Highlights: Trump Imposes Vast Global Tariffs

The tariffs imposed on Chinese imports by Mr. Trump during his second term have created a severe burden on companies importing from China. These are on top of the tariffs he placed on Chinese imports during his first term.

“There are no winners in a trade war,” the commerce ministry said, urging the United States to use dialogue for resolving trade issues.

The tariffs on China have likely dimmed hope of a meeting between the country’s top leader, Xi Jinping, and Mr. Trump, who has expressed interest in a summit.

Wang Yi, China’s top diplomat, told Russian state media this week that the United States needed to remove the tariffs imposed on China earlier this year before any talks could take place between the two countries.

“If the U.S. side keeps on pressuring and even blackmailing, China surely will be resolute in its countermeasures,” Mr. Wang said.

China imposed tariffs on American exports, such as agricultural products, in response to the two earlier rounds of U.S. tariffs. Beijing’s options this time could include more tariffs, restrictions on U.S. investment in China or export controls on rare earth minerals.

There will be a partial exemption for cars made in Mexico or Canada that meet the terms of free trade agreements with those countries. Carmakers will not have to pay duties on parts like engines, transmissions or batteries that were made in the United States and later installed in cars in Mexican or Canadian factories.

That provision will reduce the impact on vehicles like the Chevrolet Equinox electric vehicle, which is assembled in Mexico but includes a battery pack and other components made in the United States. General Motors will pay a tariff only on the portion of the car made abroad.

At the same time, the duty on parts will raise the cost of cars made in Michigan, Tennessee, Ohio or other states. That is because most cars rolling out of U.S. factories contain components made abroad, often amounting to more than half the cost of the vehicle.

About 90 percent of the value of some Mercedes-Benz cars made in Alabama, for example, is in engines and transmissions that are imported from Europe, according to data compiled by the National Highway Traffic Safety Administration.

The impact of the tariffs on individual vehicles will vary widely. Cars like the Tesla Model Y, made in Texas and California, or Honda Passport, made in Alabama, have high percentages of U.S.-made parts and will pay lower tariffs.

Tariffs will be highest on cars manufactured abroad, like the Toyota Prius made in Japan or Porsche sports cars made in Germany.

Even people who don’t buy new cars will be hit by the tariffs because they will pay more for parts like tires, brake pads and oil filters.

Michael Holmes, co-chief executive of Virginia Tire and Auto, a chain of auto repair and maintenance shops, said he and his suppliers would initially try to absorb most of the increased cost.

“That’s not sustainable,” Mr. Holmes said. “It’s magical thinking to think businesses won’t pass this on.”

The auto tariffs could also push up prices for used cars over time, analysts said, by increasing demand for those vehicles as new ones become unaffordable for many buyers. Insurance premiums may also rise because repairs will cost more.

Those are just the new tariffs on China since Mr. Trump started his second term in office. During his first term, he put tariffs of 25 percent on a wide range of Chinese industrial goods and 7.5 percent on some consumer goods, which former President Joseph R. Biden Jr. left in place.

Mr. Trump’s latest action, on what he described as “Liberation Day,” has provoked considerable anger in China. On Thursday, China’s commerce ministry vowed to take countermeasures to “safeguard its own rights and interests.”

Many government officials and experts had been hoping that Mr. Trump might follow the World Trade Organization’s free trade rules.

He Weiwen, a retired Ministry of Commerce official who is now a senior fellow at the Center for China and Globalization, a Beijing research group, said that Mr. Trump’s actions were the biggest violation ever of the rules of the W.T.O. or its predecessor, the General Agreement on Tariffs and Trade.

The latest tariffs “will not liberate America, but will only cause new suffering to the American economy and American families,” Mr. He said.

China’s official news agency, Xinhua, published an editorial describing the Trump administration’s tariffs as “self-defeating bullying,” and said Washington was “turning trade into an over-simplistic tit-for-tat game.”

• Taking the trade deficit that America runs with that nation and dividing it by the exports that country sent into the United States.

• Then, because Mr. Trump said he was being “kind,” the final tariff number was cut in half.

James Surowiecki, a financial writer and book author, first pointed out the trend in a post on X. His comment set off widespread speculation, given that Mr. Trump previously said each nation’s tariff rate would be “the combined rate of all their tariffs, non-monetary barriers and other forms of cheating.”

Those non-monetary barriers include a host of hard-to-quantify laws and other policies that Mr. Trump sees as the primary reason that the U.S. experiences such trade imbalances in the first place. (There are exceptions: Some nations face only a standard 10 percent minimum tariff starting this month.)

