The US president has promised to target countries which charge tax on US imports by matching them with a reciprocal tariff.
Donald Trump has ordered his team to start calculating duties by early April – increasing fears of a global trade war that could also accelerate US inflation.
“On trade, I have decided for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them. No more, no less,” he posted on Truth Social.
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What is America’s trade position?
It is set to spark negotiations with dozens of countries aimed at lowering their tariffs and trade barriers. The US wants to shrink its goods trade deficit which topped $1.2trn (£954bn) last year.
A White House official said that countries with large US trade surpluses could be targeted first. The top five are China, Mexico, Vietnam, Ireland and Germany, according to the US Census Bureau.
Taken at face value Donald Trump’s embrace of reciprocal tariffs is a declaration of total trade war.
It would amount to perhaps the single biggest peacetime shock to global commerce.
In promising to levy import taxes on any nation that imposes tariffs or VAT on US exports, he is following through on a campaign promise.
The aim is to address a near trillion dollar trade deficit – the difference between the value of America’s exports and its imports – that he believes amounts to a tax on American jobs.
In response, he wants to deploy tariffs to simultaneously ease the US deficit and – in theory – price out imports in favour of domestic production.
His primary targets appear to be the major trading partners with whom the trading deficit is greatest.
It is a blow to the emerging view in Whitehall that Britain might wriggle through the chaos relatively unscathed.
UK government minister Pat McFadden told Sky News’ Politics Hub with Sophy Ridge that Britain will take a “wait and see” approach when it comes to the tariffs. He refused to say if the government would retaliate.
The UK could be hit with tariffs as high as 24% if Mr Trump follows through on his threats to treat VAT as a tariff, according to Paul Ashworth, chief North America economist at Capital Economics.
Although some estimates are lower, he thinks Britain would be the fourth hardest hit, following India (29%), Brazil (28%) and the EU (25%).
This is based on VAT rates combined with existing tariffs, but the Trump administration also intends to take into account regulations, government subsidies, digital services taxation policies and exchange rate policies.
“Most people would consider VAT to be a non-discriminatory tax since it is also applied to domestically-produced goods making a level playing field,” said Mr Ashworth.
But the US still argues that VAT is a form of discriminatory tariff because America applies a much lower average sales tax at state level.
Image: Narendra Modi and Donald Trump at the White House. Pic: AP
On Thursday, Mr Trump also held a meeting with Indian Prime Minister Narendra Modi, agreeing to join forces on artificial intelligence, semiconductors and strategic minerals.
During a news conference afterwards, Mr Trump said India has been “very strong on tariffs” and “it’s very hard to sell into India”, adding: “They’re going to be purchasing a lot of our oil and gas.”
India’s tariff rates are the highest, according to the World Trade Organisation, with a simple average 17% rate for all products compared to 3.3% for the US.
Donald Trump has criticised Vladimir Putin and suggested a shift in his stance towards the Russian president after a meeting with Volodymyr Zelenskyy before the Pope’s funeral.
The Ukrainian president said the one-on-one talks could prove to be “historic” after pictures showed him sitting opposite Mr Trump, around two feet apart, in the large marble hall inside St Peter’s Basilica.
The US president said he doubted his Russian counterpart’s willingness to end the war after leaving Rome after the funeral of Pope Francis at the Vatican.
In a post on his Truth Social platform, he said “there was no reason” for the Russian president “to be shooting missiles into civilian areas, cities and towns, over the last few days”.
Image: The two leaders held talks before attending the Pope’s funeral
He added: “It makes me think that maybe he doesn’t want to stop the war, he’s just tapping me along, and has to be dealt with differently, through ‘Banking’ or ‘Secondary Sanctions?’ Too many people are dying!!!”
The meeting between the US and Ukrainian leaders was their first face-to-face encounter since a very public row in the Oval Office in February.
