Tariffs in the second Trump administration

Steel and aluminum tariffs

On March 12, 2025, the US imposed 25% tariffs on all steel and aluminum imports, aiming to strengthen domestic production.^[64] On April 2, 2025, aluminum tariffs expanded to include empty aluminum cans and canned beer.^[65] The measures expanded Trump's first-term steel and aluminum tariffs by eliminating all exemptions and raising the aluminum tariff from 10% to 25%.^[52] The administration argued previous exemptions "inadvertently created loopholes that were exploited by China and others with excess steel and aluminum capacity".^[66] Trump also mandated that steel be "melted and poured" and aluminum "smelted and cast" in the US to qualify for duty-free status to prevent tariff circumvention.^[67] Commerce Secretary Howard Lutnick said Trump would soon add a copper tariff as well.^[68]

In 2023, the US imported 44% of its aluminum and 26% of its steel.^[69] Canada was its largest supplier of both, accounting for more than half of aluminum^[70] and two-thirds of primary aluminum imports.^[69] While the US was the world's largest producer of aluminum through 2000, it accounted for less than 2% of the global supply by 2021, largely due to high electricity costs that made it less competitive in the global market.^[71] In 2021, primary aluminum smelters operated at 55% capacity in the US compared to 95% in Canada and 88% globally. The US remained a major producer of less energy-intensive secondary aluminum, but secondary aluminum is less desirable for defense or electronics.^[71]

Automobile and auto part tariffs

In January 2025, President Trump announced broad tariffs on Canada and Mexico, threatening the highly integrated North American auto supply chain.^[72] Due to decades of free trade agreements including USMCA, factories in the US, Canada, and Mexico grew accustomed to shipping auto parts back and forth multiple times during the manufacturing process.^[72] The three largest US automakers—Ford, General Motors, and Stellantis—lobbied for exemptions, warning the tariffs would hurt American companies more than foreign competitors.^[73] Ford CEO Jim Farley warned investors, "Long term, a 25% tariff across the Mexico and Canadian border will blow a hole in the US industry that we have never seen."^[72] Trump agreed to delayed tariffs on USMCA-compliant vehicles.^[74] Still, non-USMCA compliant brands manufacturing in Canada or Mexico, such as BMW, were affected starting March 4, 2025.^[73] BMW chose to cover these tariffs until May 1, 2025.^[75]

The USMCA exemption closed on April 3, when Trump imposed a 25% tariff on all imported cars, including those from Mexico and Canada.^[76] The tariff will extend to non-US content in domestically assembled vehicles "no later than May 3".^[77] The White House argued the move would boost domestic manufacturing and generate $100 billion in tax revenue,^[78] noting that about 50% of the 16 million cars bought by Americans in 2024 were imported.^[79] The same day, Stellantis announced it would temporarily close factories in Canada and Mexico and lay off 900 American employees as it assessed the impact of tariffs.^[80]

Additional proposals

Excluded goods

The following goods were not impacted by additional tariffs, including the 10% baseline tariff:^[103]

• All articles subject to 50 USC 1702(b), such as books and other informational materials
• Steel and aluminum products, which were separately impacted by a 25% universal Section 232 tariff
• Automobiles and automobile parts, which were separately impacted by a 25% universal Section 232 tariff
• Copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, and energy and energy products, some of which were under investigation for Section 232 tariffs
• Any products which become subject to future Section 232 tariffs
• Products from Mexico and Canada compliant with USMCA, except for goods targeted by Section 232 tariffs
• Imports from countries subject to Column 2 of the HTSUS, which at the time were Cuba, North Korea, Russia, and Belarus.^[104]

Development

Reuters reported the Trump administration struggled to design reciprocal tariffs because each of the 186 members of the World Customs Organization applied different duties.^[105] The administration initially considered dividing all countries into tiers of high, medium, and low trade barriers.^[106] Later, officials Scott Bessent and Kevin Hassett told Fox Business that the administration would focus on the United States' largest trading partners and assign individualized tariff rates.^[106][98] Hassett stated that "more than 100 countries don't really have any tariffs on us and don't have any non-tariff barriers" and that only "10 to 15 countries" were a concern.^[98]

