The new wave of prices of American President Donald Trump – has described as the most aggressive commercial intervention since the 1930s – has triggered a turmoil of the world market and sent dozens of business partners who rush to negotiate exemptions or better conditions.
The new policy, which imposes import rights up to 50%, comes into force on August 7 and already becomes the world trade card again.
According to a presidential order published Thursday, 69 countries will face import rights between 10% and 41%, pushing the American effective rate rate from 2.3% to almost 18%, Economics capital analysts said.
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The White House maintains that prices are part of a wider effort to rebalance trade and protect national security. But for many nations – and investors – the decision is an economic shock that is already reflected in the industries and the world’s stock markets.
Market reaction and work shock
The immediate benefits were clear. American shares have plunged, the average Dow Jones Industrial ending 1.23%, the S&P 500 down 1.6%and the NASDAQ falling 2.24%. European actions were even harder: the Stoxx 600 flowed 1.89%, reflecting the fears of an escalation of the trade war.
Market anxiety has been amplified by a disappointing report of American jobs. The number of July jobs has become lower than expected, and June figures have been revised downwards, reporting a possible slowdown in the labor market. Trump responded by ordering the dismissal of Erika Mcentarfer, the commissioner of the work statistics, and presumed – without proposing evidence – that the figures were “rigged”.
Who struck – and who is relieved
Among the hardest countries:
- Switzerland, amazed by a rate of 39%, put pressure for emergency negotiations. “We are really amazed,” said Jean-Philippe Kohl of Swissmem, who represents the mechanical and electrical engineering sector of Switzerland.
- Canada faces a 35% price on goods related to fentanyl restrictions, compared to 25%. Trump accused Ottawa of not helping to stop illicit drug flows.
- Brazil was slapped with a 50% rate on certain exports.
- India, faced with an obligation of 25% which could have an impact on $ 40 billion in exports, opened talks with Washington in order to defuse.
- Taiwan, who obtained a rate of 20%, said the price was “temporary” and expected a reduction after new discussions.
- South Africa faces a 30%tax, which prompted its Minister to Trade, Tau Parks, to call for “real and practical interventions” to protect jobs.
- Certain nations of Southeast Asia, however, have seen unexpected relief. The price of Thailand was reduced from 36% to 19%, a move congratulated by the Minister of Finance Pichai Chunhavajira as that which “stimulates the confidence of investors and opens the door to economic growth”.
- Australia has also been spared deeper cuts, with its minimum rate of 10%, giving its exporters a relative advantage in the US markets, according to the Minister of Trade Farrell.
However, most of the analysts were clear at the age of the broader impact. “There are no real winners in commercial conflicts,” said Thomas Rupf, Cio Asia at VP Bank in Singapore. “The prices injured the Americans and they injured us.”
Companies rush to cope
Some companies are already looking for ways to soften the blow. European companies in the fashion and cosmetics sector, including Oreal, explore an escape from the American dark customs known as the “first sale” rule. This makes it possible to apply import rights to the factory price of a product rather than its final retail price, which considerably reduces costs in certain cases.
Others seek to restructure supply chains or seek a diversification of exchanges. Canadian Prime Minister Mark Carney described Trump’s decision as “deeply disappointing” and has promised to protect Canadian jobs and swivel new markets.
“We are not going to wait passively while punitive rates harm our industries,” he said.
Trump administration officials defended prices as a calculated tool to extract better commercial transactions. “The uncertainty about the prices was essential to obtain the lever effect we needed,” said Stephen Miran, president of the Council of Economic Advisers, during an interview on CNBC.
This lever effect, has argued Miran, has already produced “monumental” agreements in recent weeks, although the details have been summary. The European Union, for example, still expects other orders from the Trump office to finalize sculptures on cars and planes after having concluded a framework agreement last Sunday.
There is also a confusion on how the White House will define and apply the transhipment rules – a practice in which exporters transport products through third countries to hide their origin. The new order includes the provisions of 40% of prices on shipments deemed to be raped these rules, in particular those which hide the Chinese origins.
While the complete effects will take time to cascade through the economy, the first signs show that the prices are already swelling prices. The US Commerce Department said that the prices of furnishings and sustainable household items increased by 1.3% in June, the highest monthly increase over two years. This leap is widely attributed to the increase in import costs due to the previous tariff cycles.
Outlook shows a redesigned commercial card
Trump’s latest tariff offensive marks a radical change in the way the United States engages economically with the world. Although condemned as an effort to restore equity and economic sovereignty, the deployment rocked the markets, upset the allies and raised fears of the disturbances of the supply chain.
With the prices that should take effect on August 7 at 04:01 GMT, many countries are still in the dark on key implementation details. Meanwhile, the companies of the winegrowers of Moselle Valley in Germany at technological exporters in Taiwan are preparing for benefits.
Although Trump’s team insists that the approach will result in favorable offers, many wonder if the cost – higher prices, disturbed trade and global uncertainty – do not bother.