Mr Zelenskyy said he had a good meeting with Mr Trump in which they talked about the defence of the Ukrainian people, a full and unconditional ceasefire, and a durable and lasting peace that would prevent the war restarting.
Other images released by the Ukrainian president’s office show Sir Keir Starmer and French President Emmanuel Macron were present for part of the talks, which were described as “positive” by the French presidency.
Mr Zelenskyy‘s spokesman said the meeting lasted for around 15 minutes and he and Mr Trump had agreed to hold further discussions later on Saturday.
Image: The world leaders shared a moment before the service
Image: Donald Trump and Volodymyr Zelenskyy meet in the Basilica
But the US president left Rome for Washington on Air Force One soon after the funeral without any other talks having taken place.
The Ukrainian president’s office said there was no second meeting in Rome because of the tight schedule of both leaders, although he had separate discussions with Mr Starmer and Mr Macron.
The French president said in a post on X “Ukraine is ready for an unconditional ceasefire” and that a so-called coalition of the willing, led by the UK and France, would continue working to achieve a lasting peace.
There was applause from some of the other world leaders in attendance at the Vatican when Mr Zelenskyy walked out of St Peter’s Basilica after stopping in front of the pontiff’s coffin to pay his respects.
Image: Donald Trump and the Ukrainian president met for the first time since their Oval Office row. Pic: Reuters
Sir Tony Brenton, the former British ambassador to Russia, said the event presents diplomatic opportunities, including the “biggest possible meeting” between Mr Trump and the Ukrainian leader.
He told Sky News it could mark “an important step” in starting the peace process between Russia and Ukraine.
Professor Father Francesco Giordano told Sky News the meeting is being called “Pope Francis’s miracle” by members of the clergy, adding: “There’s so many things that happened today – it was just overwhelming.”
The bilateral meeting comes after Mr Trump’s peace negotiator Steve Witkoff held talks with Mr Putin at the Kremlin.
They discussed “the possibility of resuming direct negotiations between Russia and Ukraine”, Kremlin aide Yuri Ushakov said.
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On an extraordinary day, remarkable pictures on the margins that capture what may be a turning point for the world.
In a corner of St Peter’s Basilica before the funeral of Pope Francis, the leaders of America and Ukraine sit facing each other in two solitary chairs.
They look like confessor and sinner except we cannot tell which one is which.
In another, the Ukrainian president seems to be remonstrating with the US president. This is their first encounter since their infamous bust-up in the Oval Office.
Image: The two leaders held talks before attending the Pope’s funeral
Other pictures show the moment their French and British counterparts introduced the two men. There is a palpable sense of nervousness in the way the leaders engage.
We do not know what the two presidents said in their brief meeting.
But in the mind of the Ukrainian leader will be the knowledge President Trump has this week said America will reward Russia for its unprovoked brutal invasion of his country, under any peace deal.
Mr Trump has presented Ukraine and Russia with a proposal and ultimatum so one-sided it could have been written in the Kremlin.
Kyiv must surrender the land Russia has taken by force, Crimea forever, the rest at least for now. And it must submit to an act of extortion, a proposed deal that would hand over half its mineral wealth effectively to America.
Image: The world leaders shared a moment before the service
Afterwards, Zelenskyy said it had been a good meeting that could turn out to be historic “if we reach results together”.
They had talked, he said, about the defence of Ukraine, a full and unconditional ceasefire and a durable and lasting peace that will prevent a war restarting.
The Trump peace proposal includes only unspecified security guarantees for Ukraine from countries that do not include the US. It rules out any membership of Ukraine.
Ukraine’s allies are watching closely to see if Mr Trump will apply any pressure on Vladimir Putin, let alone punish him for recent bloody attacks on Ukraine.
Or will he simply walk away if the proposal fails, blaming Ukrainian intransigence, however outrageously, before moving onto a rapprochement with Moscow.
If he does, America’s role as guarantor of international security will be seen effectively as over.
This could be the week we see the world order as we have known it since the end of the Second World War buried, as well as a pope.