However, on March 30 Trump told reporters, "I don't know who told you 10 or 15", dismissing the idea as a "rumor" and saying he would impose tariffs on "all countries".^[107][108] Although many countries attempted to negotiate deals in the weeks leading up to April 2, no exemptions were granted.^[109][110] The lack of clarity contributed to economic volatility and the beginning of the 2025 stock market crash.^{[111][112][113]}

Formula calculation

Soon after the unveiling, financial journalist James Surowiecki reported that the final "reciprocal tariff" policy appeared to calculate the value of a country's trade barriers by dividing the US trade deficit with the country by the value of US imports from the country.^[46] The "reciprocal" tariff rate Trump imposed was then calculated by dividing that value in half.^[114] For example, dividing the US's 2024 trade deficit in goods with China, $295 billion, by the amount that the US imported from China, $439 billion, results in the 67% trade barrier value the US assigned to China: $295bn ÷ $439bn = 0.67 which, as a percentage, is 67%.^[115]

The Trump administration later published their trade barrier formula online, which simplified to the same formula.^[46][116] With variable i representing a country, m_i representing imports from that country, and x_i representing exports to that country, the formula given by the White House is as follows:

${\displaystyle \Delta \tau _{i}={\frac {x_{i}-m_{i}}{\varepsilon \times \phi \times m_{i}}}}$

The Trump administration formula included measures of elasticity set at ε = 4 and φ = 0.25, then multiplied them for ε × φ = 1, which resulted in no change when ε × φ was multiplied to other parts of the calculation as defined in the formula.^[46] Thus, with x_i − m_i being the trade deficit, the formula simplifies to Surowiecki's:

${\displaystyle \Delta \tau _{i}={\frac {x_{i}-m_{i}}{m_{i}}}}$

The Trump administration's Office of the United States Trade Representative (USTR) explained that the tariffs "are calculated as the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of our trading partners", aiming to "drive bilateral trade deficits to zero".^[117] However, even countries with which the US runs a trade surplus, such as Australia, received a tariff of 10%.^[118]

Reactions

USTR cited research papers by several economists, many of whom publicly criticized the formula and stated the White House had misinterpreted and incorrectly applied their research.^[15] Anson Soderbery, whose work was cited, said his research was meant to discourage exactly the types of policies the White House was implementing.^[15] Brent Neiman said the administration used the wrong variable from his research—leading to results four times too high—and that trade deficits reflect economic fundamentals, not unfair trade.^[16]

Economic experts criticized the formula for being overly simplistic with little relation to trade barriers,^{[15][119][120][121]} with The Economist describing it as "almost as random as taxing you on the number of vowels in your name."^[122] Analysts Some media outlets noted that this was the same formula that was obtained by asking ChatGPT and other large language models for a global tariff formula that compensates for trade deficit.^{[123][124][125]}

Treasury Secretary Scott Bessent told "every country" on April 3: "do not retaliate, sit back, take it in, let's see how it goes, because, if you retaliate, there will be escalation."^[126] After the stock market lost significant value the next day, President Trump said events were "going very well" and "markets are going to boom, the stock is going to boom, the country is going to boom".^[127] On April 6, while the stock markets continued to fall, Trump said that his tariffs "are already in effect, and a beautiful thing to behold".^[128]

Impacted regions

The White House's initial list of impacted areas included the Heard Island and McDonald Islands, a remote uninhabited Antarctic territory of Australia.^[129] A tariff of 29% was proposed for Norfolk Island, which has a population around 2,000 and also belongs to Australia; the rest of Australia received a tariff of 10%.^[130] The initial list also proposed tariffs of 10% on the British Indian Ocean Territory, whose population is solely composed of the inhabitants of the joint American-British military base of Diego Garcia, numbering some 3,000 American and British military contractors.^[131] The decision to impose tariffs on some of these regions appears to have been based on inaccurate trade data. An analysis of United States import records by The Guardian revealed that some shipments were erroneously recorded as originating from remote territories instead of their actual countries of origin. These misclassified imports included items such as wine, aquarium systems, and Timberland boots.^[132]

