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President Donald Trump speaks to the media as he leaves the White House for a trip to Florida on April 3, 2025.
Reality hits on new tariffs, but Trump says it’s ‘going very well’
The reviews are in: US President Donald Trump’s widespread tariff plan isn’t most loved, and especially not with the markets. Stocks have plummeted, layoffs have begun, and confusion has metastasized about the bizarre method the United States used to calculate its tariff formula.
The reaction from countries affected by the tariffs, though, was relatively muted. The European Union and China threatened to retaliate if the Trump administration didn’t withdraw these new duties, but they haven’t explicitly made any moves yet. The United Kingdom drew up a list of potential US products it could tariff but hasn’t yet taken any specific actions. Australia outright won’t retaliate.
Big bully. These major economies will take a hit, but it could be the smallest countries that suffer the most. Due to the tariff formula — which ostensibly involves dividing the US trade deficit with a country by the total amount of imports from it, and then halving this number — nations like Lesotho, Myanmar, and Nauru must deal with new duties approaching 50%. Their humble economies rely on producing for the mammoth US market, so these huge price hikes could devastate them. As if dealing with a 7.7-magnitude earthquake wasn’t enough.
Totally chill meeting. The new tariffs overshadowed a NATO summit in Brussels on Thursday, one that was supposed to focus on reaffirming the military alliance between the United States and its European allies. Despite US Secretary of State Marco Rubio’s conciliatory tone, leaders across the pond expressed dismay at the new levies, with German Foreign Minister Annalena Baerbock arguing that economic security was linked to “overall security.”
Whatever the complaints from Europe, Trump is unlikely to reverse course, says Eurasia Group trade and global supply chain expert Nancy Wei.
“The newly introduced tariffs under President Trump’s administration are designed to be a lasting ‘tariff wall’ around the US,” Wei said. “It is improbable that negotiations will lead to major tariff reductions or complete removal.”
While some thought Trump might reverse course in the face of market volatility, the US president didn’t seem too fazed by the chaos. He told reporters on Thursday that he thought it was “going very well” and likened the situation to a patient having surgery. “The markets are going to boom, the stock is going to boom, the country's going to boom,” he added.
Trump's tariffs & the end of globalization
Ian Bremmer's Quick Take: It is the day after 'Liberation Day,' April 2nd. I'm not sure that day is going to stick. It was good not to do on April 1st. Not only because it's April Fools, but also because you had a couple of key elections in the US, in Florida and in Wisconsin. And Trump clearly wanted to go after that because he knew that these weren't going to be super popular. And yet, this is exactly what he was promising.
He has been promising tariffs. He's been promising securing American borders, securing borders from people coming into the US illegally, also securing US borders from unfair trade practices. And that is precisely what we're seeing right now. Overnight, the United States is moving to having the highest tariffs against countries of any major economy in the world by a very long margin, and also the largest average trade tariff in over a hundred years.
This is a new era. It's a post globalization era. It's a post post-war era. It's kind of the equivalent of what the Brits did with Brexit just on a global scale. Now, why these tariffs and what's behind the percentages? Because Trump's been talking about reciprocal tariffs for a very long time, and yet these aren't reciprocal. There are no countries that have the percentage tariffs on the US that the US is now putting on them in terms of goods. So how did they do that? That's the extraordinary thing, is the calculation wasn't based on the tariffs that are imposed on US goods. Rather, it was a look at the trade deficit that the US runs against those countries and taking the percentage of what the trade deficit is and applying a tariff that would get you to parity. In other words, what reciprocal from Trump's perspective is whatever would actually bring that trade deficit into trade neutrality and then just impose half of that, which makes no sense economically whatsoever.
Why not? Well, first of all, because there are a lot of poor countries around the world that have trade deficits with the US because they can't afford American goods, and the US wants to buy commodities, for example, from those countries or low tech manufacturer like from Bangladesh. And are you angry because the Bengalis aren't capable of buying Teslas from the US or buying smartphones? And the answer is, of course not. And all that's going to be is a tax. The US government will pick up revenue and the Americans will have to pay more for inexpensive goods that the US isn't going to produce. Some cases, these are goods that the Americans not only wouldn't want to produce because the labor quality and cost is really, really low and no one's going to do that work, especially when you're closing borders and taking illegals out of the population. But also, because the US economy couldn't produce them.
