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. The administration essentially calculated its tariff rates to raise revenues equal in size to the trade imbalances with those nations. Trump then halved that rate in act that he described as “very kind.”

The White House says the tariffs and other trade imbalances led to an $1.2 trillion imbalance last year. Administration officials suggested it could take an extended set of actions by other countries to bring down the new tariffs their imports now face, and retaliatory tariffs by those countries could make the situation worse.

Olu Sonola, head of U.S. economic research at Fitch Ratings, said the average tariff rate charged by the United States would increase to roughly 22% from 2.5% in 2024.

“Many countries will likely end up in a recession,” Sonola said. “You can throw most forecasts out the door, if this tariff rate stays on for an extended period of time.”

The new tariffs will come on top of recent announcements of 25% taxes on auto imports; levies against China, Canada and Mexico; and expanded trade penalties on steel and aluminum. 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.

Canada and Mexico would not face higher rates on what they’re already being charged by Trump in what he says is an effort to stop illegal immigration and drug smuggling. As of now, goods that comply with the USMCA North American trade pact would be excluded from those tariffs.

But the 20% charged on imports from China due to its role in fentanyl production would largely be added to the 34% announced by Trump. The specific products that Trump is tariffing, such as autos, would be exempt from the tariffs unveiled Wednesday, as would products such as pharmaceutical drugs that he plans to tariff at a later date.

Threats of backlash

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% 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% 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 $800 or less. He plans to remove the exemptions other nations have on imports worth $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.

Trump would be applying these tariffs on his own; he has ways of doing so without congressional approval. That makes it easy for Democratic lawmakers and policymakers to criticize the administration if the uncertainty expressed by businesses and declining consumer sentiment are signs of trouble to come.

Rep. Suzan DelBene, D-Wash., said the tariffs are “part of the chaos and dysfunction” being generated across the Trump administration. The chair of the Democratic Congressional Campaign Committee stressed that Trump should not have the sole authority to raise taxes as he intends without getting lawmakers’ approval, saying that Republicans so far have been “blindly loyal.”

“The president shouldn’t be able to do that,” DelBene said. “This is a massive tax increase on American families, and it’s without a vote in Congress. … President Trump promised on the campaign trail that he would lower costs on day one. Now he says he doesn’t care if prices go up — he’s broken his promise.”

Even Republicans who trust Trump’s instincts have acknowledged that the tariffs could disrupt an economy with an otherwise healthy 4.1 % unemployment rate.

“We’ll see how it all develops,” said House Speaker Mike Johnson, R-La. “It may be rocky in the beginning. But I think that this will make sense for Americans and help all Americans.”

Allies brace themselves

Longtime trading partners are preparing their own countermeasures. Canada has imposed some in response to the tariffs that Trump tied to the trafficking of fentanyl. The European Union, in response to the steel and aluminum tariffs, put taxes on 26 billion euros ($28 billion) worth of U.S. goods, including on bourbon, which prompted Trump to threaten a 200% tariff on European alcohol.

Many allies feel they have been reluctantly drawn into a confrontation by Trump, who routinely says America’s friends and foes have essentially ripped off the United States with a mix of tariffs and other trade barriers.

The flip side is that Americans also have the incomes to choose to buy designer gowns by French fashion houses and autos from German manufacturers, whereas World Bank data show the EU has lower incomes per capita than the U.S.

The Chinese government delivered a measured response to the new tariffs, saying in a statement: “China believes that protectionism leads nowhere, and trade and tariff wars have no winners. This has been widely recognized in the international community.”

Canadian Prime Minister Mark Carney said Trump’s new tariffs would “fundamentally change the international trading system.” He noted that the tariffs already in place against his country and those Trump says he plans to add will be fought with countermeasures.

“In a crisis, it’s important to come together and it’s essential to act with purpose and with force and that’s what we will do,” Carney said.

Italy’s conservative Premier Giorgia Meloni said Trump’s new tariffs against the EU were “wrong” and Italy would work toward an agreement with the United States to avoid a trade war that would weaken all involved.

Basic Fun CEO Jay Foreman, whose company is behind such classic toys as Tonka trucks, Lincoln Logs and Care Bears, has been working hard to come up with new ways to cut tariff-related costs like reduce packaging and eliminate batteries with the products.

But Trump’s announcement that he plans a 34% increase in tariffs on Chinese imports has solidified his decision to hike prices. Most of the company’s toys are made in China. He said the Tonka Mighty Dump Truck will go from $29.99 to $39.99 this holiday season, possibly even $45.

“There is no other way,” he said.

