WASHINGTON – After weeks of forecasts and speculation, President Donald Trump continued on the tariff threat this week by declaring a 10% baseline tax on imports from all countries and tariff rates in dozens of countries operating trade surplus with the United States.
The global market fell further when it acquired the crater the day after the announcement, and then later announced that China would retaliate with tariffs comparable to those imposed by the US.
When he unveiled what he called mutual tariffs, Trump had fulfilled his important campaign promise by raising US taxes on foreign taxes to narrow the gaps with tariffs other countries have unfairly imposed on US products.
Trump’s higher fees will strike foreign entities selling more items to the US than they would buy. But economists don’t share Trump’s enthusiasm for tariffs, as it is a tax on importers that is usually carried over to consumers. However, mutual tariffs could allow other countries to be taken to the table and lower their own import tax.
The Associated Press asked you for your questions about mutual customs duties. Some of these are as follows along with our answers:
What is Trump trying to achieve with his tariffs?
What the president’s final game is often unknown, adding to the uncertainty surrounding his trade war. He gives various reasons for his sweeping import taxes, and sometimes they contradict each other.
Trump says tariffs will serve as a negotiation tactic to raise funds for the US Treasury Department, protect the US industry, attract factories to the US, and to help other countries succumb to their will.
However, if tariffs mean that Americans will buy fewer imports, or if businesses move their factories to the US, revenue from tariffs will decrease, making plans to use them as an alternative to income taxes.
Trump and his own aides are offering competing explanations of the “reciprocal” tariffs released Wednesday.
The president on Thursday said the collection “gives us great power to negotiate” and had accessed other countries to offer to lower their own trade barriers. “Every country is calling us,” Trump said. We put ourselves in the driver’s seat.”
On the same day, White House trade adviser Peter Navarro told CNBC that tariffs were intended to remain. He said the idea was to let businesses produce goods in the US rather than overseas, defeating the long-standing US trade deficit. “Let this be very clear,” he said. “This is not a negotiation. This is not that. This is a national emergency.”
What is currency manipulation?
Currency manipulation occurs when a country intentionally reduces the value of a currency. This can be done by selling its own currency and purchasing other countries (usually US dollars) in the Forex market.
In announcing the sweeping tariffs this year, Trump accused other countries of using the tactics to gain an unfair advantage over American businesses. China was particularly well known for manipulating currency to promote exports for years. However, last November, the Biden administration’s Treasury Department concluded that “partners of US major trading partners” had manipulated the currency and gained an unfair advantage in the fiscal year ended June 2024.
The US dollar’s status as a global “reserve currency” is used much more than others in global commerce – it tends to keep its value high, and can put US exporters at a disadvantage.
How were the tariffs imposed by Trump calculated? Do other countries really have such high tariffs?
According to the Trump administration, European Union tariffs and trade barriers on the US amount to 39% tariffs on US goods, while China’s tariffs are 67% and India’s 52%.
These are far more expensive than other sources say. The world trade organization has set the average EU tariff on all imports at 2.7%, China at 3% and India at 12%.
The Trump administration says it includes currency manipulation, government subsidies and other barriers to trade in its calculations. Trump said Wednesday that he was “kind” and that as of April 9, the US would levie imports from Europe 20%, India 26% and China 34% as of April 9, as he was “kind” and has since charged half of what other countries have imposed on the US. In China, that is added to other obligations. This means that some Chinese products face 79% obligations.
Many countries have taken non-customer tariff measures to limit access to the market. For example, the EU has restricted the import of hormone-treated beef from the United States, and the US government has long complained that China has not protected intellectual property, such as software created by American companies.
Yet these factors do not explain how the administration came up with such a large number against tariffs in other countries. Instead, the White House says it did a simple calculation. It took the scale of the imbalance of countries’ trade with the US and their goods, and divided it by the amount of imports from that country.
After that, half of that percentage was spent and the new tariff rate was reached.
Will tariffs collected by the US enter the General Income Fund? Can Trump withdraw money from the fund without supervision?
Customs duties are taxes on imports collected by the Customs and Border Protection Agency when foreign goods cross the US border. About $80 billion in money last year will be sent to the US Treasury to help pay federal expenses. Congress has the authority to say how money is spent.
Trump – supported primarily by Republican lawmakers who control the US Senate and House – wants to use increased tariff revenue to fund tax cuts that analysts say will disproportionately benefit the wealthy. Specifically, they want to extend the tax cuts that will be handed over in Trump’s first term and largely expire at the end of 2025. The Tax Foundation, a nonpartisan think tank in Washington, found that extending Trump’s tax cuts would reduce federal revenue by $4.5 trillion between 2025 and 2034.
Trump wants higher tariffs that will help offset lower tax collections. Another think tank, the Tax Policy Center, says it will provide ongoing tax credits for Americans at all income levels by extending the 2017 tax cut.
How quickly will prices rise as a result of customs policy?
It depends on how both the US and overseas companies respond, but consumers can see the overall price being charged within a month or two of the tariffs. For some products, such as agricultural products from Mexico, prices can rise much more rapidly after customs duties become effective.
Some US retailers and other importers may eat a portion of the cost of customs duties, while overseas exporters may lower prices to offset additional obligations. But for many businesses, the tariffs Trump announced on Wednesday (such as 20% of imports from Europe) are too big to swallow on their own.
Companies can also use customs duties as an excuse to raise prices. When Trump took the washing machine duties in 2018, investigations showed that retailers later increased prices for both washer and dryer, even if they had no new duties.
The key question for the coming months is whether something similar will happen again. Economists are worried that consumers who have just overcome the biggest inflationary spike in 40 years are more used to rising prices than before the pandemic.
However, there are also indications that Americans, who are put off by rising costs of living, are not willing to accept price increases and simply cut their purchases. That may discourage businesses from significantly increasing prices.
What are the limits of the authority of an administrative agency to implement tariffs? Is Congress not playing a role?
The US Constitution gives the authority to set tariffs on Congress. However, over the years, Congress has delegated these powers to the President through several different laws. These laws specify situations where the White House can impose customs duties. This is limited to cases where imports pose national security threats or severely harm certain industries.
In the past, the president generally imposed tariffs only after hearings to determine whether certain imports met those standards. Trump followed those measures when he imposed tariffs in his first semester.
However, in his second semester, Trump tried to impose tariffs in a more ad hoc manner, using the emergency set in the 1977 law. For example, Trump said fentanyl influx from Canada and Mexico constitutes a national emergency, and using that pretext, imposing a 25% obligation from both countries.
Congress could try to cancel the president’s declaration of emergency, and Sen. Tim Kane, a Democrat from Virginia, suggested that we do that with regard to Canada. That law could pass the Senate, but will likely die in the House. Other legislation in Congress is to limit the powers to establish presidential powers, and faces similarly severe odds for passing.
