By Mirna Fahmy

In a move that sent shockwaves through the global economy, the 45th President Donald Trump of the United States (U.S.) announced sweeping tariffs on April 2, 2025 — a date he proclaimed “Liberation Day.” The decision marks one of the most significant disruptions to the post-World War II global trade system, unsettling markets and prompting swift retaliation from key trading partners.

Starting April 5, a baseline 10% tariff will apply to all U.S. imports. In addition, 90 countries will face reciprocal tariffs — ranging from 11% to 50% — taking effect on April 9. These rates are calibrated to reflect what the administration describes as “unfair” trade barriers placed on American goods.

China will face the steepest penalty, with a cumulative tariff of 54%, including a newly added 34% duty. Other notable figures include 20% for the European Union, 46% for Vietnam, and 49% for Cambodia.

He also launched a new trade war with Canada and Mexico by imposing a 25% tariff on most Canadian and Mexican goods, though he later granted indefinite exemptions for goods compliant with the United States–Mexico–Canada Agreement (UMSCA).

Cuba, Belarus, North Korea, and Russia were not subjected to new tariffs. Cuba and North Korea are under existing U.S. sanctions, while Belarus and Russia have high tariffs already in place. Russia’s exemption is also due to limited trade with the U.S. due to existing sanctions.

Vatican City, Palau, Seychelles, and Somalia were also exempted from the tariffs, likely due to their limited trade with the U.S. or special diplomatic considerations.

On social media, Trump declared, “The U.S. has massive financial deficits with China, the EU, and many others. The only way to fix this is with TARIFFS, which are now bringing tens of billions of dollars into the U.S.A.” He described tariffs as “a beautiful thing” and criticized the Biden administration for allowing trade surpluses with other nations to grow. “We are going to reverse it, and reverse it QUICKLY,” he vowed.

The Strategy Behind the Tariffs

Trump’s central goal is to reduce longstanding U.S. trade deficits, which he argues have eroded American manufacturing and compromised national security. By raising the cost of imported goods, the administration hopes to steer consumers toward American-made alternatives, reshoring production and strengthening domestic supply chains.

The Associated Press (AP) stated that the U.S. households could see annual costs rise by $3,800 due to higher prices for clothing (up 17%), electronics, and automobiles.

To implement the policy, Trump invoked the International Emergency Economic Powers Act (IEEPA), citing trade imbalances, currency manipulation, and high foreign VATs as threats to national economic security.

The administration’s “reciprocal tariff” model aims to mirror the rates other nations impose on U.S. goods. Press Secretary Karoline Leavitt echoed this principle in a press briefing, saying, “It’s the golden rule we all learned in school: Treat others the way you want to be treated.”

Countries like China, the EU, Vietnam, and India were singled out for what the administration views as excessive tariffs or trade barriers against American exports.

The Global Response: Retaliation and Repercussions

Predictably, global backlash was swift. China condemned the move as a violation of the World Trade Organization (WTO) rules, calling it “unilateral bullying.” Beijing responded with a 34% tariff on U.S. imports effective April 10 and imposed export controls on seven categories of rare-earth minerals vital to U.S. industries. Eleven American firms were blacklisted, and anti-dumping investigations were launched.

In a further escalation, Trump threatened on April 7 to impose an additional 50% tariff on China unless it reverses its retaliatory measures immediately — and said all discussions with Beijing would be canceled.

​​EU President Ursula von der Leyen outlined plans for countermeasures targeting U.S. steel and other sectors. Spain and Poland criticized the U.S. action, with Spanish Prime Minister Pedro Sánchez promising proportional retaliation.

Japan, where Trump’s tariffs now stand at 24%, also condemned the move. Prime Minister Shigeru Ishiba — who once dismissed similar concerns as “theoretical” — now calls the tariffs “extremely regrettable.” Japan is weighing “all available options” for a response. Trump, meanwhile, has expressed frustration that Japanese cars dominate the U.S. market, while American cars struggle to appeal to Japanese consumers. In a later post on April 7,

Australia’s Prime Minister Anthony Albanese called the move “totally unwarranted” and “not the act of a friend.” Brazil passed a bill authorizing reciprocal measures and is considering a WTO appeal.

Some countries, especially those with lower tariff levels under Trump’s rules, are opting for diplomacy. Italy’s Prime Minister Giorgia Meloni urged negotiation, advocating for complete tariff removal instead of escalation. Israel, which had already dropped its own tariffs on U.S. goods, is hoping for a reduction of the 17% tariff currently levied by Washington.

Cambodia offered to slash its tariffs on U.S. goods from 35% to 5% in exchange for a renegotiation of the 49% rate it now faces. Vietnam proposed eliminating all tariffs on American goods in return for a 45-day pause on the new levies.