WASHINGTON (AP) — President Donald Trump is set to launch a barrage of so-called reciprocal tariffs on friend and foe alike. Wednesday’s (April 2, 2025) tariffs come on what the Republican president has dubbed “Liberation Day” to free the U.S. from what he says are years of unfair trade practices. By most economists’ assessments, the risky move threatens to plunge the economy into a downturn and mangle decades-old alliances. The White House is exuding confidence despite the political and financial gamble being undertaken. Importers would likely pass some of the cost of the taxes on to consumers. The Budget Lab at Yale University estimates a 20% universal tariff would cost the average household $3,400 to $4,200.

 

WASHINGTON (AP) — President Donald Trump says that he will double his planned tariffs on steel and aluminum from 25% to 50% for Canada, escalating a trade war with the United States’ northern neighbor. Trump says the increase of the tariffs set to take effect on Wednesday (March 12, 2025) is a response to the price increases that the provincial government of Ontario put on electricity sold to the United States. Trump says on Truth Social that he will double the tariffs. The U.S. stock market promptly fell following his social media post, triggering more concerns after a brutal selloff on Monday that puts Trump under pressure to show he has a legitimate plan to grow the economy instead of perhaps pushing it into a recession.

WASHINGTON (AP) — President Donald Trump said Tuesday (March 12, 2025 that he will double his planned tariffs on steel and aluminum from 25% to 50% for Canada, escalating a trade war with the United States’ northern neighbor.

Trump said on social media that the increase of the tariffs set to take effect on Wednesday is a response to the price increases that the provincial government of Ontario put on electricity sold to the United States.

“I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD,” Trump posted Tuesday on Truth Social.

The U.S. president has given a variety of explanations for his antagonism of Canada, saying that his separate 25% tariffs are about fentanyl smuggling and voicing objections to Canada putting high taxes on dairy imports that penalize U.S. farmers. But he continued to call for Canada to become part of the United States as a solution, a form of taunting that has infuriated Canadian leaders.

“The only thing that makes sense is for Canada to become our cherished Fifty First State,” Trump posted on Tuesday. “This would make all Tariffs, and everything else, totally disappear.”

The U.S. stock market promptly fell following his social media post, triggering more concerns after a brutal selloff on Monday that puts Trump under pressure to show he has a legitimate plan to grow the economy instead of perhaps pushing it into a recession.

Trump was set to deliver a Tuesday afternoon address to the Business Roundtable, a trade association of CEOs that during the 2024 campaign he wooed with the promise of lower corporate tax rates for domestic manufacturers. But his tariffs on Canada, Mexico, China, steel, aluminum — with plans for more to possibly come on Europe, Brazil, South Korea, pharmaceutical drugs, copper, lumber and computer chips — would amount to a massive tax hike.

The stock market’s vote of no confidence over the past two weeks puts the president in a bind between his enthusiasm for taxing imports and his brand as a politician who understands business based on his own experiences in real estate, media and marketing.

Harvard University economist Larry Summers, a former treasury secretary for the Clinton administration, on Monday put the odds of a recession at 50-50.

“All the emphasis on tariffs and all the ambiguity and uncertainty has both chilled demand and caused prices to go up,” Summers posted on X. “We are getting the worst of both worlds – concerns about inflation and an economic downturn and more uncertainty about the future and that slows everything.”

The investment bank Goldman Sachs revised down its growth forecast for this year to 1.7% from 2.2% previously. It modestly increased its recession probability to 20% “because the White House has the option to pull back policy changes if downside risks begin to look more serious.”

Trump has tried to assure the public that his tariffs would cause a bit of a “transition” to the economy, with the taxes prodding more companies to begin the years-long process of relocating factories to the United States to avoid the tariffs. But he set off alarms in an interview broadcast on Sunday in which he didn’t rule out a possible recession.

“I hate to predict things like that,” Trump said on Fox News Channel’s “Sunday Morning Futures.” ”There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing. And there are always periods of — it takes a little time. It takes a little time. But I don’t — I think it should be great for us. I mean, I think it should be great.”

The promise of great things ahead did not eliminate anxiety, with the S&P 500 stock index tumbling 2.7% on Monday in an unmistakable Trump slump that has erased the market gains that greeted his victory in November 2024. The S&P 500 index fell roughly 0.4% in Tuesday morning trading.

The White House after the markets closed on Monday highlighted that the tariffs were prompting companies such as Honda, Volkswagen and Volvo to consider new investments in U.S. factories.

It issued a statement that Trump’s combination of tariffs, deregulations and increased energy production had led industry leaders to promise to “create thousands of new jobs.”

The significance of thousands of additional jobs was unclear, as the U.S. economy added 2.2 million jobs last year alone, according to the Bureau of Labor Statistics.

WASHINGTON (AP) — President Donald Trump is granting a one-month exemption on his stiff new tariffs on imports from Mexico and Canada for U.S. automakers. Worries persist that the newly launched trade war could crush domestic manufacturing. The announcement comes after Trump spoke with leaders of the “big 3” automakers, Ford, General Motors, and Stellantis on Wednesday (March 5, 2025). Asked if 30 days was enough for the auto sector to prepare for the new taxes, White House press secretary Karoline Leavitt says Trump told them: “He told them that they should get on it, start investing, start moving, shift production here to the United States of America where they will pay no tariff.”