I mean, your tropical fruits, I mean some of them can be in the United States, but most of them need to come from other places. Coffee beans, I mean all sorts of things that the Americans are just not going to be substitution effect producing that now are just going to be higher costs for the United States, for average Americans. And then in places where the US was not in deficit, then you're just throwing a 10% tariff against. Why? Is that about fair trade? No, that's just about the Americans wanting to ensure that there are tariffs on absolutely everyone. It reminds me of the January 6th conversation where originally Trump was talking about, "Well, maybe we've got to look more carefully at all the really violent types and we're not going to want to give them amnesty. But there are a lot of people that were treated very badly, very unfairly, and so they should have amnesty and they should be pardoned."
And as the details and the debates on who should and shouldn't get a pardon came out, Trump got sick of the debate, got sick of the nuance, and said, "I'm just giving it to everybody." And I think that's what happened with tariffs. There were debates going on with large numbers of advisors around Trump, right until the last minute and he just said, "Ah, I'm just putting tariffs on everybody." And that's what's happened. And now there will be individual deals that will be cut with a bunch of countries to try to get out of that. But the reality is that the biggest trade partners of the United States, there's no quick fix. Not with Europe, not with Mexico, not with Canada, not with China. And given that, we are clearly not only out of a US-driven globalization era... That's been gone for some time now. Globalization has been moving apace, but the US has not been driving it.
The US had been kind of standing on the sidelines and pushing their own industrial policy. But now you have the United States actively unwinding globalization. And the question will be how effective will other countries be in playing defense, in hedging, and in bringing some production, more production to the United States? Because in the near-term, you expect to see a lot of countries will try to limit the damage that's being done. And the US economy is, of course, stronger and more powerful. So that will mean that a lot of countries won't immediately do reciprocal tariffs, but will try to cut deals with the Americans. A lot of companies will try to find ways to manufacture more in the US. That's near-term.
In the medium and long-term, there will be hedging. There will be efforts to find ways to de-risk their economies from the United States, from the uncertainty, the volatility, the high costs. And sure, you'll want to produce things in the US for US consumers, but most things are not being consumed by Americans. And that is increasingly true around the world. And therefore you wouldn't want to produce most things in the US in that environment. So you'll see more hedging of the Europeans towards other countries, including in some non-AI fields towards China. And I think you'll see that in bigger ways in the Global South who already have their principal trade partners as China anyway.
And then final point is keep in mind that the Americans are not really good at being patient. And Trump has been talking the entire way, not one of the most patient people in the world that, "Look, I mean, yeah, they're going to be costing in the near-term, and I don't care if the cost of cars go up. But long-term, this is good for Americans." And certainly near-term there's going to be a significant economic hit, not just in the stock market, but also in US GDP and also in inflation. And Americans, I suspect are going to be pretty angry about that because Americans are very short-term in orientation. It's a nature of free market capitalism, kleptocratic or not in the US and it's also the nature of the political system.
So that's where we are. A lot to think about on the back of these unprecedented policy moves. And remember, it is a marathon, not a sprint. We are only a couple months in. Trump has four full years, and a lot is going to happen over the course of that administration. And I'll be here to talk to you about it. Thanks a lot, and I'll talk to you all real soon.
President Donald Trump holds a "Foreign Trade Barriers" document as he delivers remarks on tariffs in the Rose Garden at the White House on April 2, 2025.
Trump’s tariffs spark market chaos, risk political backlash
Donald Trump’s much-anticipated “liberation day” tariff announcement on Wednesday is the biggest disruption to global trade in decades, so the political, diplomatic, and economic impacts will take time to become clear.
In a dramatic unveiling in the Rose Garden, Trump set in place tariffs of at least 10% on most US trading partners, which set off a global sell-off of stocks, a rebellion from some Republicans, and angry rebukes from shocked trading partners.
It is hard to game out what will happen next because it has been so long since a shock on this scale hit the global tradition system. “We’re literally going back 100 years for historical precedents, and I’m not sure that there is an economic precedent of a policy-driven change of this magnitude in this direction,” says Eurasia Group senior analyst Graeme Thompson.
Trump’s new policy will make it more expensive for Americans to buy products from most countries, which investors fear will lead to a dramatic global economic slowdown and drive up inflation. Trump’s stated goal for the new policy is to stop foreign countries from taking advantage of the United States and boost American manufacturing, but observers and analysts are almost universally united in skepticism around the “golden age” that he promises they will bring.
