BGA Head of Research Murray Heibert and BGA Senior Adviser Amb. C. Lawrence Greenwood wrote an update to clients on U.S. President Donald Trump’s April 2 tariff announcement.

Context

  • U.S. President Donald Trump announced his most wide-ranging tariffs against foreign trading partners in a ceremony at the White House April 2. He called it “liberation day” and said it would be remembered as the day American destiny would be reclaimed.
  • Trump said he would impose a 10 percent tariff on all economies and much larger “reciprocal” tariffs on scores of other countries that Trump said had long treated the United States unfairly. Among the top 25 countries cited by the president, many were from the Indo-Pacific. These included China, close U.S. allies such as Japan and Korea, Taiwan, at least seven Southeast Asian countries, Australia and India.

Significance

  • Trump in his announcement did not spell out how countries could lower the tariffs against them whether by lowering their own tariffs and nontariff barriers or negotiating reciprocal trade agreements. But a White House fact sheet released after his speech said the tariffs would remain in effect when Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved or mitigated.
  • Many countries will be charged a what Trump called a “discounted reciprocal tariff,” which is roughly half the rate the Trump administration determined they charged on U.S. products by calculating their tariff rates, nontariff barriers and currency manipulation. These tariffs do not apply to autos, steel and aluminum which were already under tariffs.

Implications

  • Stock futures dropped sharply as Trump spoke, suggesting markets were anxious that tariffs would slow economic growth and cause inflation to rise.
  • U.S. analysts say these will be highest tariffs since the 1930 Smoot-Hawley Tariff Act, which prompted a trade war across the globe and exacerbated the Great Depression of the 1930s. They warn this could mark and end to the rules-based system the United States had helped build.

We will continue to keep you updated on important trade developments as they occur. If you have any questions or comments, please contact BGA Head of Research Murray Hiebert at mhiebert@bowergroupasia.com or BGA Senior Adviser Amb. C. Lawrence Greenwood at lgreenwood@bowergroupasia.com.

Best regards,

BGA Research Team

A small ginko leaf

Head of Research

Murray is a top Asia expert and skilled researcher with three decades of experience living and working in Asia. His networks in business, media and government circles are deep and wide-ranging. He is also a senior associate of the Southeast Asia Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Earlier he served as deputy director of the program for six years. Prior to joining CSIS, Murray served for five years as senior director for Southeast Asia at the U.S. Chamber of Commerce where he worked with leading American companies, the U.S. government and Southeast Asian ... Read More