The highest tariffs of 50% were placed on Lesotho, described by Trump as a country that "nobody had ever heard of"; a 50% tariff was also initially proposed for France's Saint Pierre and Miquelon islands, with a population of around 5,000.^[129] Other countries facing some of the highest tariffs are Cambodia (49%), Laos (48%), Madagascar (47%), Vietnam (46%), and Myanmar (44%).^[133]

Exemptions

Six countries were exempted from reciprocal tariffs: Belarus, Canada, Cuba, Mexico, North Korea, and Russia.^[95] Press Secretary Karoline Leavitt commented this was because Trump previously imposed tariffs of 25% on Canada and Mexico for non-USMCA goods. She claimed Russia escaped tariffs because current American sanctions on Russia resulted in no "meaningful trade" between the two countries. However, in 2024, the value of this trade was $3.5 billion, greater than countries such as Mauritius, or Brunei who were tarrifed heavily from this round of tariffs. Leavitt cited that the tariffs and sanctions on Belarus, Cuba, and North Korea were already high.^[134] However, Iran, and Syria, which had been under American sanctions for 20 years, did receive a high Liberation Day tariff of 41%.^[135]

China

On February 1, 2025, Trump signed Executive Order 14195 to establish a new 10% baseline tariff on all Chinese imports.^[136] This measure applied in addition to tariffs remaining from Trump's first term, which averaged 20%.^[137] The order, which went into effect on February 4, was encouraged by the National Security Council.^[136] China retaliated on February 10 with tariffs of 15% on coals and liquefied natural gas and 10% on oil and agricultural machines. China also added PVH Corp. and Illumina to the Unreliable Entity List, launched an antitrust investigation into Google, and added export controls to some metals including tungsten.^[138][139]

Capital Economics, a UK-based macroeconomic research consultancy, estimated that while the US levied new tariffs on about $450 billion worth of Chinese goods, China's additional tariffs only targeted about $20 billion of US goods. Julian Evans-Pritchard, the firm's head of China Economics, stated "The measures are fairly modest, at least relative to US moves".^[139] American retailers including Walmart, Costco, and Target attempted to pressure their Chinese suppliers into absorbing some of the increased costs.^[140][141]

On March 4, 2025, Trump raised baseline tariffs on Chinese imports again from 10% to 20%.^[142][143] China retaliated by imposing a 15% tariff on US chicken, wheat, corn, and cotton, as well as a 10% tariff on US sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products, effective March 10, 2025.^[144][145] China also launched an anti-circumvention investigation into optical fiber products imported from the United States.^[146] The General Administration of Customs of China suspended US lumber imports and revoked soybean import licenses for three US firms.^[147] On March 30, 2025, China, South Korea, and Japan's trade ministers met for the first time in five years. The officials discussed goals for a trilateral free trade agreement and enhanced supply-chain cooperation in response to Trump tariffs.^[148][149]

On April 2, the US added a 34% "reciprocal tariff" on top of pre-existing orders, resulting in an effective minimum tariff of 54% on all imports from China. Products subject to Section 301 tariffs from Trump's first term faced total rates as high as 76%.^[150] Capital Economics reported the "average US tariff rate on China is now almost 70 per cent". The Chinese government retaliated with tariffs of 34% on all imports from the United States, effective April 10, 2025,^[151] and suspended negotiations regarding the sale of TikTok.^[152] On April 7, Trump threatened to add an additional 50% tariff on China starting on April 9 if the country doesn’t withdraw its retaliatory tariff increase on the U.S.^[153][154]