Because the results are hitting investors and will soon hit the pocketbooks of consumers, there will be growing pressure on Republicans in the House and Senate to force Trump to change course. Until now, Trump’s popularity with his electoral base has kept them in line, but this new policy may put that under strain. Four senators voted with the Democrats in a (likely only symbolic) vote against Canadian tariffs late Wednesday, an acknowledgment that Republicans could face political blowback in the midterms for these widespread duties.
The political reaction is taking place before other countries have even put in place retaliatory measures, which can be expected to damage American exports. The greatest downside is unpredictability.
“I think what is hitting investors globally at this point is that uncertainty,” says Thompson.
“If you just came in and said, very clearly, ‘This is what’s happening, end of story,’ I think a lot of companies wouldn’t be happy, but they could work with it, but that’s not the story that we’ve got right now.”
It’s hard to see anything positive in the reactions from markets in the short term, and the political and diplomatic reaction in the United States and abroad is likely to test the strength of Trump’s support.
Graphic Truth: Where US automakers get their parts
As part of the broad suite of tariffs that he imposed on April 2, US President Donald Trump introduced a 25% levy on all auto parts entering the United States.
No matter the part, US automakers import huge amounts of each vehicle from abroad. The United States, for example, purchased $3.3 billion worth of brakes from Mexico and $2.8 billion of silencers and exhausts from Japan last year.
This chart excludes some of the mechanics of a car, such as engines, many of which are also imported from abroad. In fact, not a single car currently available in the US domestic market is 100% American-made, according to the National Highway Traffic Safety Administration. So, unless US parts manufacturers can plug the gaps, car companies are on the road to higher production costs.U.S. President Donald Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C., U.S., April 2, 2025.
Trump slaps tariffs on the world
During a speech in the White House Rose Garden on Wednesday, Donald Trump announced a 10% across-the-board tariff on US imports, with higher rates for countries that have a larger trade surplus with the United States – to the tune of 20% for the EU, 54% for China, and 46% for Vietnam, to name a few of the hardest-hit. Trump also confirmed that he’s imposing 25% levies on foreign-made cars and parts.
There are some exceptions: Neither Canada nor Mexico were singled out for “reciprocal” tariffs. While they are subject to automobile and steel tariffs, products compliant with the USMCA agreement – around 38% of imports from Canada and 50% from Mexico – will not be subject to any tariffs.
How are countries responding? The 10% tariffs will take effect on April 5, followed by the extra “reciprocal” duties on April 9. This timeline gives countries a chance to retaliate, and many have vowed to do so by imposing equally high tariffs on US imports. The EU said on Thursday that it would impose countermeasures if negotiations with the White House don’t go anywhere. China echoed the Europeans’ approach, threatening countermeasures if the US doesn’t pull back. Other countries were more muted, though: India said it would be “measured” in response, while Australia won’t counter at all.
The Trump administration is betting that some may choose to negotiate, either by lowering their own tariffs or increasing investments in the US. “My advice to every country right now is, do not retaliate,” warned Treasury Secretary Scott Bessent on Fox News. “If you retaliate, there will be escalation. If you don’t, this is the high watermark.”
Financial markets react. S&P and NASDAQ futures declined by 3.5% and 4.5%, respectively. Meanwhile, New York copper futures are experiencing the sharpest drop, plunging as much as 4%, while crude oil fell by over 3%.
Promises made, promises kept. From the blue-collar workers scattered throughout the Rose Garden crowd to the Teamsters union shoutout, the goal of the tariffs was clear: Trump wants to reshore manufacturing to the US. He also hopes that the revenue collected from tariffs will pay for the tax cuts making their way through Congress.
Trump is making a political gamble that the short-term pain from tariffs — price inflation and possibly even a recession — will be offset by economic benefits from tax cuts, deregulation, and expanded manufacturing. He’s betting that these benefits will arrive before the 2026 midterm elections. If he’s wrong, his party is likely to pay a heavy price at the ballot box.
What if Japan & South Korea sided with China on US tariffs?
Ian Bremmer shares his insights on global politics this week on World In :60.
If China, Japan, and South Korea formed a united front, what kind of leverage would they have in negotiating against US tariffs?
