There’s Nowhere to Hide as Tariffs Reshape Global Trade

The new US tariffs announced on April 2, including a “minimum baseline tariff” of 10% and higher “reciprocal trade tariffs” on goods from some 60 countries, expand the Trump administration’s trade targets from a few nations and sectors to the vast majority of the global economy. In addition to higher costs for US companies and consumers, two things are clear. First, we are entering a new era of trade and economic relations. The president’s tariffs, which are on top of levies already imposed, have moved well beyond a few bilateral trading relationships or sectors of interest. Second, uncertainty will be a defining attribute of much of global trade for the foreseeable future, not only with respect to the possibility of further tariffs (next week, next month, or next year) but also the stability and reliability of the US’s relationships with its trading partners and the resulting global ramifications.

Management decision making just got a lot more complicated. Every company, regardless of sector or location, needs to build tariffs and the related uncertainty into its planning and operating model. Here’s what we know right now and what it looks like it means for US and global businesses.

Every company, regardless of sector or location, needs to build tariffs and the related uncertainty into their planning and operating model.

What We Know

Before April 2, the second Trump administration had largely targeted or threatened tariffs on a few trading partners (such as China, Mexico, Canada, and the EU) and industries (like autos and steel and aluminum). Now, the president has imposed broad tariffs designed to level trade imbalances between the US and its international partners.

The new tariffs are planned to be rolled out quickly, with the 10% global baseline tariff going into effect on April 5 and country-specific tariffs on April 9. Canada and Mexico were exempted from the latest tariffs but are still subject to earlier levies, with certain sectoral and product-specific exemptions, as well as to the global steel and aluminum tariffs.

There are exemptions for certain products deemed important to the strategic interests of the US, including pharmaceuticals, semiconductors, and certain metals, minerals, and energy resources.

The new tariffs will “stack” on top of most tariffs already in place, with exceptions for the Section 232 tariffs (such as those on steel, aluminum, and automobiles). All imported autos were subject to a 25% levy under an earlier-announced Section 232 measure. The “reciprocal trade” tariff rates range from the 10% baseline up to 50% for Lesotho. The total tariffs on goods from China will jump to 54% (it did not receive Canada and Mexico’s exemption), and those levies could go as high as 74% if the proposed duty on countries buying Venezuelan oil is also imposed. There are exemptions for certain products deemed important to the strategic interests of the US, including pharmaceuticals, semiconductors, and certain metals, minerals, and energy resources.

We expect most affected countries to both attempt to negotiate with the Trump administration and retaliate with increased tariffs of their own or other trade and nontrade measures. The EU, for example, has announced a four-week window for negotiation before it retaliates. A new front in the tariff war could be opened with levies on US services (such as internet streaming services, cloud computing, and software), enormous parts of the US economy that have so far been kept out of the fray.