Trump's 10% baseline tariff on most US imports takes effect

Trump's 10% baseline tariff on most US imports takes effect

Washington, D.C. — President Donald Trump's reciprocal tariff threats have materialized as of April 5, with the implementation of a 10% baseline tariff on most U.S. imports. This policy aims to level the playing field by matching the tariffs other countries impose on U.S. goods.

The new tariffs, announced from the White House Rose Garden on Wednesday, will initially target a broad range of nations that maintain significant trade surpluses with the United States. Trump emphasized that the "reciprocal" approach means "they do it to us and we do it to them," signaling a shift in trade policy to counter what his administration perceives as unfair trade practices.

Economists caution that while tariffs can be a tool to negotiate better trade terms, they also act as a tax on imports, often passed on to consumers. The potential impact on prices is expected to be felt within a month or two, with some products like produce from Mexico experiencing quicker price hikes. Businesses may absorb part of the cost, but the higher tariffs could also lead to price increases.

Congress retains the authority to manage tariff revenue, with Trump's administration seeking to use increased tariff collections to finance tax cuts, particularly extending those passed in Trump's first term. The Tax Foundation estimates that extending these cuts would reduce federal revenue by $4.5 trillion from 2025 to 2034.

The executive branch's power to implement tariffs is limited by laws delegated from Congress, which typically allow for tariffs in cases of national security threats or severe industry harm. Trump has used emergency powers to impose tariffs, but Congress can seek to cancel these declarations.

The new tariffs will not affect previously enacted duties on Canada, Mexico, and goods like steel, aluminum, cars, and pharmaceuticals. The baseline tariff will apply to finished goods containing at least 20% U.S. content.

Trading partners, including China, Japan, and the European Union, are expected to respond with retaliatory measures, potentially leading to a tit-for-tat escalation in trade tensions. Mexico has already indicated plans to retaliate against higher U.S. import fees.

Investors and financial professionals should monitor the evolving situation closely, as the impact on global trade dynamics and U.S. consumer prices could be significant.