Canada and Mexico

On November 25, 2024, after winning reelection, Trump announced a 25% tariff on all imports from Canada and Mexico unless they took action against illegal immigration and drug trafficking, particularly fentanyl. Mexican President Claudia Sheinbaum and then-Canadian Prime Minister Justin Trudeau sought to de-escalate tensions.^[155][156] While Trudeau noted that less than 1% of illegal border crossings and less than 1% of fentanyl into the US come from Canada,^[157] he unveiled a $1.3 billion security plan for the Canada–US border on December 16, 2024.^[158][159] Despite these efforts, on February 1, Trump ordered the tariffs to begin February 4, with a reduced 10% rate for Canadian energy products.^[157][160] Bloomberg News reported that Trump advisors Peter Navarro and Stephen Miller led the economic discussions on the tariffs.^[136]

Trudeau and Sheinbaum condemned Trump's actions and threatened immediate economic retaliation, but on February 3, the three leaders negotiated a one-month delay on the tariffs. As part of the agreement, Mexico committed to deploying 10,000 troops to its border with the United States, while Canada pledged to appoint a "fentanyl czar" and continue implementing the border security plan announced in 2024.^[161][162] In return, Trump pledged to take measures to curb weapons trafficking to Mexico and to collaborate with Canada on a joint anti-crime "strike force".^[163][164]

On February 27, Trump claimed "Drugs are still pouring into our Country from Mexico and Canada" and reaffirmed his tariffs,^[142] leading to their implementation on March 4, 2025.^[165] Canada retaliated with 25% tariffs on $20 billion (CA$30 billion) in US goods, with plans to expand to $85 billion (CA$125 billion),^[166] while Mexico prepared its response for March 9.^[167] The Wall Street Journal warned the tariffs had "the potential to profoundly reshape relations between the US and two of its biggest trading partners, abruptly reversing America's decades-long project of expanding free trade with its allies."^[168]

The onset of the trade war triggered stock market declines and economic concerns, particularly for retailers and car manufacturers.^[169] Lutnick quickly signaled tariff reductions. "The president is listening to the offers from Mexico and Canada. He's thinking about trying to do something in the middle," he said on March 5.^[170] The same day, Trump delayed tariffs on USMCA-compliant automakers.^[73] The next day, he extended the delay to all USMCA-compliant goods—covering 50% of Mexican and 38% of Canadian imports—until April 2.^[171] The Mexican government expected the number of compliant goods would increase to 85–90% within weeks.^[172] Canada said it would maintain its initial tariffs but pause planned increases.^[173] Tens of thousands of Mexicans celebrated with Sheinbaum in Mexico City's central plaza.^[174]

Although the USMCA exemption was expected to expire on April 2, that day the White House announced it would continue indefinitely. However, Trump signed new orders imposing 25% tariffs on imports of steel, aluminum, automobiles, and auto parts from any country, including Canada and Mexico.^[74] Canada, the US's largest supplier of steel and aluminum, was significantly impacted by US tariffs on these products, and retaliated on March 13 with 25% tariffs on an additional $20.6 billion (CA$29.8 billion) of US goods.^[175]

Europe

Asia

South Korea

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Africa

South Africa

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Other countries

On January 26, 2025, a dispute arose between Colombia and the US after Colombian president Gustavo Petro refused to allow the landing of two US military aircraft carrying deported Colombian nationals.^[224] Petro called the treatment of deportees on military flights undignified and said he would accept deportation flights on civilian planes.^[225] In response, Trump ordered retaliation against Colombia and its officials,^[225] including 25 percent tariffs that would increase to 50 percent in one week if Petro did not reverse his position.^[226] Petro responded by ordering a 25 percent tariff on the US that would also increase to 50 percent.^[225] Hours later, the US said Colombia had agreed to "unrestricted acceptance" of deportees, including on military aircraft.^[227] Colombia said it would "continue to receive" deported Colombians and would guarantee them "dignified conditions".^[224]

