Tariff Troubles
Markets were thrown into a panicked frenzy following President Donald Trump’s choice to implement a new reciprocal tariff policy. Making good on his campaign promise of a 25 percent Tariff on Canada and Mexico, along with a 10 percent tariff on China, Trump went above and beyond. Trump’s new tariff policy reflects a dangerous shift in foreign economic policy.
“To me, the most beautiful word in the dictionary is ‘tariff,’” President Trump said at a campaign rally back in October of 2024. Throughout the bulk of his campaign for re-election in 2024, Trump kept his discussion on tariffs to only include Mexico, Canada, and China; following re-election, Trump chose to expand on his tariff policy to include over 40 nations. Citing the large trade deficit, which is 1.2 trillion dollars according to The Wall Street Journal, Trump said, “Tariffs are going to make us rich as hell. It's going to bring our country's businesses back that left us." Trump started off by launching a 25 percent Tariff on Canada and Mexico, which were swiftly paused days later after agreements between both nations were reached. Many thought that the tariffs against two of the United States’ biggest trade partners were unnecessary and hostile. Former Canadian Prime Minister Justin Trudeau responded, saying the tariffs were “completely bogus and completely unjustified,” according to CBC News.
The next step in his tariff plan, and the one that caused the most chaos, was the announcement of his “reciprocal tariff” policy. Announced on what Trump called a “Liberation Day” for the United States, the reciprocal tariff plan was to cut down on the trade deficit. According to CNN, the Reciprocal tariff starts at a static rate of 10 percent and goes up depending on the rate that a country taxes the United States; the rate of the tariff goes up when a nation raises its tariff. For example, when the Reciprocal Tariff was put into place, China faced a tariff rate of 34 percent. Following multiple Chinese responses to match the tariff rate, Trump raised the Chinese tariff rate to 145 percent. Along with other tariffs on China, the tariff rate can now be as high as 245 percent, according to The New York Times.
Following the implementation of the tariff policy, which was instantly seen as a threat to investments, the United States stock market, along with global markets, took a massive tumble. According to Al Jazeera, the Dow, S&P 500, NASDAQ, and most major stocks were in the red for multiple days, leading to $6.6 trillion in value being wiped out following the announcement of the tariff. Later, President Trump told reporters, “I don’t want anything to go down, but sometimes you have to take medicine to fix something,” as well as posted “HANG TOUGH, it won’t be easy, but the end result will be historic,” on his Truth Social platform.
What is now being considered a global trade war might not be permanent; many nations have begun the process of appealing to the Trump administration in order to seek lower tariff rates. President Trump also noted that the rate on China of 145 percent was very high and is expected to go down as an agreement is made, which, according to CNN, is in the works. Markets have slowly been recovering following a 90-day pause on the tariffs, President Trump has signalled that this period could be shortened or extended in the future.
“To be honest, I just think it’s kind of crazy that Trump could even consider a tariff on China so high, considering we get so much of our products from them,” said Thomas Rennhack, 10.
According to CNN’s Fear and Greed market outlook, American investors continue to be driven by fear as they watch the market develop.