The United States (US) will impose new tariffs of between 10% and 12.5% on imports from most major trading partners, its biggest move yet to reconstruct US President Donald Trump’s tariff wall that was pierced by the Supreme Court, Bloomberg reported on Thursday.
The duties target key economic partners, including the United Kingdom (UK), China, the European Union (EU), Canada, Japan and India. They come in on Friday, as a temporary 10% levies on foreign goods introduced earlier this year expires.
The fresh measures follow an investigation into the alleged failure of around 60 economies to prevent forced labor in their supply chains to the detriment of American workers. According to the Federal Register, goods from some 10 trading partners deemed to have adopted forced-labor restrictions will be subject to 10% tariffs, including Mexico, the UK, Canada and India.
Tariffs on items from the EU and Taiwan will be at least 10%, and products from Japan, Switzerland and South Korea will be taxed at at least 12.5% in a way that complies with the trade agreements they reached with the US. Products from dozens of others will face a 12.5% charge.
Market reaction
At the time of writing, the US Dollar Index (DXY) is down 0.02% on the day at 101.43.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