Oh, if that were to happen, they'd have incredible leverage because China's the second-largest economy in the world, Japan's the third. This would be a really, really big deal. Except for the fact that it's not going to happen. Their trade ministers did just meet, and they've had some interesting coordinated statements. They do a lot of trade together, and they want to continue that. But the fact that the security of South Korea and Japan is overwhelmingly oriented towards the US, and they would not want to undermine that, means that they will certainly not see China as a confederate to coordinate with against the United States, not least on trade. The American response would be belligerent. So no, that's not going to happen.
Will Syria's newly formed transitional government be enough for Arab and Western leaders to lift sanctions and restore diplomatic ties?
I think they are heading in that trajectory. The question is, will it be enough to keep Syria stable and away from descending into civil war? And there, there's a huge question because this is a completely untested government, completely inexperienced, no governance background, very little background in terms of military stability, especially with all of the new members, militias that have been integrated from across a very diverse country. And a lot of internal opponents that are sitting back and waiting to fight. So I'm more worried about that than I am about international support. I think largely the international support they need is going to be there.
Why does Trump want to take Greenland?
I have no idea. Maybe somebody showed him a globe from the top and he saw how big it was, and he's like, "Oh, that'd be kind of cool to have." It's not like there's anything he needs that he can't get directly from negotiating with Denmark. Plenty of willingness to allow the US to have expanded bases, troops on the ground. Plenty of willingness from other countries in the region to do more in terms of patrolling, build more icebreakers to deal with. The Finnish President, Alex Stubb, who just went to see him golfing with him, spent seven hours over the weekend moving in that direction. But you saw from Vice President Vance, he's like, "Well, the President wants it. So of course I got to respond to that." Yeah, but they don't have any reason. And I do think that it is sufficiently blowing up in their faces on the ground in Denmark and in Greenland, that the Danes understand not to make a big deal out of this and it will eventually blow over. It is annoying to them symbolically, but it doesn't matter all that much. In that regard, we can spend a little bit less time on it. Okay, that's it for me. I'll talk to you all real soon.
President Donald Trump, seen here on the South Lawn of the White House in February, is set to unveil his "Liberation Day" tariffs.
Trump’s tariff plan to take effect
T-Day has arrived. On Wednesday afternoon, Donald Trump’s reciprocal tariffs on US trade partners will take effect immediately after a Rose Garden announcement.
The devil’s in the detail: Trump has reportedly settled on the main aspects of the plan, and has been talking over the fine print with his top advisers. The administration has reportedly weighed a few different options for the overall scheme, including imposing different tariff rates on each trading partner, targeting specific countries, or enforcing a blanket tariff — possibly as high as 20%.
The pros and cons: By building a tariff fortress around the world’s biggest economy, Trump is fulfilling a campaign pledge while also seeking revenue to offset tax cuts. US steelmakers and other domestic manufacturing have supported the targeted use of tariffs, citing unfair import competition, but have come out against blanket tariffs or tariffs on Canada – which particularly hurts the auto industry.
Meanwhile, Wall Street fears it could trigger a recession and slow global growth as small businesses and consumers may face rising prices as imports become more expensive. The Yale Budget Lab projects the policy will equate to a 13-point hike in the US effective tariff rate, raising prices by 1.7-2.1% and lowering real GDP growth by 0.6-1.0 percentage point in 2025.
“Markets are bracing for a seismic shift as Trump’s global reciprocal tariffs loom,” says Eurasia Group trade and global supply chain expert Nancy Wei. “The mix of rising inflation and slowing industrial activity signals a precarious balance, with businesses scrambling to front-load inventory and mitigate pricing uncertainty.”
“With demand weakening and costs climbing, companies are navigating an increasingly challenging economic landscape.”
For more insights from Nancy Wei, check out our Viewpoint about “Liberation Day” here.President Donald Trump speaks from the Oval Office flanked by Commerce Secretary Howard Lutnick on the day he signed executive orders for reciprocal tariffs, Feb. 13, 2025.
Opinion: Searching for signals on ‘Liberation Day’
Now in its third month, Trump 2.0 has sustained a breakneck pace. In recent days, the administration announced 25% tariffs on automobiles, conceived of secondary tariffs for nations buying oil from Venezuela (and potentially Russia and Iran), and reiterated its interest in “getting” Greenland.
