A customer shops a grain aisle at New India Bazar, where most merchandise is imported from India and Canada, on Wednesday in Fremont, Calif.Noah Berger/The Associated Press
U.S. President Donald Trump began levying higher import taxes on dozens of countries Thursday, just as the economic fallout of his monthslong tariff threats has begun to create visible damage for the U.S. economy.
Just after midnight, goods from more than 60 countries and the European Union became subject to tariff rates of 10 per cent or higher. Products from the EU, Japan and South Korea are taxed at 15 per cent, while imports from Taiwan, Vietnam and Bangladesh are taxed at 20 per cent. Trump also expects the EU, Japan and South Korea to invest hundreds of billions of dollars in the U.S.
“I think the growth is going to be unprecedented,” Trump said Wednesday afternoon. He added that the U.S. was “taking in hundreds of billions of dollars in tariffs,” but he couldn’t provide a specific figure for revenues because “we don’t even know what the final number is” regarding tariff rates.
U.S. Commerce Secretary Howard Lutnick said on Thursday he expects the country to collect US$50-billion a month in tariff revenues or more – up from US$30-billion last month – as the higher levies kick in.
Despite the uncertainty, the Trump White House is confident that the onset of his broad tariffs will provide clarity about the path of the world’s largest economy. Now that companies understand the direction the U.S. is headed, the Republican administration believes they can ramp up new investments and jump-start hiring in ways that can rebalance the U.S. economy as a manufacturing power.
So far, however, there are signs of self-inflicted wounds to the U.S. as companies and consumers brace for the impact of the new taxes.
Hiring began to stall, inflationary pressures crept upward and home values in key markets started to decline after the initial tariff rollout in April, said John Silvia, CEO of Dynamic Economic Strategy.
“A less productive economy requires fewer workers,” Silvia said in an analysis note. “But there is more, the higher tariff prices lower workers’ real wages. The economy has become less productive, and firms cannot pay the same real wages as before. Actions have consequences.”
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Many economists say the risk is that the American economy is steadily eroded rather than collapsing instantly.
“We all want it to be made for television where it’s this explosion – it’s not like that,” said Brad Jensen, a professor at Georgetown University. “It’s going to be fine sand in the gears and slow things down.”
Trump has promoted the tariffs as a way to reduce the persistent trade deficit. But importers sought to avoid the taxes by importing more goods before the taxes went into effect. As a result, the US$582.7-billion trade imbalance for the first half of the year was 38 per cent higher than in 2024. Total construction spending has dropped 2.9 per cent over the past year.
The economic pain is not confined to the U.S.
Germany, which sends 10 per cent of its exports to the U.S. market, saw industrial production sag 1.9 per cent in June as Trump’s earlier rounds of tariff hikes took hold. “The new tariffs will clearly weigh on economic growth,” said Carsten Brzeski, global chief of macro for ING bank.
The lead-up to Thursday fit the slapdash nature of Trump’s tariffs, which have been variously rolled out, walked back, delayed, increased, imposed by letter and frantically renegotiated.
Trump on Wednesday announced additional 25-per-cent tariffs to be imposed on India because of its purchases of Russian oil, bringing their total import taxes to 50 per cent.
A leading group of Indian exporters said Thursday the latest U.S. tariffs will impact nearly 55 per cent of the country’s outbound shipments to America and force exporters to lose their long-standing clients.
“Absorbing this sudden cost escalation is simply not viable. Margins are already thin,” S.C. Ralhan, president of the Federation of Indian Export Organizations, said in a statement.
The Swiss executive branch, the Federal Council, was expected to hold an extraordinary meeting Thursday afternoon after President Karin Keller-Sutter and other top Swiss officials returned from a hastily arranged trip to Washington in a failed bid to avert steep 39-per-cent U.S. tariffs on Swiss goods.
Import taxes are still coming on pharmaceutical drugs and Trump announced 100-per-cent tariffs on computer chips. That could leave the U.S. economy in a place of suspended animation as it awaits the impact.
The President’s use of a 1977 law to declare an economic emergency to impose the tariffs is under a legal challenge. Even people who worked with Trump during his first term are skeptical, such as Paul Ryan, the Wisconsin Republican who was House speaker.
“There’s no sort of rationale for this other than the President wanting to raise tariffs based upon his whims, his opinions,” Ryan told CNBC on Wednesday. “I think choppy waters are ahead because I think they’re going to have some legal challenges.”
Trump is aware of the risk that courts could overturn his tariffs, prompting him to say on his Truth Social platform: “THE ONLY THING THAT CAN STOP AMERICA’S GREATNESS WOULD BE A RADICAL LEFT COURT THAT WANTS TO SEE OUR COUNTRY FAIL!”
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The stock market has been solid during the recent tariff drama, with the S&P 500 index climbing more than 25 per cent from its April low. The market’s rebound and the income tax cuts in Trump’s tax and spending measures signed into law on July 4 have given the White House confidence that economic growth is bound to accelerate in the coming months.
Global financial markets took Thursday’s tariff adjustments in stride, with Asian and European shares and U.S. futures mostly higher.
But ING’s Brzeski warned: “While financial markets seem to have grown numb to tariff announcements, let’s not forget that their adverse effects on economies will gradually unfold over time.”
Trump foresees an economic boom. American voters and the rest of the world wait, nervously.
“There’s one person who can afford to be cavalier about the uncertainty that he’s creating, and that’s Donald Trump,” said Rachel West, a senior fellow at The Century Foundation who worked in the Biden White House on labour policy. “The rest of Americans are already paying the price for that uncertainty.”
With a report from Reuters