By David Lawder and Andrea Shalal, Reuters
The new rates will test Trump's strategy for shrinking US trade deficits without causing massive disruptions to global supply chains or provoking trading partners. Photo: BRENDAN SMIALOWSKI / AFP
United States President Donald Trump's higher tariffs on imports from dozens of countries have kicked in, raising the average US import duty to its highest in a century and leaving major trade partners such as Switzerland, Brazil and India hurriedly searching for a better deal.
The US Customs and Border Protection agency began collecting the higher tariffs of 10 percent to 50 percent at 12:01am EDT (4:01pm Thursday in New Zealand) after weeks of suspense over Trump's final tariff rates and frantic negotiations with countries seeking to lower them. The leaders of Brazil and India vowed not to be cowed by Trump's hardline bargaining position, even while their negotiators sought a reprieve from the highest tariff levels. The new rates will test Trump's strategy for shrinking US trade deficits without causing massive disruptions to global supply chains or provoking higher inflation and stiff retaliation from trading partners.
'Billions' of tariff revenue
After unveiling his "Liberation Day" tariffs in April, Trump has frequently modified his plans, slapping much higher rates on imports from some countries, including 50 percent for goods from Brazil, 39 percent from Switzerland, 35 percent from Canada and 25 percent from India. He announced on Wednesday a separate 25 percent tariff on Indian goods, to be imposed in 21 days, over India's purchases of Russian oil.
"BILLIONS OF DOLLARS, LARGELY FROM COUNTRIES THAT HAVE TAKEN ADVANTAGE OF THE UNITED STATES FOR MANY YEARS, LAUGHING ALL THE WAY, WILL START FLOWING INTO THE USA," Trump said on Truth Social just ahead of the tariff deadline.
Tariffs are ultimately paid by companies importing the goods, and passed on in full or in part to consumers of end products. Trump's top trade negotiator, Jamieson Greer, said the US was working to reverse decades of policies that had weakened US manufacturing capacity and workforce, and that many other countries shared concerns about macroeconomic imbalances.
"The rules of international trade cannot be a suicide pact," he wrote in a column published by the New York Times.
"By imposing tariffs to rebalance the trade deficit and negotiating significant reforms that form the basis of a new international system, the United States has shown bold leadership," Greer said.
Eight major trading partners accounting for about 40 percent of US trade flows have reached framework deals for trade and investment concessions to Trump, including the European Union, Japan and South Korea, reducing their base tariff rates to 15 percent.
Britain won a 10 percent rate, while Vietnam, Indonesia, Pakistan and the Philippines secured rate reductions to 19 percent or 20 percent.
"There'll be some supply chain rearrangement. There'll be a new equilibrium. Prices here will go up, but it'll take a while for that to show up in a major way," said William Reinsch, a senior fellow and trade expert at the Center for Strategic and International Studies in Washington.
Countries with punishingly high duties, such as India and Canada, "will continue to scramble around trying to fix this", he added. Switzerland's government was to hold an emergency meeting after President Karin Keller-Sutter returned home empty-handed from an 11th-hour trip to Washington aimed at averting the crippling US import tariff on Swiss goods. A last-minute attempt by South Africa to improve its offer in exchange for a lower tariff rate also failed. The two countries' trade negotiating teams will have more talks, South African President Cyril Ramaphosa's office said.
Vietnam said it will continue talks with the US as it seeks to lower tariffs further still after negotiating a reduction to 20 percent from the 46 percent duty Trump slapped on the Southeast Asian country in April. Meanwhile, Brazil's President Luiz Inacio Lula da Silva told Reuters on Wednesday he wouldn't humiliate himself by seeking a phone call with Trump even as he said his government would continue cabinet-level talks to lower a 50 percent tariff rate. Indian Prime Minister Narendra Modi was similarly defiant, saying he would not compromise the interests of the country's farmers. There were also signs that some countries were rallying together to confront Trump, with Brazil's Lula saying he would call the leaders of India and China to discuss a joint BRICS response to tariffs.
India said on Wednesday that Modi will visit China for the first time in seven years.
US President Donald Trump and Indian Prime Minister Narendra Modi arrive to hold a joint press conference in the East Room of the White House in Washington, DC, on 13 February, 2025. Photo: AFP
Indian Prime Minister Narendra Modi and US President Donald Trump at the White House in February.
Revenues, price hikes
US import taxes are one part of a multilayered tariff strategy that includes national security-based sectoral tariffs on semiconductors, pharmaceuticals, autos, steel, aluminum, copper, lumber and other goods. Trump said on Wednesday the microchip duties could reach 100 percent.
China is on a separate tariff track and will face a potential tariff increase on 12 August unless Trump approves an extension of a prior truce. He has said he may impose additional tariffs over China's purchases of Russian oil as he seeks to pressure Moscow into ending its war in Ukraine. Trump has touted a vast increase in federal revenues from his import tax collections, with US Commerce Secretary Howard Lutnick saying on Fox Business Network on Thursday that he expected revenue from tariffs to reach $50 billion (NZ$84b) a month.
The move will drive average US tariff rates to around 20 percent, the highest in a century and up from 2.5 percent when Trump took office in January, the Atlantic Institute estimates.
Commerce Department data released last week showed more evidence that tariffs were driving up US prices, including for recreational goods and motor vehicles, while costs are mounting for companies, including bellwethers Caterpillar, Marriott, Molson Coors and Yum Brands.
Toyota on Thursday said it expected a hit of nearly $10 billion (NZ$16.9b) from tariffs on cars imported into the US as it cut its full-year profit forecast by 16 percent. But other Japanese companies such as Sony and Honda said they now expected a smaller impact on profits after Japan agreed a bilateral deal with Washington to lower tariffs.
- Reuters