Market participants have held their breath for Wednesday – “Liberation Day” – as the administration is set to unveil global tariffs, the lynchpin of its America First trade policy.
As the zone has flooded, predicting the current administration’s next moves has become an Olympic-level sport. Details of a group chat between senior administration officials that leaked last week – the so-called Houthi PC small group – provide allies, adversaries, and watchers with revealing insights into the administration’s foreign policy blueprint.
Reestablishing deterrence
While campaigning, President Donald Trump was fond of saying that no wars broke out during his presidency and that the conflicts in Ukraine and Israel-Gaza would never have happened if he had been president. In the run-up to his inauguration, Trump promised to end the war in Ukraine on his first day in office (later extended to within six months). On Gaza, Trump posted on social media that Hamas would have “all hell to pay” if they did not release Israeli hostages before he was sworn in.
Whether the administration was prepared to back up these threats with action hung as a giant question mark. During his first term, Trump largely avoided large-scale security operations. The major exception was the January 2020 assassination of Qasem Soleimani, commander of Iran’s Quds Force. This time, the risk of threatening “all hell” is that to establish credibility, you may have to administer “all hell.”
On March 15, the US military began conducting a series of air strikes on Iran-backed Houthi militants in Yemen – the operation at the heart of the group chat.
Exchanges in the chat tell us this use of force was strategic by design.According to the transcript, after Vice President JD Vance shared concerns about conducting the attacks, Secretary of Defense Pete Hegseth countered, “We are prepared to execute, and if I had final go or no go vote, I believe we should. This is not about the Houthis. I see it as two things: 1) Restoring Freedom of Navigation, a core national interest; and 2) Reestablish deterrence, which Biden cratered.” The message is clear: this is not about the Houthis; this is about the Trump 2.0 administration telegraphing its willingness to carry out “all hell.” TheUS has reportedly deployed B-2 bombers and cargo planes to the region as a further indicator of the administration’s apparent willingness to conduct additional strikes.
A ledger of allies
Hegseth’s remarks also reveal another principle of the Trump 2.0 foreign policy: Isolationism is dead, long live America First. During the first Trump administration, there was a sense that the president’s focus on rebuilding manufacturing jobs and tightening immigration meant that the US was taking its ball and going home. Now, Trump and his team are scanning the horizon, looking for angles, and from Greenland to Canada to Venezuela and Yemen,no stone is being left uncovered.
Since Oct. 7, 2023, Houthi militants have targeted shipping assets traversing the Red Sea, depressing trade through the channel and setting off a global rerouting of trade. Trump ordered the sea lanes reopened. As laid out in the group chat, the administration sees it as the US's role and a core national interest to restore freedom of navigation. In fact, according to Hegseth, “VP: I fully share your loathing of European free-loading. It’s PATHETIC. But [US National Security Advisor Mike Waltz] is correct, we are the only ones on the planet (on our side of the ledger) who can do this. Nobody else even close.”
Much has been made of the anti-Europe tone of the conversation. Anyone sitting in European capitals will certainly be disappointed by the language and accompanying content that the US will be looking to Europe to foot its security bill. But anyone sitting in European capitals hopefully already knows to expect this. That Trump (like President Barack Obama before him and President Joe Biden after him) wants to see Europe pay more for its collective defense is not new or news. What should, however, buoy Europe is that the US still counts itself on the same side of the ledger as its Western allies and that it feels a responsibility – a unique responsibility – toward them. This is not a case of the US pulling up the drawbridge. This is a US administration taking aim and looking for others to help settle the bill.
There can be no doubt that following the daily turns of the US administration can leave the rest of the world gasping for air. In his second term, Trump’s true north is legacy – perhaps even athird term. Through a relentless drive on tariffs, secondary tariffs, sanctions, export controls, and other measures, he is further aligning national security and economic security toward an ambition of bringing revenue and investment back to the US. This is a years-long project, beginning on Liberation Day, and no three-month period can definitively judge its outcome. The administration initiated the Houthi operation to backstop its economic policy prong with a hard-power policy prong. Going forward, when threats of a “bad situation” or of bombing Iran are made unless a deal is struck, they will carry weight.
Still, Trump hopes that his “proudest legacy will be that of a peacemaker and unifier.” The US is not leaving the world alone, for better or for worse.
Lindsay Newman is a geopolitical risk expert and columnist for GZERO.