The first three months of President Trump’s second term in the White House have been turbulent to say the least. Most concerning for economists, financial markets, and international trade industries have been the whirlwind of tariffs. The ‘will he, won’t
he’ back and forth on announced – and then paused – tariffs have left the global community reeling.
Much has happened in terms of tariffs over the last 90 days, so here is a timeline highlighting the key announcements:
Tariff timeline
- 20 January: President Trump announced the implementation of additional 25% tariffs on imports from Canada and Mexico from 1 February.
- 26 January: 25% tariffs to be implemented on all goods from Colombia – to be raised to 50% after one week – after the Colombian government turned back planes with deported migrants. Colombia’s president announced retaliatory tariffs, but
both nations backed down later the same day.
- 1 February: Trump signed executive order imposing 25% tariffs on Canada and Mexico, as well as a 10% tariff on China.
- 3 February: Trump agreed to a 30-day pause on tariffs against Mexico and Canada.
- 4 February: 10% tariff on China went into effect, China retaliated with additional tariffs of their own.
- 10 February: Trump resurrected a 25% tariff on foreign steel and aluminium to come into effect in March.
- 4 March: 25% tariffs on Canada and Mexico came into effect, as well as an additional 10% tariff on China. Canada retaliated with their own 25% tariff on $155 billion of American goods.
- 5 March: Trump announced he would pause tariffs on cars from Canada and Mexico for one month.
- 10 March: China imposed tariffs on US farm products. Canadian province Ontario announced their own tariffs against the US.
- 12 March: The EU and Canada announced retaliatory tariffs to come into effect 1 April, including a 50% tariff on US whiskey.
- 13 March: Trump floated the idea of a 200% tariff on EU alcohol.
- 24 March: Trump announced 25% tariff on all goods from any country that imports oil from Venezuela to begin 2 April.
- 26 March: Trump announced 25% tariff on all cars and car parts shipped to the US.
- 2 April: Trump announced ‘Liberation Day’ with a blank 10% tariff to all countries shipping goods to the US (unless another tariff has already been introduced to said nation). Several countries faced additional tariffs on top of the baseline
10%, which were introduced in a Eurovision-results-like-fashion by reading them off a cardboard chart.
- 4 April: China announced 34% tariff in US imports.
- 9 April: Tariffs came into effect. China faced 104% tariffs after retaliation from both sides drove up percentages, while the US faced an additional 84% import tax on goods shipped to China. Later that day, in an unexpected turn, Trump
backed down in reciprocal tariffs for 90 days, bringing all US imposed tariffs back down to 10%.
- 10 April: Trump clarified the 125% tariff on Chinese goods that he announced were in addition to another 20% tariff already imposed, meaning China is facing 145% tariffs.
What does the looming trade war mean for global trade and financial services?
“Three months ago, the International Monetary Fund offered its economic forecast for the coming year: The U.S. economy was in better shape than just about all others,” writes the
New York Times. “Now, many forecasters see the possibility of a U.S. recession. After Mr. Trump imposed stinging tariffs on nearly every country, analysts are predicting higher inflation, more unemployment and slower growth in the United States.”
Since the US and China are vital to the global economy, the shockwaves of this trade war will be felt far and wide. Economists have been horrified by the math behind Trump’s tariffs, as they appear to be solely based on balancing out trade deficits. With
the US being a net importer, and thus facing a chronic trade deficit, these announced tariffs seem designed specifically to balance bilateral trade deficits in a zero-sum game.
Felix Tintelnot, associate professor of economics at Duke University,
commented: “The fact that countries that charge zero tariffs on the U.S. have been hit with tariffs illustrates that these are not reciprocal tariffs in their true meaning. It is perfectly normal in an integrated global economy for a bilateral trade deficit
to exist. A little introspection helps: you have a bilateral trade deficit with your grocery store, but a bilateral trade surplus with your employer. Why would you put a tariff on your local grocery store?”
The immediate effect of Trump’s tariffs has been felt in the markets, as the US dollar fell to a six-month low against the Euro, and Dow Jones plunged over 1,500 points after ‘Liberation Day’ was announced last week. Markets recovered after Trump announced
a 90-day pause, though not to pre-tariff announcement levels. (It is noteworthy that Trump told investors to ‘buy’ on social media hours before his announced pause sent markets up again.)
The medium- to long-term effects of the tariffs on trade, financial services, and cross-border payments remain to be seen as we wait for the fallout – or the continuation – of the US tariff escalation. While the industry has long worked to bring down the
cost of cross-border payments, this escalation is likely putting a spanner in the works.
“Political isolationism and protectionism make the world more fragmented,” commented Dima Kats, CEO and founder of Clear Junction. ”And when the world fragments politically, it fragments in terms of regulations and compliance too. That’s where it starts
to directly affect payments. Cross-border payments have always been risky and demanding of large collective effort. Now, with additional regulatory fragmentation, they’re only getting riskier. Some providers will fail, others will walk away, and a few will
invest heavily in new risk management strategies. The unfortunate reality is that customers will likely end up paying higher fees and accessing services in less competitive markets.”
What’s next?
It’s hard to predict what’s next as the Trump administration undoes the fabric of global trade as we have known it. Will tariffs resume after the 90-day pause, or will deals be made?
Canada’s PM Mark Carney has a strong economics background, and if he wins the election later this month, it is likely that Canada will continue its close relationship with the EU. The European Commission reports that Ursula von der Leyen has already
reaffirmed “the EU's strong commitment to open and predictable trade, and expressed her determination to work closely with Canada on reforming the global trading system.”
The ripple effects of this changing global trade landscape – from global cross-border payments to pensions – depend on how much further this trade war will go.