In an earlier briefing with reporters, White House officials said the figures were calculated by the Council of Economic Advisers using well-established methodologies. The official added the model was based on the concept that the trade deficit that we have with any given country is the sum of all the unfair trade practices and “cheating” that country has done.

The White House later clarified its methodology in this post. Though it uses some mathematical symbols that might be hard to parse, it confirms that the formula is essentially based on the U.S. trade deficit with a foreign country, divided by the country’s exports.

“It was always going to be a really difficult exercise to come up with a very precise reciprocal tariff rate,” said Emily Kilcrease, the director of the Energy, Economics and Security Program at the Center for a New American Security and a former deputy assistant U.S. trade representative.

“Given what seems to be their desire to get something out quickly, it appears what they’ve done is come up with an approximation that is consistent with their policy goals,” she said.

The president originally scrapped the loophole in February, saying it was depriving the United States of revenue and helping enable the fentanyl trade. Administration officials said that the large flow of low-cost goods from China had made it challenging for customs officials to identify fentanyl shipments sent through the mail.

Mr. Trump quickly reinstated the provision to allow time for the secretary of commerce to put systems in place to “fully and expediently process and collect tariff revenue.”

On Wednesday, Mr. Trump issued an executive order stating that the loophole would no longer apply as of May 2.

All other goods valued at or under $800 and would otherwise qualify for the tax loophole will be subject to a duty rate of either 30 percent of their value or $25 per item. The cost per item will increase to $50 after June 1.

The move could shift the landscape for online sales from fast-fashion retailers like Shein and Temu, which rely on Chinese vendors. Both companies have been able to expand their market share largely by exporting goods into the United States without being subject to duties.

The purpose of the executive order is to target “deceptive shipping practices by Chinese-based shippers,” according to the statement, which said that illicit substances, including synthetic opioids, were often hidden in packages that exploit the de minimis loophole.

When Mr. Trump announced the suspension of the provision in February, the decision caused confusion and chaos within the U.S. Postal Service, as well as among retailers and shippers, as hundreds of thousands of packages coming into the United States each day from China were suddenly subject to tariffs and requirements for much more information.

Other reactions were more muted, and some positive, saying the move was long overdue.

“Today is arguably the single greatest trade and economic policy action in the history of the country, and it absolutely cements President Trump’s legacy that he is trying to usher in a new golden age of economy production and prosperity,” said Nick Iacovella, executive vice president at the Coalition for a Prosperous America, a group that supports tariffs. He said the tariffs would contribute to “broadly re-industrializing the United States and creating working class jobs.”

Mr. Trump insisted on Wednesday that experts had been wrong all along about his tariffs and that the anxiety about them now was misplaced. But those who will be forced to pay the tariffs were quick to raise concerns about the move, which will increase import taxes on products from some of America’s biggest trading partners including China, the European Union, Japan and India.

The National Retail Federation said in a statement that the tariffs would “equal more anxiety and uncertainty for American businesses and consumers.” Tariffs are not paid for by foreign countries or suppliers but by U.S. importers, they said. They also added that “the immediate implementation of these tariffs is a massive undertaking and requires both advance notice and substantial preparation by the millions of U.S. businesses that will be directly impacted.”

The National Association of Manufacturers said it was still parsing the details and exact implications of the president’s tariffs. But the group’s president, Jay Timmons, said in a statement that the high costs of new tariffs threatened “investment, jobs, supply chains and, in turn, America’s ability to outcompete other nations and lead as the pre-eminent manufacturing superpower.”

The National Restaurant Association flagged concerns among business owners that tariffs would “hike food and packaging costs and add uncertainty to managing availability, while pushing prices up for consumers.”

“Many restaurant operators source as many domestic ingredients as they can, but it’s simply not possible for U.S. farmers and ranchers to produce the volumes needed to support consumer demand,” the association’s president, Michelle Korsmo, said in a statement.

Trade experts at the free-market focused Cato Institute said that Mr. Trump’s justifications for the tariffs were “flimsy” and conflicting and warned that they could fuel inflation and slow economic growth.

“With today’s announcement, U.S. 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,” Scott Lincicome and Colin Grabow of Cato said in a statement.

Top Democrats also panned Mr. Trump’s tariffs. Senator Ron Wyden of Oregon said that they would raise prices and add to uncertainty for businesses.

“Trump’s shortsighted tariff plan won’t rebuild American manufacturing or help working families get ahead,” Mr. Wyden said. “It’s a tax on almost everything families buy, so Trump can give his billionaire friends a tax cut.”

