Martin Tollén retweeté
Breaking down the biggest tariff increase since 1930, which Trump announced this afternoon. (Also likely the largest tax increase of *any kind* in modern U.S. history).
1. Most US imports, with a number of exceptions that I'll come to, will be subject to *substantial* new tariffs. This includes a new 10% "universal" tariff on almost all imports. For 60 named countries there is also a new "discounted reciprocal rate" that Trump specified for each of the 60. For example, for Vietnam the "discounted reciprocal rate" is 46%. For the UK, it is 10%. It appears that the "reciprocal rates" in the charts Trump published *include* the 10% universal tariff. Trump has not released whatever math went into the reciprocal tariff calculations, but the Administration previously said the calculation would include foreign tariffs, non-tariff barriers, and value-added taxes.
2. 10% applies to all imports starting Saturday (April 5). "Reciprocal" rates kick in April 9.
3. The new tariffs are generally additive on top of existing tariffs, such as U.S. MFN tariffs. Many Chinese products, for example, will now be subject to a 25% Section 301 tariff, 20% "fentanyl" tariffs; and now a 34% "discounted reciprocal tariff," plus whatever the US MFN rate is. E.g., total tariffs of 79%+
4. There are two major exceptions to the new tariffs.
4a. First, products that are subject to 232 tariffs, such as steel and aluminum, and autos and auto parts, or to planned 232 tariffs, such as pharmaceuticals and semiconductors, are *exempt* from the additional reciprocal/universal baseline tariffs.
4b. USMCA-qualifying goods from Canada and Mexico, which are currently exempt from Trump's previous 25% Canada and Mexico tariffs, are exempt from the new tariffs.
5. For products that include US content, the US content is exempt from the new tariffs, as long as the US content is at least 20% of the value of the imported product. E.g., a Korean car that includes 30% US content will only be tariffed at 70% of the import price.
6. All of these tariffs are done pursuant to IEEPA, a 1977 emergency powers act, that, prior to Trump, had never been used for tariffs. The basis for these tariffs is a newly declared national emergency related to the trade deficit and the loss of the U.S. industrial base. I remain very dubious of the legality here. *SOMEONE SHOULD SUE!*
7. These tariffs are *very* large. I suspect that by the end of next week the average US tariff rate will be north of 20%, which would raise maybe $500+ billions of dollars over the next 12 months, putting aside demand destruction due to higher prices. Of course, that revenue will come at least in good part from increases in prices, and I bet estimates will soon coalesce at a typical household cost of $3,000-$5,000/year.
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