In November 2024 and again in January 2025, Trump attempted to threaten BRICS countries saying they would face 100% tariffs if they attempted to replace the US dollar as a reserve currency.^[228] On March 24, 2025, Trump threatened to impose tariffs of 25% on imports from countries that purchase oil and gas from Venezuela.^[229][230]

Trump did not announce tariffs on Russia in April 2025, due to sanctions related to the Ukraine war.^[231][232] The White House said that the imposed sanctions "already rendered trade between the two countries as zero."^[233] US trade with Russia in 2024 has been estimated at US$3.5 billion, a tenth of the US$35 billion from 2021 before it invaded Ukraine.^[231]

Markets

Immediately after Trump's announcement on April 2, markets sunk sharply lower. In Japanese markets, the Nikkei 225 dropped 2.8% while the TOPIX dropped 3.1%.^[234] In Europe, the FTSE 100 was down 1.6%, while the CAC 40 in Paris fell 3.3%. The German DAX also fell 3.1%.^[235] In the United States, stock futures tied to the S&P 500 fell 3.9%. Dow Jones Industrial Average futures fell 2.7%, and Nasdaq 100 futures fell 4.7%.^[236]

On April 3, the S&P 500 Index fell over 274 points or 4.88%, the second largest daily point loss ever; this was largely attributed to the tariff announcement on April 2.^[237] Also on that day, the Nasdaq Composite fell over 1,050 points or 5.97%, the largest point loss in its history.^[237] The Dow Jones Industrial Average fell 1,679.39 points, or 3.98%, then the fifth-largest point loss in its history.^[237]

On April 4, markets continued losses. The S&P 500 fell 5.97%.^[238] The Nasdaq Composite fell by 962.82 points or 5.82%, also entering into bear market territory.^[238] The DJIA fell 2231.07 points, or 5.50%,^[238] its third-largest point loss in history. The CBOE Volatility Index (VIX), widely known as "Wall Street's fear index", gained 15.29 points, closing at 45.31 points, the highest close since 2020.^[239]

On April 3, the Russell 2000 entered bear market territory, falling over 20% from a recent high, after falling 134.82 points or 6.59%.^[237] The Nasdaq Composite did the same on April 4.^[238]

Across April 3 and April 4, U.S. stocks lost $6.6 trillion in value, their largest two-day loss in history by a margin of $2.2 trillion.^[240]

On April 7, early trading in Japan triggered the circuit breaker on futures trading after an 8.03% fall.^[241]

United States

Although Trump's first term economic policy featured lower and more targeted tariffs with many exceptions, such as an exception for Apple products, Trump promised higher rates, broader impacts, and few exceptions in his second term.^[242][243] According to the Tax Foundation, the first Trump administration imposed new tariffs on approximately $380 billion worth of imports. Comparatively, the second Trump administration was expected to impact more than $1.4 trillion of imports by April 2025.^[244]

At the start of his second term, confusion over rapidly fluctuating tariff levels and other economic policies created significant uncertainty for businesses and economists.^[245][246] US GDP grew by 2.8% in 2024, the year before Trump's inauguration.^[247] In March 2025, the Federal Reserve lowered its 2025 growth forecast from 2.1% to 1.7%,^[248] while the OECD projected a decline to 2.2% in 2025 and 1.6% in 2026.^[247] The Federal Reserve also increased average inflation expectations from 2.5% to 2.7%.^[248] The US dollar value also decreased massively following the announcement compared to other currencies.^{[249][250][251][252]} By April 4, JPMorgan Chase forecasted a recession within the year.^[253]

The expected impact of the threatened 25% tariffs on Mexican and Canadian goods is high. Grocery prices were expected to rise as two-thirds of US vegetable imports came from Mexico.^[242] The Peterson Institute for International Economics estimated that such a tariff retained through 2029 would reduce the gross domestic product of the United States by US$200 billion.^[254] According to the Budget Lab at Yale University, American households would lose approximately US$1,200 in purchasing power.^[255]