Those warnings were echoed by economists, many of whom revised their forecasts down for growth and up for inflation as a result of Mr. Trump’s announcement. Nancy Lazar, chief global economist at Piper Sandler, now reckons that growth in the second quarter may fall 1 percent “because you’re going to be increasing prices more aggressively and it’s going to negatively impact the consumer space more than we had anticipated.” She had previously expected a flat quarter. “It’s an immediate hit to the economy.”

James Knightley, chief international economist at ING, warned that tariffs of this magnitude — and the very likely retaliation from other countries — would “squeeze spending power” as well as dent corporate profits. “That’s why you are seeing all of us revising down our growth forecasts,” he said of the broader shift across Wall Street.

Still, Adriana Kugler, a governor at the Federal Reserve, pushed back on the idea that the United States was headed for stagflation — the dreaded combination of what she described as “corrosive inflation” and a recession — at an event at Princeton University on Wednesday. She said, however, that she was bracing for “more upside risk to inflation” and “some signs of a potential slowdown down the road.”

Exiger, a supply chain mapping firm, calculated that Mr. Trump’s announcements would result in $600 billion of new U.S. tariffs, the bulk of which would come from just 10 countries.

The firm calculated that the burden would fall heaviest on Chinese exports, which would face $149 billion in additional tariffs, while Vietnamese goods would face $63 billion, Taiwanese products $37 billion and Japanese goods $36 billion in tariffs. German and Irish goods combined would face $41 billion in additional levies.

Exiger called the announcement a “monumental policy shift that will reshape sourcing, pricing and geopolitical strategy.”

Despite the backlash, some business groups praised Mr. Trump’s measures.

“American steel producers are all too familiar with the detrimental effects of unfair foreign trade practices on domestic industries and their workers,” said Kevin Dempsey, president of the American Iron and Steel Institute, who thanked the president for “standing up for American workers.”

John Williams, the executive director of the Southern Shrimp Alliance, said his industry had “watched as multigenerational family businesses tie up their boats, unable to compete with foreign producers who play by a completely different set of rules.”

“We are grateful for the Trump administration’s actions today, which will preserve American jobs, food security and our commitment to ethical production,” he added.

Representative Jason Smith, the Republican chairman of the House Ways and Means Committee, expressed optimism that the tariffs would be an effective tool for curbing abusive trade practices used by America’s trading partners.

“These tariffs leverage the power of the world’s largest market to create a level playing field for American farmers, producers and workers,” Mr. Smith said.

Ana Swanson and Tony Romm contributed reporting.

The index, which had already fallen five of the last six weeks, tipped into correction territory, which means it has declined more than 10 percent from its latest peak and which is a line in the sand for investors assessing the severity of a recent drop.

The tremors spread further than just stocks. Measures of inflation expectations jumped, intensifying fears of an economic slowdown and sending the dollar down against every currency of the Group of 10 nations. Investors rushed to the safety of government debt.

Thursday’s sell-off was an extraordinary moment in markets that, despite being prone to big swings, rarely react so strongly to an American president’s rollout of an economic policy.

Mr. Trump and his advisers shrugged off the market turmoil and predicted that stocks would eventually rebound.

“The markets are going to boom,” Mr. Trump said on Thursday. “The country is going to boom.”

The turmoil erupted after he announced on Wednesday a 10 percent base-line tariff on nearly all imports as well as additional taxes on goods from a host of specific countries. Those increased total tariffs on Chinese imports to 54 percent.

In a period when the markets had already been racked with uncertainty, Mr. Trump’s higher-than-expected tariffs presented a new challenge to investors’ and economists’ outlooks.

While some economists forecast that inflation from the tariffs will keep interest rates elevated, investors are betting that the shock to the economy will force the Federal Reserve to cut rates more rapidly.

“Trump’s tariff plan probably represents a shift for markets to quickly move from max uncertainty to max pessimism,” said Jeff Buchbinder, the chief equity strategist for LPL Financial.

Other analysts and investors simply expressed bewilderment.

The Trump administration modified its estimates of the tariffs that other countries impose on imports from the United States to account for what it deemed currency manipulation or even other taxes, with analysts questioning the analytical basis for doing so.

“They might as well have been in a room throwing darts at a dart board,” said Andrew Brenner, head of international fixed income at NatAlliance Securities.

“Trump is going to war with countries on this,” he said. “It’s ridiculous. It shows no comprehension as to what he is doing to other countries. And it is going to hurt the U.S.”

The market reaction clearly reflected the surprise that gripped Wall Street after the tariffs were announced.

“Never before has an hour of Presidential rhetoric cost so many people so much,” Lawrence Summers, who served as Treasury secretary under President Bill Clinton, wrote on social media late Wednesday.