WASHINGTON (AP) — President Donald Trump is granting a one-month exemption on his stiff new tariffs on imports from Mexico and Canada for U.S. automakers, as worries persist that the newly launched trade war could crush domestic manufacturing.

The pause comes after Trump spoke with leaders of the “big 3” automakers, Ford, General Motors and Stellantis, on Wednesday (March 5, 2025), according to White House press secretary Karoline Leavitt.

Asked if 30 days was enough for the auto sector to prepare for the new taxes, Leavitt said Trump was blunt with the automakers seeking an exemption: “He told them that they should get on it, start investing, start moving, shift production here to the United States of America where they will pay no tariff.”

Shares of big U.S., Asian and European automakers jumped as much as 6% after the announcement.

Pausing the 25% taxes on autos traded through the North American trade pact USMCA would only delay a broader reckoning to take place on April 2, when Trump is set to impose broad “reciprocal” tariffs to match the taxes and subsidies that other countries charge on imports.

Leavitt said the president is “open” to hearing requests from other industries seeking exemptions as well.

The White House repeatedly insisted that it would not grant exemptions and the sudden turnaround reflects the economic and political problems being created by Trump’s day-old tariffs. While the Republican president sees them as enriching the United States, his plans to tax imports have alienated allies and caused anxiety about slower economic growth and accelerating inflation.

Trump has long promised to impose tariffs, but his opening weeks in the White House have involved aggressive threats, surprise suspensions and allies unclear at what the U.S. president is actually trying to achieve. Based off various Trump administration statements, the tariffs on Canada, Mexico and China imposed on Tuesday are about stopping illegal immigration, blocking fentanyl smuggling, closing the trade gap, balancing the federal budget and other nations showing more respect for Trump.

The U.S. president engaged in a phone call on Wednesday with Canadian Prime Minister Justin Trudeau, as U.S. Commerce Secretary Howard Lutnick had suggested that the administration was looking to meet Canada and Mexico “in the middle.”

But Trudeau refused to lift Canada’s retaliatory tariffs so long as Trump continues with his new taxes on imports from Canada, a senior government official told The Associated Press. The official confirmed the stance on condition of anonymity as they were not authorized to speak publicly on the matter.

“Both countries will continue to be in contact today,” Trudeau’s office said.

Ontario Premier Doug Ford earlier told The AP that the auto sector in the U.S. and Canada would last approximately 10 days before they start shutting down the assembly lines in the U.S. and in Ontario.

“People are going to lose their jobs,” he said.

The prospect of a trade war appears to be an ongoing feature of the Trump administration, rather than a brief skirmish. In addition to his upcoming reciprocal tariffs that could strike the European Union, India, Brazil, South Korea, Canada and Mexico, Trump wants to tax imports of computer chips, pharmaceutical drugs and autos. He also closed exemptions on his 2018 steel and aluminum tariffs and is investigating tariffs on copper as well.

Tariffs are taxes paid by importers in the countries receiving the goods, so the cost could largely be passed along to U.S. consumers and businesses in the form of higher prices. In his Tuesday night speech to a joint session of Congress, Trump tried to minimize the financial pain as a “ little disturbance.”

“It may be a little bit of an adjustment period,” he said after claiming that farmers would benefit from reciprocal tariffs on countries that have tariffs on U.S. exports. “You have to bear with me again and this will be even better.”

The U.S. president has predicted that tariffs will lead to greater investment inside the United States, creating more factory jobs and boosting growth in the long term.

On Tuesday, Trump put 25% taxes on imports from Mexico and Canada, taxing Canadian energy products such as oil and electricity at a lower 10% rate. The president also doubled the 10% tariff he placed on China to 20%.

The administration has claimed that the tariffs are about stopping the smuggling of drugs such as fentanyl, with aides asserting that this is about a “drug war” rather than a “trade war.” U.S. customs agents seized just 43 pounds (19.5 kilograms) of fentanyl at the northern border the last fiscal year.

Trudeau said on Tuesday that his country would plaster tariffs on over $100 billion (U.S. dollars) of American goods over the course of 21 days, stressing that the United States had abandoned a long-standing friendship.

“Today, the United States launched a trade war against Canada, their closest partner and ally, their closest friend. At the same time, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense,” Trudeau said on Tuesday.

Mexico indicated it would announce its own countermeasures on Sunday.

Beijing responded with tariffs of up to 15% on a wide array of U.S. farm exports. It also expanded the number of U.S. companies subject to export controls and other restrictions by about two dozen.

“If war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,” China’s embassy to the United States posted on X on Tuesday night.