The Council on Foreign Relations notes the energy sector of the American economy is expected to be among the most impacted by tariffs.^[256] A 10% tariff on Canadian energy imports is expected to increase energy prices for American consumers, in part, because Canada is the biggest supplier of energy to the United States, including 61 percent of crude oil imports in 2021.^[257] American refineries, particularly in the Midwest, rely on crude oil to process into gasoline, and projections indicate that gas prices could increase up to 50 cents per gallon in the region due to tariffs.^[256] On February 2, 2025, Canadian company Irving Oil released a statement, noting, "The majority of the product produced at our Saint John refinery is bound for the US market... This tariff will result in price increases for our US customers and have impacts on energy security and the broader economy."^[258] During his campaign, Trump promised voters he would cut energy prices in half during his first year in office.^[259]

Economist Michael Hudson has argued that the tariffs have the potential to disrupt the global economy by disrupting the balance of payments between the United States and its foreign debtors. By reducing the export trade between the United States and countries targeted by the tariffs and raising the cost of dollar-denominated goods, the US makes it more difficult for those countries to pay their dollar debts. Hudson believes this could cause a debt crisis, and compares it to the historical examples of the Latin American debt crisis and the inter-allied repayment of loans during the World Wars.^[260]

Following his global tariff announcements and worldwide trade war on April 3,^[261][262] the Yale Budget Lab calculated the average effective US tariff to be 22%, up from 11% before the announcement and at the highest level since 1909.^[58] Inflation Insights stated the weighted average tariff rate was set to rise to around 25% to 30%, up from 2% in the prior year.^[263] The Cato Institute and other economists stated that the tariffs would "approach levels not seen since the Smoot-Hawley Tariff Act of 1930",^[264] which The Wall Street Journal put at roughly 20% and lasted until the General Agreement on Tariffs and Trade in 1947.^[265] After adjusting for inflation, the tariffs amounted to the largest tax hike in U.S. history and triple the tax increase to fight World War II.^[266]

China

Nomura Holdings estimated that eliminating the US de minimis exemption for Chinese goods "would slow Chinese export growth by 1.3 percentage points and GDP growth by 0.2 point".^[89] When the US Congress raised the de minimis limit from $200 to $800 in 2016, they sparked a surge in US imports of cheap Chinese goods.^[89] A 2023 US House Select Committee report estimated that "nearly half" of all de minimis shipments originated from China. Chinese e-commerce companies Temu and Shein, estimated to comprise more than 30% of daily de minimis exemptions to the US, onboarded more sellers with a physical presence in the US and expanded their distribution facilities beyond China, to mitigate the impact of losing the exemption.^[91][88]

On February 7, 2025, Trump suspended closing the exemption for China until the Secretary of Commerce notified him that adequate systems to process and collect tariff revenue were in place.^[91] The exemption is expected to be closed again on May 3, 2025.^[94]

Other countries

Ontario Premier Doug Ford stated that the tariffs would likely affect around half a million jobs in the province's automotive industry.^[254] Marcus Noland, Director of Studies at the Peterson Institute, believed the tariffs would lead to deindustrialization in Mexico.^[254]

In Singapore, Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong, along with Senior Minister Lee Hsien Loong, expressed concerns that the tariffs could affect economic growth and the cost of living. Gan stated in a press briefing that authorities were monitoring the situation and would implement measures if necessary.^[267][268] Analysts in Singapore noted that while the tariffs posed a risk of trade slowdown, they could also make Singapore a more attractive source of imports for American buyers seeking alternatives to higher-taxed suppliers.^[269]

On April 5, 2025, Japanese video game manufacturer Nintendo announced it would delay pre-orders for its upcoming Switch 2 console from their initial date of April 9 in the United States, citing economic uncertainty due to the tariffs. However, the console's planned U.S. release date of June 5 remained unchanged.^[270]