A new executive order issued by President Donald J. Trump has introduced sweeping tariffs, significantly altering U.S. trade policy and drawing a wave of concern from economists, business leaders, and foreign governments.
Signed on April 2, the order outlines a two-tier system of tariffs. Beginning April 5, a 10% baseline tariff will apply to imports from most countries. In addition, a separate set of higher, country-specific tariffs will go into effect on April 9. These rates, targeting approximately 60 countries with which the U.S. maintains substantial trade deficits, are calculated using a formula based on each nation’s goods trade imbalance with the United States.
According to administration officials, the policy is intended to encourage more balanced trade, protect American industries, and pressure foreign governments to eliminate what the administration considers unfair trade barriers. A White House fact sheet states that the goal is to promote domestic manufacturing and reduce reliance on foreign supply chains.
Tariff rates under the new formula vary widely. China is subject to a 34% tariff, Vietnam to 46%, and the European Union to 20%. Even traditional allies such as the United Kingdom and Australia are included in the 10% baseline.
Economists warn that the tariffs will likely result in increased consumer prices, particularly for imported goods. According to estimates from the Yale Budget Lab, the average U.S. household could face an additional $3,800 per year in costs due to the changes.
Brookings Institution analysts have previously argued that tariffs function similarly to taxes on consumers, as businesses often pass on the cost of import fees through higher prices.
In the wake of the announcement, financial markets reacted sharply. The Dow Jones Industrial Average fell by more than 1,600 points, with major multinational corporations seeing declines in stock value. Companies that depend heavily on global supply chains, such as those in the tech and retail sectors, experienced particularly steep losses.
Some former economic officials have expressed concern that the policy could result in widespread economic harm. Warnings include the potential for decreased consumer spending, business uncertainty, and broader market disruption.
Leading economists have also criticized the tariff formula itself, describing it as overly simplistic and potentially harmful to global economic relationships. Some say it does not account for the structural or developmental factors that contribute to trade imbalances and could destabilize industries that rely on international commerce.
Trade policy experts have raised concerns about the fairness of the formula used to assign country-specific tariffs. The calculation penalizes nations based on trade deficits alone, without considering differences in economic development or the reasons behind the imbalance.
For example, Madagascar — a country with relatively low levels of trade with the U.S. — now faces a 47% tariff. Critics argue that such outcomes disproportionately affect smaller or lower-income nations with limited capacity to import U.S. goods.
Some economists, including those at the Peterson Institute for International Economics, have noted that formulas like this one may have unintended consequences for countries that are not necessarily pursuing protectionist policies but lack the infrastructure or demand to increase imports.
The new tariff policy has prompted sharp responses from several of the United States’ major trading partners. European Union officials have indicated they view the measures as harmful to the global economy and are exploring potential counteractions. Other countries, including Canada, the United Kingdom, and South Korea, have signaled that they may also respond through retaliatory tariffs or formal challenges through the World Trade Organization.
Global trade authorities have expressed broader concern that unilateral actions of this scale may weaken the framework of international trade governance and increase the risk of escalating trade disputes.
Despite the criticism, the White House has indicated that it views the new tariffs as necessary for restoring balance to international trade. Senior officials have described the strategy as part of a broader effort to assert American economic sovereignty and reduce dependence on foreign markets.
President Trump, in remarks to reporters, reiterated his longstanding position that previous trade agreements and policies disadvantaged the United States. He has consistently argued for stronger protections for domestic industries and more assertive responses to trade deficits.
Analysts say the coming weeks will be critical in determining the global response to the tariffs and assessing their economic impact. Businesses are already reviewing supply chains and pricing strategies, while international leaders weigh whether to respond diplomatically or economically.
Although the full consequences remain unclear, economists and trade experts agree that the policy represents a significant shift in the United States’ approach to global commerce — one that could influence international economic relations for years to come.
Sources for this report include Regulating Imports with a Reciprocal Tariff (White House), What’s Trump’s Sweeping New ‘Reciprocal Tariff’ Regime? (Reuters), Trump Tariff Order Introduces Aggressive New Trade Formula (Financial Times), Donald Trump’s Tariffs Math Unpacked (The Times UK), Trump’s ‘Liberation Day’ Tariffs Spark Fierce Backlash from Economists and Markets (Business Insider), Wall Street Plunges as Trump’s Reciprocal Tariffs Threaten Trade War (New York Post), Trump’s Tariff Formula Confounds World, Punishes Poor Nations (Reuters), Von der Leyen: Trump’s Tariffs Are a ‘Major Blow’ to World Economy (Euronews), and Global Retaliation Looms as Trump’s Tariffs Reshape Trade Landscape (The Times UK).