In response to China, U.S. Defense Secretary Pete Hegseth told Fox News Channel’s “Fox & Friends” that the United States is “prepared” for war against the world’s second largest economy.

“Those who long for peace must prepare for war,” Hegseth said Wednesday morning. “If we want to deter war with the Chinese or others, we have to be strong.”

Leavitt is one of three administration officials who face a lawsuit from The Associated Press on First- and Fifth-amendment grounds. The AP says the three are punishing the news agency for editorial decisions they oppose. The White House says the AP is not following an executive order to refer to the Gulf of Mexico as the Gulf of America.

WASHINGTON (AP) — President Donald Trump’s trade war against America’s three biggest trading partners drew immediate retaliation from Mexico, Canada and China. The president’s latest tariffs also sent financial markets into a tailspin Tuesday (March 4, 2025) as the U.S. faced the threat of rekindled inflation and paralyzing uncertainty for business. Just after midnight, Trump imposed 25% taxes on Mexican and Canadian imports, though he limited the levy to 10% on Canadian energy. Trump also doubled the tariff he slapped last month on Chinese products to 20%. Beijing retaliated with tariffs of up to 15% on a wide array of U.S. farm exports. Canada planned to put tariffs on more than $100 billion of American goods.

WASHINGTON (AP) — President Donald Trump launched a trade war Tuesday (March 4, 2025) against America’s three biggest trading partners, drawing immediate retaliation from Mexico, Canada and China and sending financial markets into a tailspin as the U.S. faced the threat of rekindled inflation and paralyzing uncertainty for business.

Just after midnight, Trump imposed 25% taxes, or tariffs, on Mexican and Canadian imports, though he limited the levy to 10% on Canadian energy. Trump also doubled the tariff he slapped last month on Chinese products to 20%.

Beijing retaliated with tariffs of up to 15% on a wide array of U.S. farm exports. It also expanded the number of U.S. companies subject to export controls and other restrictions by about two dozen.

Canadian Prime Minister Justin Trudeau said his country would plaster tariffs on more than $100 billion of American goods over the course of 21 days.

“Today the United States launched a trade war against Canada, their closest partner and ally, their closest friend. At the same, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense,” Trudeau said.

Mexican President Claudia Sheinbaum said Mexico will respond to the new taxes with its own retaliatory tariffs. Sheinbaum said she will announce the products Mexico on Sunday. The delay might indicate that Mexico still hopes to de-escalate Trump’s trade war.

The president is abandoning the free trade policies the United States pursued for decades after World War II. He argues that open trade cost America millions of factory jobs and that tariffs are the path to national prosperity. He rejects the views of mainstream economists who contend that such protectionism is costly and inefficient.

Import taxes are “a very powerful weapon that politicians haven’t used because they were either dishonest, stupid or paid off in some other form,” Trump said Monday. “And now we’re using them.”

Dartmouth College economist Douglas Irwin, author of a 2017 history of U.S. tariff policy, has calculated that Tuesday’s hikes will lift America’s average tariff from 2.4% to 10.5%, the highest level since the 1940s. “We’re in a new era for sure.”

U.S. markets dropped sharply Monday after Trump said there was “no room left” for negotiations that could lower the tariffs. Shares were mostly lower Tuesday after they took effect.

The Yale University Budget Lab estimates that Trump’s tariffs amount to a tax hike of $1.4 trillion to $1.5 trillion over 10 years and would disproportionately hit the poor.

Trump has said tariffs are intended to address drug trafficking and illegal immigration. But he’s also said the tariffs will come down only if the U.S. trade deficit narrows.

The American president has injected a disorienting volatility into the world economy, leaving it off balance as people wonder what he will do next.

During his first term, Trump imposed tariffs only after lengthy investigations — into the national security implications of relying on foreign steel, for example, said Michael House, co-chair of the international trade practice at the Perkins Coie law firm.

But by declaring a national emergency last month involving the flow of immigrants and illicit drugs across U.S. borders, “he can modify these tariffs with a stroke of the pen,’’ House said. “It’s chaotic.”

Democratic lawmakers were quick to criticize the tariffs.

“Donald Trump is not a king,” Rep. Gregory Meeks, top Democrat on the House Foreign Affairs Committee, said. “Presidents don’t get to invent emergencies to justify bad policies. Abusing emergency powers to wage an economic war on our closest allies isn’t leadership — it’s dangerous.”

Even some Republican senators raised alarms. “Maine and Canada’s economy are integrated,” said Sen. Susan Collins, R-Maine, explaining that much of the state’s lobsters and blueberries are processed in Canada and then sent back to the U.S.

Truck driver Carlos Ponce, 58, went about business as usual Tuesday morning, transporting auto parts from Ciudad Juarez, Mexico, to El Paso, Texas, just as he’s done for decades.

