Let’s Go Tariff for Tariff
Many people have gone through the never-ending cycle of hitting your sibling back after they hit you, and then hitting you again, so you hit them again, and the cycle keeps going and going and going. Well, that’s now happening with the U.S. and its trade partners, especially China.
Jan. 20, 2025, President Donald Trump announced after being sworn into office that he was planning to create tariffs. He then followed through with this promise on April 2, declaring a 10% tariff on U.S. imports.
Trump did not stop with this, though, as that 10% was just a baseline tariff, and he planned to raise that tariff for specific nations.
According to a PBS article, “Trump says the U.S. will now charge a 34 percent tax on imports from China, a 20 percent tax on imports from the European Union, 25 percent on South Korea, 24 percent on Japan, and 32 percent on Taiwan.”
These nations did not react kindly. The US was met with an announcement by the Prime Minister of Canada, Mark Carney, that Canada would be matching the 25% tariff the next day.
China, South Korea and Japan even joined together as a result of these tariffs. It is clear that these tariffs are only creating tension between the U.S. and other countries.
China and the U.S. have especially been going back and forth. As a result of the tariffs imposed by Trump, which were up to 145% on Chinese goods, China hit back with a 125% tariff on US goods.
There has been an agreement to ease tariffs between China and the US. They created a 90-day truce that lowered tariffs on Chinese goods to 30% and U.S. goods to 10%. This time was created so that further negotiations could be made.
The U.S. imports many of its goods from China, with China being one of the biggest importers of the U.S. While Trump believes that these tariffs will promote US manufacturing and job growth, there is some uncertainty.
According to an article by BBC, “The International Monetary Fund (IMF) has cut its global growth forecast because of the uncertainty caused by tariffs, and says it expects the US to be hit the hardest.”
Small businesses have felt the impact of these tariffs, with many small business owners having to think about raising their prices just to get by because their suppliers’ rates are skyrocketing
While many small businesses have to rethink their budgets, suppliers, and even product or service prices, big corporations have an advantage. Big corporations have two choices regarding being hit by tariffs: swallow the costs and have a lower profit margin, or raise prices for consumers to cut the losses.
Big corporations have the money to swallow the cost and make a choice, while many small businesses do not. But a big corporation is trying to just swallow the costs.
According to a Reuters article, “Nestlé reckons its operating margin will drop from 17% to 16% in 2025 as it absorbs Trump’s potential 10% reciprocal tariffs across the board, which could increase its coffee and cocoa input costs.”
Not all corporations or small businesses are doing this, though. Many businesses, no matter the size are or have to raise their prices.
The impacts of these tariffs are starting to make their way to consumers, too. The effects of tariffs are being seen most online as of right now. Goods of all kinds are rising in price.
According to a CBS News article, “Since the second week in April, sellers on Amazon have raised their prices on nearly 1,000 products, according to data from SmartScout, a price analysis software tool. The average price hike — nearly 30%, according to the company’s analysis.”
As the costs rise, the possibility of a recession in the U.S. begins to be brought to the table. Global economic growth is on a decline, and the uncertainty of recession is something experts are watching for. According to an article by CBS News, “The organization (IMF) does not expect the U.S. to enter a recession in 2025, but said the odds have now risen to 37% from 25% as of October 2024. Other analysts have said the likelihood could be even higher. James Rossiter, head of global macro strategy at TD Securities, projects the odds of a U.S. recession are 50-50.”
The future is quite uncertain, many have hope that these tariffs will grow into something beautiful, like US domestic economic growth, while others fear the worst.
Only time will tell how these tariffs will truly impact the economic growth of not only the U.S., but the world.