Many major U.S. companies sank as soon as trading began on Thursday. As the day unfolded, some of the worst hit were technology stocks: Apple fell more than 9 percent, Amazon just less than 9 percent and Nvidia 7.7 percent. The tech-heavy Nasdaq Composite index fell 6 percent.

Shares in consumer brands also slumped as the Trump administration imposed steep tariffs on countries that are manufacturing hubs for shoes and clothing — for example, 46 percent on Vietnam and 32 percent on Indonesia. Nike’s shares dropped more than 14 percent.

The Russell 2000 index of smaller companies, which are more exposed to the health of the economy, fell 6.6 percent. The index dropped into a bear market, defined as a decline of 20 percent or more from the latest peak. The Russell is now almost 22 percent below its November peak.

In Europe, shares of Puma and Adidas tumbled alongside the stock of Pandora, a Danish jewelry company that makes its products in Thailand, which fell 10.7 percent.

The Stoxx Europe 600 fell 2.6 percent on Thursday, with most sectors, including banks, technology and consumer goods, in the red. Shares in Maersk, the Danish shipping giant, fell on fears of a global trade slowdown, while big European banks including HSBC, Commerzbank and Deutsche Bank also slumped.

In Asia, stocks tumbled for a wide variety of companies, including technology and semiconductor giants as well as major auto exporters. Shares of the Japanese automaker Toyota fell more than 5 percent on Thursday and South Korea’s Samsung Electronics close to 3 percent.

Investors flocked to government debt as a haven. The yield on the 10-year U.S. Treasury bond, which moves inversely to prices, fell to 4.04 percent, its lowest level since October. Mr. Trump has homed in on the 10-year yield as a measure of his success in lowering interest rates, but analysts warn that the recent drop reflected mounting worries for the economy.

The prospect of weaker global economic growth also weighed on commodities. Oil prices slumped even further after the Organization of the Petroleum Exporting Countries and its allies accelerated plans to increase supply. Brent crude oil, the international benchmark, dropped more than 6 percent, settling at $70.14 a barrel.

Stock markets globally have been choppy in recent weeks, as investors have been whipsawed by the Trump administration’s mixed messages on tariffs. Mr. Trump previously announced, delayed, changed and ultimately imposed tariffs on Canada, Mexico, steel, aluminum, cars and auto parts.

His advisers have asked for patience, while acknowledging that the tariffs could bring some short-term pain.

“Let Donald Trump run the global economy,” Commerce Secretary Howard Lutnick said Thursday morning on CNN. “He knows what he’s doing. He’s been talking about it for 35 years. You got to trust Donald Trump in the White House.”

The uncertainty around the tariff levels, and how long they might last, has made it difficult for investors, economists and policymakers to assess the potential ramifications for consumers, businesses and the broader economy.

The U.S. tariff rate on all imports is now around 22 percent, up from 2.5 percent in 2024, said Olu Sonola, the head of U.S. economic research at Fitch Ratings. That rate was last seen around 1910, he said.

Signs of worry have also been evident in the rapid rise in the price of gold, which has climbed alongside inflation worries. Investors sent it 19 percent higher in the first three months of the year, its biggest quarterly rise since 1986. On Thursday, gold was trading at more than $3,100 per troy ounce, while a market measure of inflation expectations one year from now shot up to around 3.5 percent.

Although many investors worry about the inflationary effect of tariffs, falling bond yields and a declining U.S. dollar suggest that most are more worried about waning economic growth.

It has led investors to suggest that the Federal Reserve might need to cut interest rates more aggressively. Traders had been betting on three more quarter-point cuts this year, but the chances of a fourth have increased, financial markets implied.

Some investors had hoped that the tariff announcement on Wednesday would cure some of the uncertainty in the financial markets. But few truly expected the news to be the end of Mr. Trump’s tariff talk and, with it, an end to the stock market volatility.

“Investors no longer see tariffs as a one-time event risk but an always-present risk,” said Mandy Xu, head of derivatives market intelligence at Cboe Global Markets, adding that the current expectation in the market is for volatility to persist.

Colby Smith contributed reporting.

Some leaders reacted strongly to the wave of tariffs, which many see as overturning the global trade order that the United States established after World War II.

“The global economy will massively suffer,” Ursula von der Leyen, the president of the European Commission, said in a statement Thursday. “Uncertainty will spiral, and trigger the rise of further protectionism.”

While many countries seemed at a loss as to how to react, at least one seized the moment to score political points. China turned the tables on the United States by condemning the tariffs as a “unilateral” violation of international rules — the same language that Washington has used to criticize Chinese efforts to redraw territorial boundaries in the East and South China Seas.

