Liberation Day

Trump announced his so called Liberation Day today. He said that the US has been looted, pillaged, raped and plundered by the other countries for a long time and that it is now time to correct the imbalance. He also said that it is now time to make the US wealthy again.

So what he has done is to announce tariffs on all countries that import goods into the US. Any country importing goods into the US will be hit with a minimum 10% tariff. That number increases if the other country, for a variety of reasons, has a “tariff” that it charges to the US either as a result of direct tariffs it charges , currency manipulation or trade barriers. In addition, all foreign made automobiles will be hit with a 25% tariff. Canada and Mexico have been hit with a 25% “fentanyl” tariff.

He says that he intends to make US an industrial powerhouse. And he anticipates a total of $6 trillion of investments by companies into the US. He hopes to cut government spending significantly and with tariffs and investments by countries into the US, there will be tax cuts soon in the US.

Asia Pacific countries have been hit hard. China has been hit with another 34% and with the existing 20% that were already in place, the total tariff is now 54%. India 26%, Japan 24%, Indonesia 32%, Cambodia 49%, Thailand 36%, South Korea 25%, Vietnam 46%, Malaysia 24%, Taiwan 32% and Singapore 10%. Most of these countries are US allies and I wonder if they would feel a sense of betrayal.

But do tariffs actually work and will they achieve the results that he wants? Would an importer into the US actually pay these tariffs or would they charge it back to the consumer in the US? Or share the cost? Would countries sell their goods elsewhere instead of the US? Would other countries likewise impose a tariff on US goods or boycott buying any US products? In light of these tariffs, would companies now make a fresh investment into the US?

So many assumptions made by Trump as to what will be the result of his tariffs. Only time can provide the answers to these questions.