Taiwan declined to retaliate, expressing hope for “zero tariffs” through negotiation. British politician Nigel Farage, meanwhile, pointed out that the UK’s 10% tariff — while painful — was still better than the EU’s 20%, blaming slow Brexit execution for the lack of a U.S.-UK free trade deal.

Nigel Farage, the British parliament member and the leader of the rising right-wing political party “Reform UK” and one of the masterminds behind “Brexit,” stated on his X account that “10% tariffs from the USA are bad news, but better than 20% for EU members. If the Tory government had delivered quickly on Brexit we would have had a free trade deal years ago. This deal is still achievable.”

Economic Fallout: Global Markets Rattled

The tariff announcement triggered a global selloff. The S&P 500 lost a staggering $5 trillion in value over two days — the steepest drop since the COVID-19 pandemic. The Dow and other major indices followed suit with 2,200 points low in a single trading session. European markets such as the FTSE 100 and DAX slumped, while Japan’s Nikkei 225 suffered significant losses.

Hong Kong’s Hang Seng Index plunged over 13%, marking its steepest drop since the financial crisis of 2008. European indices also suffered significant losses, with exporters particularly hard-hit due to tariffs on goods sold to the U.S.

The unpredictability surrounding tariff rates and potential retaliatory measures created an environment of heightened risk for investors. Analysts warned that higher manufacturing costs, disrupted supply chains, and diminished business confidence would slow global economic growth.

Seeking refuge in a safer asset, gold prices surged past $3,000 per ounce as investors used them as alternatives.

On the other side, crude oil prices tumbled below $60 (fell by 6-8%) per barrel for the first time since 2021, driven by a combination of economic uncertainty and increased production by OPEC. Analysts also cited weakened demand due to rising fears of recession. Despite not directly targeting oil, Trump’s tariffs have amplified global anxiety, contributing to falling prices across key commodities.

Trump seized on the economic data to pressure the Federal Reserve, stating that with oil, food prices, and interest rates down, there should be  “NO inflation” — and that the Fed should move quickly to cut rates.

Will Global Trade be shaped?

In 2024, China and Canada rounded out the top three as these countries continue to enjoy a close trading relationship under the United States-Mexico-Canada trade agreement, according to Statista.com. In 2024, China imported goods from the U.S. valued at about $143 billion. During Trump’s previous presidential term, China has been diversifying its imports reducing its reliance on U.S. goods due to ongoing trade tensions and tariffs imposed by both countries. As a result, China was prompted to seek alternative suppliers for goods such as agricultural products (ex: soybeans) from countries like Brazil and Argentina instead of the U.S.

Paradoxically, the tariffs may end up benefiting China in several ways to strengthen its position in other global markets. Many countries that were previously critical of China’s practices (e.g., overcapacity and subsidies) now view trade with China as essential, given the difficulties in accessing U.S. markets.

The trade war has pushed China to deepen ties with emerging economies like Brazil, Türkiye, and Southeast Asian nations, as well as traditional adversaries like Canada and the EU. This diversification reduces reliance on the U.S. and strengthens China’s global trade network. China’s Belt and Road Initiative (BRI) might continue to expand its economic influence across Asia, Africa, and Europe, offering alternative markets for Chinese goods.

Another trade diversion that might tick in is the energy trade between the EU and the U.S though Trump has urged the EU to continue buying energy from the  U.S. In the last 3 years, one of the most important gains of the Russian war in Ukraine for the United States was the replacement of cheaper Russian gas with liquefied natural gas coming from the United States at double prices into the European markets.

Besides that, some economists argue that countries facing lower U.S. tariffs may be well-positioned to benefit from this geopolitical shakeup. Nations like Egypt, which faces economic instability and currently has weaker trade ties with the U.S., could attract redirected investment and serve as a new base for low-tariff exports.

Is There Room for Negotiation?

Despite his hardline stance, Trump has signaled a willingness to deal. On April 7, he claimed that “every country is talking to me for better deals,” noting that Japan was already sending a delegation for negotiations.

Syria is on top of the desired country to have negotiations with the US regarding the tariffs as the country doesn’t only have the highest tariff as an “Arabic speaking country” as all the other countries haven’t exceeded the 10% baseline, but also lots of sanctions haven’t been lifted since Assad days. All the politicians explained that Syria’s negotiations won’t revolve around tariffs as much as it might be related to the fate of the Palestinians in Gaza, and Israel and the possibility of their dislocation into Syria.

As the global trade order teeters, many observers believe the world is witnessing more than a tariff war — it is a deep recalibration of economic alliances. The United States, long the architect and primary beneficiary of the postwar global economic system, is now dismantling the very framework it once built, attempting to reshape the world economy on its own terms once again.