“The United States has drawn the so-called ‘reciprocal tariffs’ based on subjective and unilateral assessments,” the Chinese Ministry of Commerce said in a statement. “It is a typical unilateral bullying practice.”

Japan and South Korea, two of America’s most stalwart allies, reacted to the tariffs with dismay. In Tokyo, Japanese Prime Minister Shigeru Ishiba called the tariffs “extremely regrettable” but refrained from talk of retaliation. Instead, he said his government would continue to seek an exemption by reminding the Trump administration that Japan is America’s largest overseas investor.

“If it becomes appropriate for me to speak directly to President Trump, I will not hesitate to do so at the most appropriate time and in the most appropriate way,” Mr. Ishiba told reporters.

In South Korea, the acting president, Han Duck-soo, convened an emergency task force. He vowed to use “all government resources to overcome a trade crisis” by seeking aggressive negotiations with the United States.

There was also disappointment that Mr. Trump proved unwilling to spare America’s two oldest Asian allies.

“Our close partners appear to be treated similarly to our rivals,” said Wendy Cutler, a former U.S. trade negotiator who is now vice president of Asia Society Policy Institute. “Asian countries in particular have been hard hit, causing them sharp economic pain given their export-driven economies.”

Analysts said China may see a diplomatic opportunity. Mr. Trump imposed some of the highest tariffs on the smaller nations in Southeast Asia, including Vietnam, a producer of shoes and clothing bought by Americans, which now faces a levy of 46 percent.

China’s top leader, Xi Jinping, will be visiting the region in coming days, when he may seek to present his nation as a more reasonable and dependable trading partner.

“In terms of who’s going to be there and reaping their geopolitical reward, it’s China,” said Susannah Patton, director of the Southeast Asia Program at Australia’s Lowy Institute.

Exiger, a data analytics firm, calculated that the burden from the tariffs could fall heaviest on Chinese exports, which would face $149 billion in additional surcharges, while Vietnamese goods would face $63 billion, Taiwanese products $37 billion and Japanese goods $36 billion. The firm called the announcement a “monumental policy shift that will reshape sourcing, pricing and geopolitical strategy.”

In Europe, nations have announced plans to retaliate to an earlier wave of steel and aluminum tariffs, and they have been clear that they will respond to the growing trade conflict with further measures if negotiations fail — including, potentially, by creating barriers for services like big technology companies.

The European Union’s willingness to push back could hurt American producers and consumers. Taken as a whole, its 27 nations account for nearly a fifth of American imports, and European consumers are a huge market for American services.

Others nations hit by the tariffs took a wait-and-see approach.

Prime Minister Anthony Albanese of Australia said the United States imposing 10 percent tariffs on the country had “no basis in logic.” But Australia would not race to retaliate, he said, saying the country would not “join a race to the bottom that leads to higher prices and slower growth.”

In Mexico and Canada, there was a sense of muted relief that they would not be subject to new tariffs beyond those previously announced. “This is good news for the country,” said Luis de la Calle, a top Mexican trade economist. “It allows us to safeguard our access to U.S. markets.”

Many nations are still trying to figure out Mr. Trump’s objective in imposing the tariffs.

At times, he has talked about forcing automakers, drugmakers and other manufacturers to move factories — and factory jobs — back to the United States. However, Mr. Trump has also spoken of tariffs as a way to pay for tax cuts.

Knowing his endgame could shape how countries respond to the tariffs.

Europe, for instance, has made a forceful response by announcing retaliatory tariffs on whiskey, motorcycles, farm goods and a wide range of other products in response to steel and aluminum levies. But it may also be willing to negotiate if it knows, for example, that Mr. Trump wants a more balanced flow of trade.

Many European nations are also in the same boat as Japan and South Korea: dependent on the United States for their security. These countries must now balance a need to persuade Mr. Trump to uphold American military commitments — not a given with his America First agenda — while weighing whether to retaliate for the trade measures.

“These countries face a real dilemma,” said Kurt Tong, a former senior U.S. diplomat and managing partner at The Asia Group. “They can’t afford to have an antagonistic relationship with the United States, but on the other hand they are being treated badly. They will have to find a way to thread this needle.”

David Pierson contributed reporting from Hong Kong; Sui-Lee Wee from Bangkok; Choe Sang-Hun from Seoul; Paulina Villegas from Mexico City; Ian Austen from Windsor, Ontario; River Akira Davis from Tokyo; and Victoria Kim from Canberra, Australia.