Like many on the border, he was worried about the fallout from the tariffs. “Things could change drastically,” Ponce said. Truckers could lose their jobs or have to drive farther to coastal ports as Mexican manufacturers look for trading partners beyond the U.S.

Alan Russell, head of Tecma, which helps factories set up in places like Ciudad Juarez, is skeptical that Trump’s tariffs will bring manufacturing back to the United States.

“Nobody is going to move their factory until they have certainty,” Russell said. Just last week, he said, Tecma helped a North Carolina manufacturer that moved to Mexico because it couldn’t find enough workers in the United States.

U.S. businesses near the Canadian border scrambled to deal with the impact. Gutherie Lumber in suburban Detroit reached out Tuesday to Canadian suppliers about the cost of 8-foot wood studs. About 15% of the lumber at Gutherie yard in Livonia, Michigan, comes from Canada.

Sales manager Mike Mahoney said Canadian suppliers are already raising prices. “They’re putting that 25% on studs.” Builders will strain to stay within their budgets.

Retaliation will likely pinch U.S. businesses.

After years of effort and thousands of dollars in investment, Tom Bard, a Kentucky craft bourbon distiller, gained a foothold in the Canadian provinces of British Columbia and Alberta and watched his sales grow north of the border. Now Kentucky bourbon is in Canada’s crosshairs, and an order from his Canadian distributors is on hold.

“That hurts,” he said. At his small distillery “every single pallet that goes out the door makes a huge difference … The last thing you want is to have an empty spot where your bottles are supposed to be on a shelf.”

Bard co-owns the Bard Distillery with his wife, Kim, in western Kentucky’s Muhlenberg County, about 135 miles (217 kilometers) southwest of Louisville, Kentucky.

Trump overwhelmingly carried Kentucky in the November election. In Muhlenberg County, Trump defeated Kamala Harris by a more than 3-to-1 margin.

The China tariffs threaten the U.S. toy industry. Greg Ahearn, president and CEO of the Toy Association, said the 20% tariffs on Chinese goods will be “crippling,” as nearly 80% of toys sold in the U.S. are made in China.

Steve Rad, CEO of the Austin, Texas-based toy maker Abacus Brands Inc., hopes to find ways to avoid raising prices in the wake of the 20% tax on Chinese goods.

The company will have to “go to war” with its pricing and cost structure and figure out how to avoid penalizing consumers. For one product, a $39.99 kit that teaches children how volcanoes work, he’s thinking of switching to cheaper, lower-quality paper.

Rachel Lutz owns the Peacock Room, four women’s boutique shops with about 15 employees in Detroit. She’s been bracing for the tariffs but doesn’t understand the logic behind them.

“I’m struggling to see the wisdom in picking a fight with our largest trading partner that we’ve had historically wonderful relationships with,” Lutz said Tuesday from her shop. “I’m struggling to really understand how they can’t see that will profoundly impact our economy in ways that I think the American consumer has not predicted. We’re about to find out.”

WASHINGTON (AP) — President Donald Trump’s long-threatened tariffs against Canada and Mexico have gone into effect, kicking off a trade war with America’s neighbors. Starting just past midnight Tuesday (March 4, 2025), imports from Canada and Mexico are now taxed at 25%, with Canadian energy products subject to 10% import duties. In addition, the 10% tariff that Trump placed on Chinese imports in February was doubled to 20%. China retaliated Tuesday with additional tariffs of up to 15% on a wide array of U.S. farm exports, among other measures. Canada also has announced tariffs on American goods. Trump’s moves have raised inflation fears, even as he has promised the American public that taxes on imports are the easiest path to national prosperity.

WASHINGTON (AP) — President Donald Trump’s long-threatened tariffs against Canada and Mexico went into effect Tuesday (March 4, 2025), putting global markets on edge and setting up costly retaliations by the United States’ North American allies.

Starting just past midnight, imports from Canada and Mexico are now to be taxed at 25%, with Canadian energy products subject to 10% import duties.

The 10% tariff that Trump placed on Chinese imports in February was doubled to 20%, and Beijing retaliated Tuesday with tariffs of up to 15% on a wide array of U.S. farm exports. It also expanded the number of U.S. companies subject to export controls and other restrictions by about two dozen.

Canadian Prime Minister Justin Trudeau said his country would slap tariffs on more than $100 billion of American goods over the course of 21 days. Mexico didn’t immediately detail any retaliatory measures.

The U.S. president’s moves raised fears of higher inflation and the prospect of a trade war even as he promised the American public that taxes on imports are the easiest path to national prosperity. He has shown a willingness to buck the warnings of mainstream economists and put his own public approval on the line, believing that tariffs can fix what ails the country.

“It’s a very powerful weapon that politicians haven’t used because they were either dishonest, stupid or paid off in some other form,” Trump said Monday at the White House. “And now we’re using them.”

