Investing.com - U.S. President Donald Trump warned on Friday that levies on automobiles could be coming as soon as April 2, one day after members of his economic team are due to present reports to him on imposing like-for-like tariffs on every country charging import taxes on U.S. goods.
It was the latest salvo in a series of escalating tariff threats issued by Trump during the early weeks of his administration, as he attempts to bring more manufacturing jobs back to the U.S. and address perceived inequalities in America's global trading stance.
Earlier this week, Trump ordered his economic team to review and create a plan for reciprocal tariffs, arguing that they are necessary for the "purposes of fairness." He tasked officials with devising a push to begin tallying up U.S. duties so they can match those imposed by other countries. He also called for the removal of non-tariff barriers such as value-added taxes and vehicle safety restrictions.
Still, Trump did not immediately impose the new tariffs, choosing instead to conduct potentially weeks of investigations into America's trading ties with a host of countries, including traditional allies like the European Union, South Korea, and Japan. Howard Lutnick, Trump's nominee to run the Commerce Department, has said the reviews are expected to be submitted to Trump by April 1.
Although the ultimate outcome of the reciprocal tariffs -- and the responses they could elicit from countries around the world -- is yet to be determined, Trump has not shied away from imposing fresh duties in the early weeks of his presidency.
He has slapped 10% tariffs on imports coming from China, sparking countermeasures from Beijing. Sweeping 25% surcharges on steel and aluminum imports are due to come into effect on March 12 as well, with several countries hitting out at the duties, vowing to respond.
A new protectionist trading stance has become a hallmark of Trump's nascent second term in office, with the president often issuing threats against both friends and adversaries alike. However, the approach has stoked uncertainty across a wide range of businesses, while some economists have warned the tariffs could refuel inflationary pressures.
"Less than a month into the new Trump administration and already it feels as though enough has been written about trade, tariffs and U.S. foreign relations to last four years," analysts at Capital Economics said in a note to clients.
Yet, they flagged that, with events moving at such a rapid pace, "there is a clearly a danger of leaping to firm conclusions about the path ahead." They outlined some major lessons they have learned from Trump's trade actions -- and rhetoric -- in the opening weeks of his administration.
First, while Trump is "serious" about tariffs, he is also open to securing advantageous deals, the analysts said, noting that Canada, Mexico, and Colombia were all threatened with levies but avoided them after reaching eleventh-hour agreements with U.S. officials.
"In this light, the president’s latest warning that his administration is planning to introduce tariffs on a reciprocal basis -- imposing duties on trading partners at levels equivalent to those imposed on the U.S. -- could present more opportunity for deal-making," the analysts wrote.
The other key takeaway was derived from China's retaliation to the tariffs, which were largely viewed as relatively muted, the analysts argued.
Beijing imposed levies on around $20 billion of imports from the U.S. -- far less than the $450 billion hit by Washington -- and rolled out antitrust investigations into large American firms including Alphabet (NASDAQ:GOOGL)-owned Google and artificial intelligence-darling Nvidia (NASDAQ:NVDA).
"Taken together, the package of measures is relatively modest and appears designed to avoid escalation. Other countries are likely to respond in a similar manner if and when they come under fire from U.S. tariffs," the analysts wrote.
But the path ahead for U.S. trade policy is "murky, to put it politely," they flagged, adding that the associated uncertainty will have "real-world consequences."
The Federal Reserve could be particularly impacted, with policymakers having to decide if they may be facing a massive price shock from the tariffs or if the announcements from the White House are simply "sound and fury," the analysts wrote. Fed officials may choose not to roll out any more interest rate cuts over the coming months as a result, they said.
Much will depend on Trump decisions, they noted, saying that there have been "few certainties about [his] trade policy approach -- other than that the threat of higher tariffs isn’t going away."