Trump's Tariff Wall: A New Era of US Trade Protectionism

Strategic Insights -

As US President Donald Trump's trade policies continue to unfold, the country's effective tariff level has reached an estimated 17.3 per cent, the highest since before the Second World War. This tariff wall, spearheaded by Trump's administration, has been marked by a series of U-turns, exemptions, and limited deals, blunting the full force of the highest levies threatened. The president's tariffs on foreign goods have taken a significant toll on global trade, prompting warnings of a reordering of the global trading system.

Key Takeaways:

  • The US's effective tariff rate of 17.3 per cent is the highest since 1935, when the rate was 17.5 per cent (Budget Lab, Yale University).
  • Trump's tariff wall threatens to trigger a reordering of global trade, with Eswar Prasad, a professor of trade policy and economics at Cornell University, stating that "Trump has engineered a new era of US trade protectionism that will eventually reverberate through the entire global trading system."
  • The US has agreed to limited deals or offered substantial carve-outs to countries covering 60 per cent of US imports that had been subject to the reciprocal tariffs.
  • Companies may look for alternative markets to sell their goods, with Alan Wolff, a senior fellow at the Peterson Institute for International Economics, stating that "the US, the world's best market in Trump's view, is now not as good as it was."
  • The US had separately agreed to deescalate tariffs with China in May, but a fundamental resolution of economic and trade differences remains elusive.
  • Investors have welcomed the spate of agreements, but may face a reality check once the impact of high tariffs becomes apparent.
  • The dollar remains nearly 10 per cent lower against a basket of rivals this year, despite a recent rebound.

Statistics:

  • The US's effective tariff rate of 17.3 per cent is the highest since 1935 (Budget Lab, Yale University).
  • 45 per cent of all US imports are subject to tariffs.
  • 60 per cent of US imports covered by the reciprocal tariffs have received limited deals or carve-outs.
  • The US had imposed tariffs of 145 per cent on Chinese goods before agreeing to deescalate in May.
  • The dollar is nearly 10 per cent lower against a basket of rivals this year, despite a recent rebound.

Sources:

  • Budget Lab, Yale University ("effective tariff rate of 17.3 per cent")
  • Eswar Prasad, professor of trade policy and economics at Cornell University
  • Alan Wolff, senior fellow at the Peterson Institute for International Economics
  • Philip Fong/AFP/Getty Images ("new vehicles await transportation near Tokyo")
  • UBS, European equities strategy ("relief and market fundamentals")