Trump delays tariff implementation, fuelling doubts over schedule
In a move aimed at addressing U.S. trade deficits and national security concerns, President Trump announced new tariffs via an Executive Order in late July 2025. These tariffs, ranging from 10% to over 40%, will be imposed on imports from nearly 70 countries, including the European Union and the Falkland Islands.
The average effective tariff rate will rise to 18.3%, the highest since 1934. This decision, according to J.P. Morgan Global Research, substantially increases the risk of a global recession, now estimated at 40% for 2025, up from 30% earlier in the year. The tariffs will raise costs for U.S. companies, particularly those reliant on imports, such as aluminum, which has seen domestic prices surge in anticipation of the tariffs.
The uncertainty caused by fluctuating tariffs also unsettles markets. U.S. stocks fell sharply following these announcements, partly due to concerns about the economy entering "stagflation"—a period of slow growth combined with rising prices.
For the U.S. economy, the tariffs could present a dilemma for monetary policy. The Federal Reserve faces the challenge of balancing inflation control and economic growth. Raising interest rates to counter tariff-driven inflation risks deepening an economic slowdown, while lowering rates to stimulate growth could further fuel inflation.
Legally, reciprocal tariffs face challenges both domestically and internationally. The tariffs target countries with whom the U.S. has large trade deficits and also extend to non-tariff foreign charges, such as value-added taxes and digital services taxes, which could be contested under World Trade Organization (WTO) rules and provoke retaliatory measures.
Several countries have entered or are close to trade and security agreements with the U.S., but others oppose the measures or have not engaged in negotiations. This patchwork approach creates uncertainty and potential disputes in international trade law. The WTO and affected countries may challenge these tariffs' compatibility with existing trade agreements, increasing legal complexity and diplomatic tensions.
Despite these challenges, the tariffs have not yet shown signs of increasing domestic manufacturing jobs. The tariff schedule was updated, pushing back the start date of the new tariffs by seven days. The Trump administration is in extended trade talks with China, which faces a 30% tariff and retaliates with a 10% rate.
The tariffs threaten to create new inflationary pressures and hamper economic growth, concerns the Trump White House has dismissed. Liechtenstein saw its rate slashed from 37% to 15% in the new tariffs, while Switzerland and Norway are among the countries not yet knowing their tariff rate.
India may no longer benefit as much from efforts to pivot manufacturing out of China due to the new tariffs. Countries not listed in the Thursday night order will be charged a baseline 10% tariff. Mexico's tariffs will remain at 25% for a 90-day negotiating period.
The Personal Consumption Expenditures index shows a 2.6% inflation rate over the past 12 months, suggesting accelerating inflation due to the tariffs. Major companies are facing financial pressure from tariffs, with Ford Motor Co. anticipating a $2 billion hit to earnings this year.
The very legality of the tariffs remains an open question as a U.S. appeals court is hearing arguments on whether Trump has exceeded his authority. Federal judges have expressed skepticism about Trump's use of a 1977 law to impose tariffs. The EU is awaiting a written agreement on its 15% tariff deal, and Canada's fentanyl-related tariffs have been amended to 35%.
In the midst of these developments, Trump has negotiated trade frameworks over the past few weeks with the EU, Japan, South Korea, Indonesia, and the Philippines. However, the tariffs risk jeopardizing America's global standing as allies feel forced into unfriendly deals. The new tariffs will affect 66 countries, the European Union, and the Falkland Islands, potentially setting the stage for a complex web of international trade disputes and diplomatic tensions.
- The tariffs announced by President Trump are predicted to significantly raise the risk of a global recession, with J.P. Morgan Global Research estimating it at 40% for 2025.
- The decision to impose tariffs will increase costs for U.S. companies, particularly those relying on imports, as evidenced by the surge in domestic prices of aluminum.
- The new tariffs have the potential to set the stage for a complex web of international trade disputes and diplomatic tensions, affecting 66 countries, the European Union, and the Falkland Islands.
