Donald Trump declares trade war on whole world, but not on Russia, DPRK and Iran

On April 2, US President Donald Trump announced the implementation of tariffs on all imported goods, except those deemed critical for production and national security. The tariffs apply to all countries and territories – even those inhabited solely by penguins – with a minimum rate of 10% and up to 49% for certain nations.

Photo: commons.wikimedia.org by The White House, https://creativecommons.org/public-domain/pdm/

Donald Trump

Breakdown of Trump’s Tariffs:

A base tariff of 10% on all imported goods.
Some countries face additional tariffs, with the highest rates imposed on:

• Cambodia (49%)
• Vietnam (46%)
• Thailand (36%)
• China (34%)
• Taiwan (32%)
• South Africa (30%)
• Russia, Belarus, Cuba, North Korea, Iran, Canada, and Mexico are not affected by the tariffs.
• Ukraine will face 10% tariffs like everyone else.
• The European Union (EU) faces a 20% tariff on its exports to the US.
• Imported cars are subject to a 25% tariff.
• Goods considered vital for national security and production are exempt.
• Trump pledged to use revenue from the tariffs to pay down the US national debt.
• Countries must remove their own tariffs and trade barriers against US goods to have the new tariffs lifted.

The strangest part of Trump's tariff implementation: a 10% tariff was imposed on Heard and McDonald Islands, a group of islands near Antarctica that are considered Australian territory. There are no people on these islands—the population consists mostly of... penguins.

Global Response to Trump's tariffs

China and EU Threaten Retaliation

China's Ministry of Commerce condemned the move, arguing it disrupts trade agreements reached in previous negotiations.

“China strongly opposes this and will take countermeasures to protect its rights and interests,” the ministry stated.

In response, China has:

• Limited domestic companies' investments in the US.
• Announced it may cut purchases of US natural gas.
• Imposed 10-15% retaliatory tariffs on American agricultural products, including grain, protein sources, cotton, and fresh produce.

Meanwhile, the EU has signaled its willingness to negotiate but has already agreed on an initial package of countermeasures. European Commission President Ursula von der Leyen stated that the tariffs will negatively impact businesses and consumers worldwide, adding that the EU is prepared to escalate its response if talks with Washington fail.

Market Reaction and Economic Fallout

Analysts at Bloomberg warned that Trump’s tariffs could destabilize global trade, increase inflation, and raise the cost of goods by trillions of dollars annually.

Following the announcement, Trump declared a national emergency over the trade imbalance, calling it a threat to national security.

Stock Market Reaction:

• S&P 500 futures fell 3.3%
• Nasdaq 100 futures dropped 4.2%
• Russell 2000 fell nearly 5%

Companies dependent on imports, like Nike, Gap, and Lululemon, saw stock prices drop by at least 7%.

Apple shares, which rely on Chinese supply chains, fell 6.9%.

Currency and Commodity Markets:

The US dollar weakened against major currencies, with the ICE DXY Index down 0.99%.
WTI crude oil prices fell 1.4%, dropping to $70.73 per barrel.
Bloomberg Economics estimated that the tariffs could impact $33 trillion in global trade, causing exports to the US from some nations to decline by 4-90%.

Impact on Russia

Trump’s tariffs do not affect Russia, Belarus, Cuba, or North Korea, as these countries are already subject to sanctions. According to US Treasury Secretary Scott Bessent, the tariffs were applied based on the principle of "reciprocity," meaning they target nations that have active trade with the US.

However, Trump warned that if Russia fails to negotiate a peace deal regarding Ukraine, he may impose 25% tariffs on Russian oil and other products within a month.

Experts believe that, in the short term, the tariffs will have minimal impact on Russia, as US-Russia trade has already declined significantly since 2022. In 2024, bilateral trade between the two nations amounted to $3.5 billion, the lowest level since 1992. Russia primarily exports fertilizers, nuclear fuel, and platinum-group metals to the US – items that are not currently subject to sanctions.

While direct effects may be limited, some analysts warn that a global trade war could reduce demand for commodities like metals, oil, and petroleum products, negatively impacting Russian exports.

Global Trade War Escalates

Trump’s tariffs have triggered global economic uncertainty, with the EU and China preparing countermeasures. Meanwhile, markets are already reacting negatively to the increased trade tensions. While Russia is not immediately affected, a prolonged trade war could reshape global supply chains and economic dynamics.

Who stands to benefit? The Wall Street Journal suggests Brazil may emerge as a winner, as it could replace some US-bound exports from countries now hit with tariffs. In contrast, the EU is seen as one of the biggest losers due to its reliance on trade with the US.

As Trump pushes his "Make America Great Again" economic agenda through protectionist policies, the question remains:

Will this strategy boost the US economy, or will it backfire by destabilizing global trade?

Details

A tariff is a duty (tax) imposed by the government of a country or customs territory, or by a supranational union, on imports (or, exceptionally, exports) of goods. Besides being a source of revenue, import duties can also be a form of regulation of foreign trade and policy that burden foreign products to encourage or safeguard domestic industry. Protective tariffs are among the most widely used instruments of protectionism, along with import quotas and export quotas and other non-tariff barriers to trade. Tariffs can be fixed (a constant sum per unit of imported goods or a percentage of the price) or variable (the amount varies according to the price). Tariffs on imports are designed to raise the price of imported goods and services to discourage consumption. The intention is for citizens to buy local products instead, thereby stimulating their country's economy. Tariffs therefore provide an incentive to develop production and replace imports with domestic products. Tariffs are meant to reduce pressure from foreign competition and reduce the trade deficit. They have historically been justified as a means to protect infant industries and to allow import substitution industrialisation (industrializing a nation by replacing imported goods with domestic production). Tariffs may also be used to rectify artificially low prices for certain imported goods, due to 'dumping', export subsidies or currency manipulation. The effect is to raise the price of the goods in the destination country.