Trump Targets Smaller Trading Partners with New Tariffs

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Trump Targets Smaller Trading Partners with New Tariffs

Donald Trump has already begun a new era of tariffs, launching letters to seven of our smaller trading partners on Wednesday. This change follows his intention to raise import tariffs on other goods as part of his larger plan to shape trade policy during active trade discussions. These are the countries that will be targeted — the Philippines, Brunei, Moldova, Algeria, Libya, Iraq and Sri Lanka. Later in the day Trump promised to roll out similar import taxes on other countries.

As for tariffs, in his letters Trump floated a range of possible rates. This would hit imports from the likes of Libya, Iraq, Algeria and Sri Lanka with a massive 30% tax. This is because a 25% retaliatory tax will immediately be slapped on goods coming from Moldova and Brunei. Imports from the Philippines would be taxed at 20%. These tariffs go into effect on August 1. This provides the impacted countries with additional time to finalize terms of the program with the current U.S. administration.

Trump has already shown a willingness to renegotiate tariffs in favor of bigger trade partners. He suggested a 20% tariff on all imports from the European Union. If talks failed to progress in a timely manner, he warned, he would increase that rate to 50%. After a strong start in this area, he has since returned to a baseline 10% tariff proposal for all EU imports.

Malaysia’s trade minister, Zafrul Aziz, responded to the new tariffs by announcing that his country would fail to accede to all U.S. requests. This declaration came after they received news of a letter imposing a potential 25% tariff on all Malaysian exports. This may underscore increasing U.S. pressure on its trading partners as tariffs warp global trade flows.

Trump has framed these tariffs as an opportunity for countries to “participate in the extraordinary Economy of the United States.” He’s previously decried the current trade imbalances as a “concealed major threat” to America’s economy and national security. This rhetoric serves to illuminate his administration’s greater mission of leveling the playing field with what they feel are unfair trade relations.

The announcement follows on the heels of Trump’s unprecedented plan to slap a 25% import tax. He followed quickly on two crucial U.S. trading partners, Japan and South Korea, as of this past Monday. This series of moves indicates a dramatic change in strategy towards correcting trade imbalances through direct tariff actions.

Maros Sefcovic, the European Union’s chief trade negotiator, noted that extending talks until August 1 could provide “additional space to reach a satisfactory conclusion.” This statement illustrates the cautious optimism that characterized EU officials as they steered their way through the throttling labyrinth of these new tariffs.

Yet, all of the economic analyses to date have unanimously forecast that these tariffs will only increase inflationary pressures and pull resources away from economic growth. The third point is that extraordinarily high tariffs are supposed to be a negotiating tactic. At the same time, economists are raising concerns that this approach may hurt American consumers domestically and create an international diplomatic crisis.

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