U.S. markets dropped sharply Monday after Trump said there was “no room left” for negotiations that could lower the tariffs. Shares in Europe and Asia were mostly lower Tuesday after they took effect.

The Canada and Mexico tariffs were supposed to begin in February, but Trump agreed to a 30-day suspension to negotiate further with the two largest U.S. trading partners. The stated reason for the tariffs is to address drug trafficking and illegal immigration, and both countries say they’ve made progress on those issues. But Trump has also said the tariffs will only come down if the U.S. trade imbalance closes, a process unlikely to be settled on a political timeline.

The tariffs may be short-lived if the U.S. economy suffers. But Trump could also impose more tariffs on the European Union, India, computer chips, autos and pharmaceutical drugs. The American president has injected a disorienting volatility into the world economy, leaving it off balance as people wonder what he’ll do next.

“It’s chaotic, especially compared to the way we saw tariffs rolled out in the first (Trump) administration,” said Michael House, co-chair of the international trade practice at the Perkins Coie law firm. “It’s unpredictable. We don’t know, in fact, what the president will do.’’

Democratic lawmakers were quick to criticize the tariffs, and even some Republican senators raised alarms.

Sen. Susan Collins, R-Maine, said she’s “very concerned” about the tariffs going into effect because of her state’s proximity to Canada.

“Maine and Canada’s economy are integrated,” Collins said, explaining that much of the state’s lobsters and blueberries are processed in Canada and then sent back to the U.S.

The world economy is now caught in the fog of what appears to be a trade war.

Even after Trump announced Monday that the tariffs were going forward, Canadian officials were still in touch with their U.S. counterparts.

“The dialogue will continue, but we are ready to respond,” Canadian Defense Minister Bill Blair said in Ottawa as he went into a special Cabinet meeting on U.S.-Canada relations. “There are still discussions taking place.”

Shortly after Blair spoke, Trudeau said Canada would impose 25% tariffs on $155 billion Canadian ($107 billion U.S.) worth of American goods, starting with tariffs on $30 billion Canadian ($21 billion U.S.) worth of goods immediately and on the remaining amount on American products in three weeks.

“Our tariffs will remain in place until the U.S. trade action is withdrawn, and should U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Trudeau said.

The White House would like to see a drop in seizures of fentanyl inside the United States, not just on the northern and southern borders. Administration officials say that seizures of fentanyl last month in everywhere from Louisiana to New Jersey had ties to foreign cartels.

Damon Pike, technical practice leader for customs and trade services at the tax and consulting firm BDO, suggested the responses of other countries could escalate trade tensions and possibly increase the economic pressure points.

“Canada has their list ready,” Pike said. “The EU has their list ready. It’s going to be tit for tat.’’

Tim Houston, the leader of Canada’s Atlantic coast province of Nova Scotia, said he would direct the Nova Scotia Liquor Corporation to remove all U.S. alcohol from store shelves. Houston also said his government will limit access to provincial procurement for American businesses and double the cost for commercial vehicles from the United States on a tolled highway.

The Trump administration has suggested inflation will not be as bad as economists claim, saying tariffs can motivate foreign companies to open factories in the United States. On Monday, Trump announced that Taiwan Semiconductor Manufacturing Company, the computer chipmaker, would be investing $100 billion in domestic production.

Still, it can take time to relocate factories spread across the world and train workers with the skills they need.

Greg Ahearn, president and CEO of The Toy Association, said the 20% tariffs on Chinese goods will be “crippling” for the toy industry, as nearly 80% of toys sold in the U.S. are made in China.

“There’s a sophistication of manufacturing, of the tooling,” he said. “There’s a lot of handcrafting that is part of these toys that a lot of people don’t understand … the face painting, the face masks, the hair weaving, the hair braiding, the cut and sew for plush to get it to look just so. All of that are very high hands, skilled labor that has been passed through generations in the supply chain that exists with China.”

For a president who has promised quick results, Ahearn added a note of caution about how quickly U.S. factories could match their Chinese rivals.

“That can’t be replicated overnight,” he said.

WASHINGTON (AP) — President Donald Trump on Thursday (Feb. 13, 2025) rolled out his plan to increase U.S. tariffs to match the tax rates that other countries charge on imports, possibly triggering a broader economic confrontation with allies and rivals alike as he hopes to eliminate any trade imbalances.

“I’ve decided for purposes of fairness that I will charge a reciprocal tariff,” Trump said in the Oval Office at the proclamation signing. “It’s fair to all. No other country can complain.”

Trump’s Republican administration has insisted that its new tariffs would equalize the ability of U.S. and foreign manufacturers to compete, though under current law these new taxes would likely be paid by American consumers and businesses either directly or in the form of higher prices. The rates to be charged would be studied over the weeks ahead, which could create the potential space to resolve challenges or prolong a degree of suspense and uncertainty.

