Donald Trump has slapped new taxes on any goods imported into the US – and economies around the world are reeling.
It’s the topic on everyone’s mind this week amid fears that a trade war could soon erupt and disrupt the international market as we know it.
Keir Starmer even warned “the world as we knew it has gone” over the weekend.
But just how has one man managed to cause so much chaos? HuffPost UK steps back and explores exactly what just happened here.
What has Donald Trump done?
Trump announced a series of tariffs on more than 60 countries last week during what he described as “Liberation Day”.
A tariff is a tax on an import going into another country, and usually described as a percentage of the overall value of the goods.
The importer company pays the tariff to the national customs authority (in this case, the US Customs and Border Protection, CBP).
Trump announced a 10% “base rate” on some countries – like the UK, Taliban-held Afghanistan and New Zealand – while rocketing it up to 34% for some of the so-called “worst offenders” like China.
If the US imports a £10,000 item from the UK, for example, the tariff would be set at £1,000.
These new levies come on top of the global 25% tariff he already slapped on cars and steel products.
Why is this a big deal?
Tariffs deter companies from sending their goods overseas because of the additional costs.
This disrupts global supply chains as companies who trade internationally may look for alternative manufacturers which are closer to home – but could end up being less efficient.
Or, firms continue using international suppliers with the extra cost – and then pass the higher sum onto consumers.
Considering Trump promised to boost the American economy, this does not bode well for the States, especially if it triggers recession.
Since announcing Liberation Day, $8.27. trillion (£6.44 trillion) has been wiped off the global stock market, as investors panic over just what this means.
Why has the US done this?
The US president claims he intends to make international trade “fair”, pointing to the trade deficit the States has with some nations.
A trade deficit means a country is importing more goods and services than it is exporting.
He also says these tariffs will attract more firms to do business within the US as part of his protectionist “America First” policy, which will take the States back to the “golden age”.
But there is also speculation that he is deliberately trying to rock the international market to cause a recession.
A recession would cause interest rates to plummet.
A third of America’s debt is set to expire later this year, meaning it needs to be paid back in full.
If interest rates have fallen, the US government would be able to take out a new loan to pay off those same debtors – only with lower interest.
Trump shared a video on his social media platform, Truth Social, which backed up this theory.
What does this mean for the UK’s economy?
The UK was hit with the “base rate” 10% tariff, on top of the 25% levy on cars and steel products.
This has caused some alarm among economic experts.
The FTSE 100 – the index of the top 100 companies in the UK – declined significantly when markets opened on Monday.
However, it rebounded on Tuesday and was up more than 1% within a few hours of trading.
Still, Starmer has made it clear the world as we knew it has changed as a result, and that is he “disappointed” with all of the tariffs.
The UK has no plans to respond immediately – but “nothing is off the table”, according to the prime minister.
He has launched a four-week consultation period with businesses, set to conclude on May 1, which could result in a strong response from Britain.
Starmer has also suggested the UK could set up reciprocal tariffs unless negotiators secures to set up an economic trade deal with the US by the end of the month.
Ideally, such a deal would see the States scrap the 10% tariffs in exchange for British concessions.
The government has remained tight-lipped over what the UK may offer, although there are fears that food standards could decline in a trade deal – including importing chlorinated chicken – or that Britain may offer to lower the digital services tax to appease the US’s tech sector.
However, Starmer has promised he would not do a trade agreement at just any cost, saying: “I will only strike a deal if it’s in the national interest.
“That’s my priority – strength abroad, security and renewal at home.”
What does this mean for the world economy?
There’s no doubt that the global markets – like Britain’s – are spooked right now, although some indexes started to tick upwards again on Tuesday.
Still, the UK’s chief secretary to the Treasury Darren Jones said this is the “end of globalisation” over the weekend.
And JP Morgan Chase chief executive Jamie Dimon also warned that the US – which is the largest economy in the world – is now more likely to face recession.
He said: “The economy is facing considerable turbulence. We are likely to see inflationary outcomes.
“Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth.”
Huge companies, including Tesla – owned by Trump’s right-hand man Elon Musk – have also seen their shares drop in value as a result of the tariffs.
Does this mean a trade war?
No one is quite sure what happens next, but Trump has made it a game of who blinks first – and made it clear he is not considering pausing the tariffs right now.
China, who were slapped with the largest tariffs, has been the first to take major action against the States, having imposed a 34% tariff on all US imports.
Trump subsequently warned that he would put an extra 50% levy on top of the 54% on Chinese imports unless Beijing withdrew.
And, despite pleas from the EU for a “negotiated resolution”, China’s foreign ministry has said it would “fight till the end”.
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