Donald Trump triggers prospect of global trade war over ‘reciprocal’ tariff plan – increasing risk of tensions and inflation
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.
Trump’s total trade war
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.
Read more from Paul here.
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.
Trump latest: New tariffs signal ‘total trade war’
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.
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“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.
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.
That the United States chose to hold talks with Russia about Ukraine without Ukraine sums up the power imbalance that is upending security assumptions for the whole of Europe.
Volodymyr Zelenskyy, the Ukrainian president, has consistently warned that Kyiv must have a seat at the negotiating table for any discussions about ending Vladimir Putin‘s war to have a chance of success. His European allies also want to have a voice.
Yet these requests were ignored by Donald Trump and his strongman approach to diplomacy, with the president instead dispatching his top diplomat and two other senior envoys to meet Russian counterparts in Saudi Arabia on Tuesday.
(L-R) The US delegation in Riyadh included Steve Witkoff, Marco Rubio and Mike Waltz. Pic: Reuters
Ukraine war latest: Trump says he’s ‘more confident’ of peace deal
Mr Zelenskyy, apparently by chance, had been due to embark on a pre-planned trip to the kingdom later that same day.
However, he decided to delay the visit to avoid the appearance of giving any kind of legitimacy to the bilateral encounter between Moscow and Washington.
Unfortunately for Kyiv, beyond noisy protest, it has very limited options when it comes to channelling the disruptive force of the Trump White House in its favour.
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The Ukrainian military remains hugely reliant on US weapons to fight Russia’s invasion and Mr Zelenskyy has made clear he would want an American element in any international security force that might be agreed upon to monitor a ceasefire – even though this is a role the US appears reluctant to fill and the Kremlin has said would be “unacceptable”.
It means Mr Trump has significant leverage over his Ukrainian counterpart which he will surely use to try to force through negotiations even on terms less favourable to Kyiv.
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Ukrainians react to US-Russia talks
The US has already reportedly tried to make Ukraine sign away a large portion of its natural resources to pay for US support – an uncomfortable offer that Mr Zelenskyy has so far declined but an indication of the new transactional approach to US foreign policy.
Mr Trump has repeatedly vowed to end Russia’s war in Ukraine – even claiming during the US election campaign that he would do this within 24 hours.
But he never spelled out how.
The past week, however, has offered an indication of the direction of travel and it does not look good for Ukraine.
From unilaterally picking up the phone to Vladimir Putin to sanctioning such a high-level meeting with the Russians in Riyadh, the only currency that seems to matter to the White House is power and right now both Kyiv and its European partners are looking all too weak.
The Duchess of Sussex has relaunched her lifestyle brand under a new name – and shared a rare picture of her daughter Lilibet.
Posting to her recently-created Instagram account, Meghan said she was “thrilled” to be changing the name of her American Riviera Orchard lifestyle brand to As Ever – a project which she “poured my heart into”.
As Ever’s website features an image of Lilibet running outside with her mother, surrounded by nature.
Meghan shares a rare picture of her daughter as she rebrands. Pic: As Ever
In the Instagram video post, Meghan, who married Prince Harry in 2018, says in the caption that As Ever “means ‘as it’s always been’ or some even say ‘in the same way as always’.
“If you’ve followed along since my days of creating The Tig, you’ll know this couldn’t be truer for me.
“This new chapter is an extension of what has always been my love language, beautifully weaving together everything I cherish – food, gardening, entertaining, thoughtful living, and finding joy in the everyday.”
Her Netflix show With Love, Meghan – which the streamer says “reimagines the genre of lifestyle” – launches in two weeks.
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The former Suits star returned to Instagram after four years on 1 January, when she appeared in a black and white video as she ran along a beach and wrote “2025” in the sand.
She followed it up the next day with the trailer for the upcoming Netflix show, with the message: “I have been so excited to share this with you! I hope you love the show as much as I loved making it.”
The launch of the show was delayed due to the devastating LA wildfires in January.
“I’m thankful to my partners at Netflix for supporting me in delaying the launch, as we focus on the needs of those impacted by the wildfires in my home state of California,” Meghan said at the time in a statement to Tudum, the official companion site to Netflix.
Meghan’s latest post before her video announcing As Ever was on Valentine’s Day, when she posted a picture of her and Harry kissing and said: “My love, I will eat burgers & fries and fish & chips with you forever. Thank you for you.”
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