The politics of tariffs could easily backfire on Trump if his agenda pushes up inflation and grinds down growth, making this a high stakes wager for a president eager to declare his authority over the U.S. economy.

The tariff increases would be customized for each country with the partial goal of starting new trade negotiations. But other nations might also feel the need to respond with their own tariff increases on American goods. As a result, Trump may need to find ways to reassure consumers and businesses to counteract any uncertainty caused by his tariffs.

The United States does have low average tariffs, but Trump’s proclamation as written would seem designed to jack up taxes on imports, rather than pursue fairness as the United States also has regulatory restrictions that limit foreign products, said Scott Lincicome, a trade expert at the Cato Institute, a libertarian think tank.

“It will inevitably mean higher tariffs, and thus higher taxes for American consumers and manufacturers,” he said. Trump’s tariffs plan “reflects a fundamental misunderstanding of how the global economy works.”

Trump’s proclamation identifies value-added taxes — which are similar to sales taxes and common in the European Union — as a trade barrier to be included in any reciprocal tariff calculations. Other nations’ tariff rates, subsidies to industries, regulations and possible undervaluing of currencies would be among the factors the Trump administration would use to assess tariffs.

A senior White House official, who insisted on anonymity to preview the details on a call with reporters, said that the expected tariff revenues would separately help to balance the expected $1.9 trillion budget deficit. The official also said the reviews needed for the tariffs could be completed within a matter of weeks or a few months.

The possible tax increases on imports and exports could be large compared to the comparatively modest tariffs that Trump imposed during his first term. Trade in goods between Europe and the United States nearly totaled $1.3 trillion last year, with the United States exporting $267 billion less than it imports, according to the Census Bureau.

The president has openly antagonized multiple U.S. trading partners over the past several weeks, levying tariff threats and inviting them to retaliate with import taxes of their own that could send the economy hurtling into a trade war.

Trump has put an additional 10% tariff on Chinese imports due to that country’s role in the production of the opioid fentanyl. He also has readied tariffs on Canada and Mexico, America’s two largest trading partners, that could take effect in March after being suspended for 30 days. On top of that, on Monday, he removed the exemptions from his 2018 steel and aluminum tariffs. And he’s mused about new tariffs on computer chips and pharmaceutical drugs.

But by Trump’s own admission, his separate tariffs for national security and other reasons would be on top of the reciprocal tariffs, meaning that the playing field would not necessarily be level.

In the case of the 25% steel and aluminum tariffs, “that’s over and above this,” Trump said. Autos, computer chips and pharmaceuticals would also be tariffed at higher rates than what his reciprocal plan charges, he said.

The EU, Canada and Mexico have countermeasures ready to inflict economic pain on the United States in response to Trump’s actions, while China has already taken retaliatory steps with its own tariffs on U.S. energy, agricultural machinery and large-engine autos as well as an antitrust investigation of Google.

The White House has argued that charging the same import taxes as other countries do would improve the fairness of trade, potentially raising revenues for the U.S. government while also enabling negotiations that could eventually improve trade.

But Trump is also making a political wager that voters can tolerate higher inflation levels. Price spikes in 2021 and 2022 severely weakened the popularity of then-President Joe Biden, with voters so frustrated by inflation eroding their buying power that they chose last year to put Trump back in the White House to address the problem. Inflation has risen since November’s election, with the government reporting on Wednesday that the consumer price index is running at an annual rate of 3%.

The Trump team has decried criticism of its tariffs even as it has acknowledged the likelihood of some financial pain. It says that the tariffs have to be weighed against the possible extension and expansion of Trump’s 2017 tax cuts as well as efforts to curb regulations and force savings through the spending freezes and staff reductions in billionaire adviser Elon Musk’s Department of Government Efficiency initiative.

But an obstacle to this approach might be the sequencing of the various policies and the possibilities of a wider trade conflict stifling investment and hiring amid the greater inflationary pressures.

Analysts at the bank Wells Fargo said in a Thursday report that the tariffs would likely hurt growth this year, just as the possibility of extended and expanded tax cuts could help growth recover in 2026.

Trump tried to minimize the likelihood that his policies would trigger anything more than a brief bump in inflation. But when asked if he would ask agencies to analyze the possible impact on prices, the president declined.

“There’s nothing to study,” Trump said. “It’s going to go well.”

PALM BEACH, Fla. (AP) — New trade penalties against Canada, Mexico and China that President Donald Trump plans to impose represent an aggressive early move against America’s three largest trading partners, but at the risk of higher inflation and possible disruptions to the global economy. In Trump’s view, the 25% tariffs against the two North American allies and a 10% tax on imports from Washington’s chief economic rival are a way for the United States to throw around its financial heft to reshape the world. The Republican president is making a major political bet with this expected move on Saturday that his actions won’t worsen inflation, cause financial aftershocks that could destabilize the worldwide economy or provoke a voter backlash.

