The world is reeling from US President Donald Trump’s “Liberation Day,” when he announced the highest US tariffs in more than a century. The United States is hiking taxes on imports from almost every country in the world. Shoes made in Bangladesh and sold to American wholesalers for $20 will now cost at least $27. A machine part that General Motors imports from Europe for $200 will now cost at least $240. The White House’s new, supposedly “reciprocal" tariff increases range from 11% for the Democratic Republic of the Congo (DRC) to 50% for Saint Pierre and Miquelon and Lesotho. For the European Union and China, which already faced US tariffs, the rate is rising by an additional 20% and 34%, respectively. In the immediate aftermath, global markets have plunged, triggering fears of a global recession.The Trump administration says that the tariffs are part of a plan for bringing manufacturing jobs and production back to the US, and to balance US trade, which is currently in deficit. While economists and policymakers have mixed feelings about whether, and when, trade deficits actually matter, it is worth noting that the US deficit, which has persisted since 1976, did grow at a faster rate after the North American Free Trade Agreement in 1994.
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