Trump ignites global trade war / Reactions

On April 2, US President Donald Trump revealed his long-awaited tariff strategy. It includes new blanket tariffs of 10% on imports from all countries to the United States, and, depending on the trade deficit, many countries will also face significantly high reciprocal tariffs. The new tariffs will come into effect on April 5 and April 9, respectively.

The reciprocal tariffs range from 50% for the small African kingdom of Lesotho and the French overseas territory of Saint-Pierre and Miquelon on the east coast of Canada, to 10% for Argentina, Brazil, Saudi Arabia, Turkey, and the United Kingdom. Imports from Germany and other European Union countries into the USA are subject to new tariffs of 20%. Asia is seeing significant increases compared to lower rates for LATAM. China is facing a 34% tariff in addition to the 20% that was imposed earlier this year. Vietnam faces 46%, Thailand 36%, Taiwan 32%, India 26%, South Korea 25 % and Japan 24%.

“April 2, 2025, will forever be remembered as the day American industry was reborn, the day America’s destiny was reclaimed, and the day that we began to make America wealthy again,” Trump said when revealing the tariffs.

Some economists and industry experts had already warned that additional tariffs would have a negative impact on the US economy and markets.

Credit rating agency Moody’s outlined a worst-case scenario based on 20% blanket tariffs, which estimated up to 5.5 million job losses, sending the unemployment rate up to 7%, and causing the United States’ GDP to decline by 1.7%. The IMF has so far estimated the US economy’s growth at 2.7% for this year.

“The high costs of new tariffs threaten investment, jobs, supply chains and, in turn, America’s ability to outcompete other nations and lead as the preeminent manufacturing superpower,” said Jay Timmons, president of the National Association of Manufacturers, in a statement.

The scale of Trump’s newly announced tariffs could pose a serious threat to the global economy, opines Jan Viebig, Chief Investment Officer at Franco-German financial services group ODDO BHF SE. “Trump is conjuring up risks for the global economy that cannot be reliably estimated from today’s perspective,” he said.

He also sees negative consequences for the US economy itself. “The tariff increases will make prices for imported goods in the United States more expensive. To the extent that these cannot be replaced by US products, consumer prices will rise—and the disposable income of American citizens will fall accordingly.” In effect, he added, “the tariffs act like an additional consumption tax for American households.”

Aberdeen Investments expects a “market knee-jerk reaction, with the USD weakening, US equities reversing gains, and continued de-risking”. Ray Sharma-Ong, Head of Multi-Asset Investment Solutions – Southeast Asia, at the asset manager, expects a further de-risking in the hardest-hit regions, including China, South Korea, and Taiwan, as investors move towards safe-haven assets such as Treasuries, JPY, and Gold.

“The chaos is here and now it will be interesting to see to what degree all these countries under attack will retaliate,” comments Vincenzo Vedda, Chief Investment Officer at DWS. “Or maybe they shouldn’t, as Treasury Secretary Scott Bessent urged them to in an interview with Bloomberg Television: ‘I wouldn’t try to retaliate. As long as you don’t retaliate this is the high end of the number’.”