Donald Trump’s latest tariff threat shows that the tumultuous days of April aren’t necessarily gone for good.
On Friday 10 October, Trump threatened to hit Chinese imports with 100% tariffs following Beijing’s announcement the previous day that it would be tightening exports of rare earth metals from 1 December. Trump’s comments prompted a stock market selloff that saw the S&P 500 fall 2.7% on 10 October.
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On 2 April, which the president dubbed ‘Liberation Day’, Trump announced a sweeping set of tariffs on all the US’ global trading partners. Their objective was to reduce the country’s trade deficit and boost its domestic industry by ending US reliance on imported goods.
This pause calmed the markets, and gave rise to the use of the TACO acronym, standing for ‘Trump always chickens out’.
The so-called ‘TACO trade’ (where markets reverse losses based on an assumption that Trump will row back on previous tariff threats) could be coming into play early this time around. Trump posted on his Truth Social platform on 12 October: “Don’t worry about China, it will all be fine!”, causing markets to recover slightly the following session.
“The timing of the announcements ahead of the touted meeting between presidents Xi Jinping and Donald Trump later this month suggests tactical positioning, rather than escalation,” said Louise Loo, head of Asia economics at Oxford Economics.
Are tariffs making money?
The economic rationale underpinning tariffs is effectively that the revenue they bring in for the US government can be used to fund tax cuts and/or increased public spending whilst protecting US domestic producers from external competition.
Official US data shows that tariffs brought in $28 billion in June, triple the level of monthly revenues from 2024. At this rate, the Committee for a Responsible Federal Budget estimates that tariffs could generate $1.3 trillion in additional revenue by the end of Trump’s term in office and $2.8 trillion through 2034.
But on the other side of this ledger is the cost to US consumers. Tariffs are effectively a tax, paid by the companies that import goods.
Many experts feel that tariffs will fuel inflation in the US. Goldman Sachs issued a report on 12 October suggesting that US consumers are already bearing up to 55% of the additional costs that tariffs have imposed on American businesses.
Trump tariffs court challenge latest
Given fears that tariffs could harm the US economy, Trump had to use an unconventional mechanism to bring them into effect.
Usually, trade policies like tariffs are subject to a vote in Congress. But Trump circumvented US lawmakers by using the International Emergency Economic Powers Act (IEEPA) to enact most of the tariffs via executive orders.
This has since been challenged by two court cases brought by small businesses in the US that will see their costs rise dramatically as a result of the tariffs. They contend that IEEPA doesn’t give the president the authority to impose tariffs (which is granted to Congress under Article 1 of the US Constitution) and that, at any rate, trade deficits do not meet the ‘unusual and extraordinary threat’ threshold required by the Act.
A New York federal trade court upheld one of these challenges in May, but the White House has appealed the decision. The Appeals court upheld the original decision (to invalidate the tariffs), but dismissed part of the case that called for tariffs to be removed immediately, giving the US government time to appeal the decision in the US Supreme Court. That hearing is set for 5 November.
If the case is ultimately successful, then not only will the tariffs as they stand at present be removed, but the hundreds of billions of dollars in revenue they have so far raised may have to be refunded.
Not all of Trump’s tariffs will be impacted by the court’s decision. The case refers to the worldwide ‘reciprocal’ tariffs that apply to goods from specific countries. Import rates on particular goods, such as the 50% levy on imports of steel and aluminium, won’t be affected.
Which countries face the highest US tariffs?
Here are the current tariff rates on the US’s 15 largest trading partners (by share of imports):
Country | Share of US imports | Rate |
|---|---|---|
Mexico | 15.5% | 25% |
China | 13.4% | 30% |
Canada | 12.6% | 35% |
Germany | 4.9% | 15% |
Japan | 4.5% | 15% |
Vietnam | 4.2% | 20% |
South Korea | 4.0% | 15% |
Taiwan | 3.6% | 20% |
Ireland | 3.2% | 15% |
India | 2.7% | 50% |
Italy | 2.3% | 15% |
United Kingdom | 2.1% | 10% |
Switzerland | 1.9% | 39% |
Thailand | 1.9% | 19% |
France | 1.8% | 15% |
Source: White House. Imports data from US Census Bureau (2024) via BBC
Which goods and commodities have the highest US tariffs?
The tariffs outlined above apply to all goods imports into the US from the given countries. But some categories of strategically-important goods and commodities are subject to individual tariffs, regardless of their point of origin.
Trump is planning a 100% tariff on foreign-made semiconductors as he pushes tech firms to invest in the US. Major chipmakers that have made significant investments in America seem to have dodged the new tariff, such as TSMC, SK Hynix and Samsung.
Foreign-made branded pharmaceutical products have been subject to a 100% tariff since 1 October.
Some commodities have also been subject to individual tariffs. A 50% tariff on copper imports took effect from 1 August. Steel and aluminium imports are already subject to a 50% tariff from most countries, though in the UK’s case this is 25%.
As of 14 October, Trump's 10% tariffs on imported timber and lumber and 25% duties on kitchen cabinets, bathroom vanities and upholstered furniture came into effect.
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