Tariffs had dropped out of the headlines in recent months, but they're now roaring back.
Tariffs were the main focus of the first year of Donald Trump's second term of office. They triggered a sharp market selloff, disrupted corporate value chains, and froze diplomatic relations between Washington and many of its partners.
However, the markets moved past the issue. First, Donald Trump reduced the bill from his initial ambitions. Next, the global economy managed to adapt. Finally, the AI boom more than offset the negative effects of tariffs.
On top of that, the US courts curbed Donald Trump's push. In January, the Supreme Court struck down reciprocal tariffs, imposed under the IEEPA (International Emergency Economic Powers Act) of 1977. Most tariffs had been imposed using this legislative vehicle.
Donald Trump responded by imposing global 10% tariffs under Section 301 of the Trade Act of 1974. Temporary measures that expire on Friday. Yet, the US administration is not backing down and is preparing to announce new tariffs by the end of the week, according to Bloomberg.
In this context, the United States already announced new 25% tariffs on Brazil last week. However, exemptions are planned, notably for beef, coffee and aerospace.
A Neighbor Problem
In recent days, Canada has been central to this tariff threat. Early in the week, Donald Trump imposed 50% tariffs on about $20bn of Canadian imports, which represent about 5% of Canadian exports to the south of the border.
A few days earlier, he was already threatening to impose tariffs on Canada, as compensation for its poor handling of wildfires. Indeed, many US East Coast cities are suffering pollution linked to such fires.
The timing therefore seems surprising, although Donald Trump insists that both issues are not connected. "No, it's a separate matter, we're looking at it separately. It's nothing more than a reaction to the way they treated our farmers and our people," Donald Trump said yesterday in the Oval Office, alongside Lebanese President Joseph Aoun.
Canadian Prime Minister Mark Carney said he would step up efforts in negotiations to resolve the dispute. But relations appear highly strained, as Washington has also excluded Canada from USMCA negotiations. A trade agreement between the United States, Mexico and Canada that must be renegotiated. For now, talks are only taking place between the United States and Mexico.
Since returning to the White House, Donald Trump has made tariffs one of the pillars of his economic policy. They are also his favorite diplomatic weapon. He does not hesitate to threaten to tax French wine or German cars whenever a dispute emerges with Europeans.