PALM BEACH, Fla. (AP) — New trade penalties against Canada, Mexico and China that President Donald Trump plans to impose Saturday (Feb. 1, 2025) represent an aggressive early move against America’s three largest trading partners, but at the risk of higher inflation and possible disruptions to the global economy.

In Trump’s view, the 25% tariffs against the two North American allies and a 10% tax on imports from Washington’s chief economic rival are a way for the United States to throw around its financial heft to reshape the world.

“You see the power of the tariff,” Trump told reporters Friday. “Nobody can compete with us because we have by far the biggest piggy bank.”

The Republican president is making a major political bet that his actions will not worsen inflation, cause financial aftershocks that could destabilize the worldwide economy or provoke a voter backlash. AP VoteCast, an extensive survey of the electorate in last year’s election, found that the U.S. was split on support for tariffs.

It is possible that the tariffs could be short-lived if Canada and Mexico can reach a deal with Trump to more aggressively address illegal immigration and fentanyl smuggling. Trump’s move against China is also tied to fentanyl and comes on top of existing import taxes.

Trump is honoring promises he made in the 2024 White House campaign that are at the core of his economic and national security philosophy, though Trump allies had played down the threat of higher import taxes as mere negotiating tactics.

The president is preparing more import taxes in a sign that tariffs will be an ongoing part of his second term. On Friday, he mentioned imported computer chips, steel, oil and natural gas, as well as against copper, pharmaceutical drugs and imports from the European Union — moves that could essentially pit the U.S. against much of the global economy.

Trump’s intentions drew a swift response from financial markets, with the S&P 500 stock index slumping after his announcement Friday.

It is unclear how the tariffs could affect the business investments that Trump said would happen because of his plans to cut corporate tax rates and remove regulations. Tariffs tend to raise prices for consumers and businesses by making it more expensive to bring in foreign goods.

Many voters turned to Trump in the November election on the belief that he could better handle the inflation that spiked under Democratic President Joe Biden. But inflation expectations are creeping upward in the University of Michigan’s index of consumer sentiment as respondents expect prices to rise by 3.3%. That would be higher than the actual 2.9% annual inflation rate in December’s consumer price index.

Trump has said that the government should raise more of its revenues from tariffs, as it did before the income tax became part of the Constitution in 1913. He claims, despite economic evidence to the contrary, that the U.S. was at its wealthiest in the 1890s under President William McKinley.

“We were the richest country in the world,” Trump said Friday. “We were a tariff country.”

Trump, who has aspired to remake America by using McKinley’s model, is conducting a real-time experiment that the economists who warn tariffs lead to higher prices are wrong. While the tariffs in his first term did not meaningfully increase overall inflation, he is now looking at tariffs on a much grander scale that could push up prices if they’re enduring policies.

Trump has fondly called McKinley, an Ohioan elected president in 1896 and 1900, the “tariff sheriff.”

Brad Setser, a senior fellow at the Council on Foreign Relations, noted on the social media site X that the tariffs “if sustained, would be a massive shock — a much bigger move in one weekend than all the trade action that Trump took in his first term.”

Setser noted that the tariffs on China without exemptions could raise the price of iPhones, which would test just how much power corporate America has with Trump. Apple’s CEO Tim Cook attended Trump’s inauguration last month.

Recent research on Trump’s various tariff options by a team of economists suggested the trade penalties would be drags on growth in Canada, Mexico, China and the U.S. But Wending Zhang, a Cornell University economist who worked on the research, said the fallout would be felt more in Canada and Mexico because of their reliance on the U.S. market.

Canadian Prime Minister Justin Trudeau told Canadians that they could be facing difficult times ahead, but that Ottawa was prepared to respond with retaliatory tariffs if needed and that the U.S. penalties would be self-sabotaging.

Trudeau said Canada is addressing Trump’s calls on border security by implementing a CDN$1.3 billion (US$90 million) border plan that includes helicopters, new canine teams and imaging tools.

Mexico President Claudia Sheinbaum has stressed that her country has acted to reduce illegal border crossings and the illicit trade in fentanyl. While she has emphasized the ongoing dialogue since Trump first floated the tariffs in November, she has said that Mexico is ready to respond, too.

Mexico has a “Plan A, Plan B, Plan C for what the United States government decides,” she said.

Trump still has to get a budget, tax cuts and increase to the government’s legal borrowing authority through Congress. The outcome of his tariff plans could strengthen his hand or weaken it.

Democrats are sponsoring legislation that would strip the president of his ability to impose tariffs without congressional approval. But that is unlikely to make headway in a Republican-controlled House and Senate.

“If this weekend’s tariffs go into effect, they’ll do catastrophic damage to our relationships with our allies and raise costs for working families by hundreds of dollars a year,” said Sen. Chris Coons, D-Del. “Congress needs to stop this from happening again.”