Trump just massively escalated his trade war. Here’s what he announced

By Elisabeth Buchwald, CNN

(CNN) — President Donald Trump is stepping up his massive global trade war, a move that’s certain to weigh on Americans’ wallets and could push the US economy into a painful recession.

On Wednesday, Trump declared a national economic emergency and announced tariffs of at least 10% across all countries, with rates going even higher for 60 countries deemed the “worst offenders,” according to White House officials.

One of the highest tariff rates of 49% will be levied on all Cambodian imports, according to a poster Trump displayed at a Rose Garden event Wednesday. Among the other newly announced reciprocal tariff rates are 46% for Vietnam, 34% for China and 20% for the European Union.

China’s reciprocal tariff rate will be levied on top of the 20% tariff Trump already imposed, bringing its total tariff rate to a whopping 54%. The United States imported $439 billion worth of goods from China last year, the second top source of imports behind Mexico.

And starting on May 2, the 54% tariff rate will also be applied to packages worth less than $800 coming to the US from China and Hong Kong. This means Americans who order goods from Chinese-based companies like AliExpress, Temu and Shein will have to pay 54% more.

Goods subject to sector-wide tariffs, such as steel and aluminum and, soon, autos, won’t be subjected to additional country-specific reciprocal rates. However, in the case of China, sector tariffs will land on top of the 20% tariff in place before Wednesday’s announcement.

In most cases, Trump said the rates are “half” the tariff rate that the other countries and trading blocs charge the US when factoring in currency manipulation and other trade barriers. It’s unclear precisely how the administration arrived at those numbers.

Perhaps the source of relief from Wednesday’s tariff announcement was that Trump didn’t go even further than he did. For instance, CNN reported that Trump administration officials were considering imposing a baseline 20% tariff rate for all imports. Trump had also previously said he’d impose 25% tariffs on semiconductors and pharmaceuticals on April 2 on top of reciprocal tariffs.

Trump says tariffs will grow the US economy. Not everyone is on the same page

The tariffs, Trump said, “are going to give us growth.” The president has repeatedly touted tariffs as a way to help the US government rely less on income taxes as a main form of revenue. He’s even gone as far to say that tariff revenue could replace income taxes entirely. But economists are largely in agreement that tariffs are paid by the country importing the goods, and have historically led to higher prices for consumers.

The escalation risks alienating the US further with foes and all the more so with key allies who have been long-time trading partners.

“It’s our declaration of economic independence,” Trump said Wednesday. “Jobs and factories will come roaring back into our country, and you see it happening already.”

The universal 10% rate will go into effect on April 5, while the customized rates will take effect on April 9, suggesting there could be more room for countries with rates higher than 10% to negotiate.

Countries with higher tariff rates are ones with what Trump referred to as “non-monetary barriers” and “monetary barriers” to trade in addition to tariffs they impose on American good.

Stock market futures tumbled following Trump’s announcement, with Dow down by 0.61%, the S&P dropping by 1.69%. While the tech-heavy Nasdaq Composite took the steepest plunge of 2.54%.

“With today’s announcement, US tariffs will approach levels not seen since the Smoot-Hawley Tariff Act of 1930, which incited a global trade war and deepened the Great Depression,” Cato Institute trade specialists Scott Lincicome and Colin Grabow, said in a joint statement on Wednesday.

“Trump’s risible rhetoric about the economic power of tariffs is, like his trade strategy, detached from reality. The only thing these tariffs will ‘liberate’ is money from Americans’ wallets,” the two said, a jab at Trump’s “Liberation Day” branding.

Among an extensive list of non-tariff trade Trump laid out were currency manipulation, tax policies viewed as unfair and the use of sweatshop labor.

“It’s all detailed in a very big report by the US Trade Representative on foreign trade barriers,” Trump said, holding up to the audience.

David Beckworth, a former international economist at the Treasury Department, labeled the tariffs “a perfect recipe for stagflation and a lost midterm election.” Stagflation refers to when inflation simultaneously accelerates while economic growth declines.

There is no official threshold for stagflation but economists — and also Federal Reserve Chair Jerome Powell — generally compare it to the 1970s and 1980s, when the unemployment rate was in the double digits and inflation nearly touched that same level.

Beckworth, now a senior research fellow at the Mercatus Center, said in a statement that “the combination of higher consumer prices on imported goods alongside supply chain disruptions created by an elevated trade war are ominous for the US economy.”

And it’s not just the US economy that could suffer. “Many countries will likely end up in a recession,” Olu Sonola, head of US economic research at Fitch Ratings, said in a statement. “You can throw most forecasts out the door if this tariff rate stays on for an extended period of time.”

Only certain goods from Mexico and Canada could escape tariffs

For the time being, the only exception to tariffs will be goods coming from Canada and Mexico that comply with the United States-Canada-Mexico Agreement signed under Trump’s first term.

Wednesday’s announcement is a far cry from the certainty on tariffs businesses have been craving since Trump’s November victory. Rather, it will open a whole new can of worms as countries respond to new tariffs with countermeasures on American goods, setting the stage for a new phase of negotiations that could escalate an already bitter trade war.

The tariffs that were already in place prior to Wednesday’s announcement — and the ongoing threat of heftier tariffs — have already dragged down the US economy at a precarious time, when a growing share of consumers are struggling financially.

His latest round of tariffs is the most substantial package in nearly 80 years. Consumers are still reeling from the highest inflation levels in 40 years and feeling crunched by high interest rates.

Countries prepare to hit US back with tariffs

Treasury Secretary Scott Bessent urged countries not to retaliate. “Everybody sit back, take a deep breath,” he told CNN’s Kaitlan Collins shortly after Wednesday’s ceremony.

“Let’s see where this goes, because if you retaliate, that’s how we get escalation,” Bessent said.

Many countries didn’t appear to be heeding his advice, though.

While none formally unveiled new retaliatory measures in the immediate hours after Trump’s announcement, several foreign leaders said they were “running the numbers” on what actions to take.

For instance, Cecilie Myrseth, Norwegian minister of trade and industry, told Norwegian state broadcaster NRK on Wednesday, “We are doing the calculations and looking through what has come.”

European Commission President Ursula von der Leyen sought to put Trump on notice Tuesday, saying the EU has “a strong plan” for striking back at the US. Various other countries, including Canada, Mexico, China, Japan and South Korea, were also firming up retaliatory plans ahead of the announcement Wednesday.

Chinese Foreign Minister Wang Yi said in comments published Tuesday by state broadcaster CCTV that Beijing would “counterattack” if the US continues to engage in “blackmail.”

“‘America First’ should not be American bullying, and it should not build its own interests on the basis of damaging the legitimate rights and interests of other countries,” he was quoted as telling RT, a state-owned Russian news group.

Mexican President Claudia Sheinbaum said earlier Wednesday she will unveil “a comprehensive program” in response to Trump’s tariffs on Thursday. Canadian Finance Minister François-Philippe Champagne promised a “strong response” involving new reciprocal tariffs on US goods that will be announced later in the day.

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CNN’s Maureen Chowdhury, Elise Hammond, James Frater and Jennifer Hauser contributed reporting