On April 2, 2025, the day after April Fools' Day in the United States, will go down in history not as "one of the most important days in the history of the United States" or "our Declaration of Economic Independence," in the euphoric words of Donald Trump paraphrasing the Founding Fathers, but as the day when the system of international cooperation that arose from the ashes of World War II and was built over decades, collapsed.
This Wednesday, the President of the United States, surrounded by his top advisors, has announced the biggest setback in free trade in two and a half centuries of his Republic's existence. The final blow to the World Trade Organization and the General Agreement on Tariffs and Trade (Gatt), with an unprecedented battery of tariffs on virtually all products, without distinguishing between friends and enemies, allies and rivals, neighbors and distant nations. Starting at a 10% base for the entire planet, for example, the UK, but much higher for those he deems worse. 20% for the European Union, 34% for China (adding another 20%), 24% for Japan, or 26% for India. 17% for Israel, which yesterday announced the removal of all restrictions on American products. But even higher, 46% for Vietnam or 49% for Cambodia, where many manufacturers went to avoid Beijing's punishment. 31% for Switzerland or 32% for Indonesia, among others. The government has not clarified the situation with Russia or Belarus, which are not listed.
An unprecedented, traumatic shock, impossible to downplay or describe within conventional frameworks. All this, in addition, without even considering that certain products, like all cars manufactured outside the US, will have a minimum of 25%. Or steel and aluminum. Or the tariffs already imposed in recent weeks, like those on China, which had a 20% surcharge that, according to the White House, will now be increased by another 34%. Or those that may come, like indirect ones on Venezuelan oil, which could be additional and not substitutes.
"We will calculate the combined rate of all your tariffs, non-monetary barriers, and other forms of fraud. And because we are being very kind, we are kind people," he said amidst applause and laughter from his team. "We will charge them approximately half of what they charge us and have been charging us, so the tariffs will not be entirely reciprocal. I could have done it, yes, but it would have been difficult for many countries," he added. A striking fact is that the administration strongly targets Asia with devastating percentages but leaves Latin America at the base rate or very close, as a general rule.
The measures will be implemented gradually. Starting at midnight today, the surcharges on tariffs. At midnight on April 5, the base rate of 105 for all trading partners. And on April 9, in a week, the so-called reciprocal tariffs, which include those from Europe. According to the documentation sent today, there are, however, some exemptions for now. Pharmaceuticals, semiconductors, wood, some metals, and minerals not available in the US.
Trump has invoked the International Emergency Economic Powers Act (IEEPA) for this whirlwind, a law that will undoubtedly be challenged in court, as it requires an "unusual and extraordinary threat," and a trade deficit is hardly considered as such. Nevertheless, it is difficult for a court to overturn Trump's decision, so it is up to Congress to act if they want to stop it. Only a small group of Republicans has shown firm opposition to this unilateral trade war declaration so far.
Today's announcement does not affect Canada and Mexico, as there is specific legislation for them. This means that products complying with the trade agreement, the USMCA, will remain subject to a 0% tariff, those that do not comply to a 25% tariff, and energy and potash products that do not comply to a 10% tariff. If the executive orders on "fentanyl/migration" were to expire, products complying with the USMCA will continue to receive preferential treatment, while those that do not will be subject to a reciprocal tariff of 12%.
In recent days, local media had expressed serious doubts within the economic team about what to do or what the president would want, even suggesting caution and ultimately opting for a measure at the lower end of the spectrum. This was not the case at all. Trump has decided to go big, despite the markets' reaction in the last month, despite the potential inflation spike, and the Federal Reserve's warnings.
Donald Trump believes that the economy is a zero-sum game and that for him and his country to win, others must lose. He argues that the entire world has been taking advantage of the benevolence of the world's leading power for decades. And that tariffs will bring not only "justice" and "balance" but also wealth, prosperity, jobs, and tax cuts. "From 1789 to 1913, we were a nation supported by tariffs, and the United States was proportionally the richest country in its history. So rich, in fact, that in the 1880s, they established a commission to decide what to do with the huge sums of money they were collecting. We were collecting so much money so quickly that we didn't know what to do with it. Then, in 1913, for reasons unknown to humanity, they established the income tax so that citizens, instead of foreign countries, would pay the necessary money for the operation of our government. And in 1929, everything came to an abrupt end with the Great Depression, and this would never have happened if the tariff policy had been maintained. It would have been a very different story," he said with his unique view of history.
The reaction among his former partners and allies is one of disbelief, helplessness, and anger. The White House has calculated these alleged tariffs and restrictions, for example, on Europe, with a finger in the air, incorporating what it wants without any rigor or criteria, with a long-term obsession with VAT, without understanding its operation at all. But also incorporating national taxes that have nothing to do with international trade.
According to a ranking by the Heritage Foundation, a conservative think tank favored by the administration, the United States currently ranks 69th in terms of trade freedom. That is, there are 68 countries worldwide with fewer tariffs, barriers, and obstacles, despite the president's rhetoric.
"For decades, our country has been plundered, violated, and looted by nearby and distant nations, friends and enemies. American steelworkers, automakers, farmers, and skilled artisans, many of them here with us today, have suffered deeply, watching with anguish as foreign leaders stole our jobs. Foreigners have looted our factories, and foreign harvesters have shattered our once beautiful American dream. But this will no longer happen. It will not happen," he said from the White House gardens. "I will sign a historic Executive Order imposing reciprocal tariffs on countries worldwide. That means they do it to us, and we do it to them. Very simple," he summarized.
Trump has given examples of what he considers looting and abuses, "fierce attacks on our workers." The United States, he said, "charges other countries only a 2.4% tariff on motorcycles. Meanwhile, Thailand and others are charging much higher prices, like 60%, India charges 70%, Vietnam charges 75%, and others even higher than that. Similarly, until today, the United States has charged a 2.5% tariff on cars manufactured abroad. The European Union charges us over 10%, and they have a 20% VAT, much, much higher. India charges 70%, and perhaps the worst of all are the non-monetary restrictions imposed by South Korea, Japan, and many other nations as a result of these colossal trade barriers. 81% of cars in South Korea are made in South Korea. 94% of cars in Japan are made in Japan. Toyota sells a million cars made abroad to the United States. And General Motors sells almost none. Ford sells very little. None of our companies are allowed to enter other countries. In many cases, the friend is worse than the enemy in terms of trade," he reproached, blaming his allies for the "horrendous imbalances that have devastated our industrial base and jeopardized our national security. I do not blame these other countries at all for this calamity. I blame the former presidents and leaders who did not do their job," he said, attacking his predecessors.
Reagan's Warning Against Demagoguery
During his speech, Trump invited a Detroit motor worker to speak, who explained that his first vote was for Ronald Reagan, whom he always thought was "the best president until Donald J. Trump came along." In November 1988, on Thanksgiving Day, Ronald Reagan, a prominent symbol and idol of the Republican Party, spoke about the importance of trade and freedoms on his Saturday radio program. His speech, which resurfaced during Trump's first term, has gone viral again this week. In the address, the president emphasized that "for the past 200 years, the argument against tariffs and trade barriers has not only gained almost universal consensus among economists but has also proven its effectiveness in the real world, where we have seen nations with free trade prosper while protectionist countries lag behind."
Specifically, he warned that "the most recent experiment with protectionism in the United States was a disaster for workers. When Congress passed the Smoot-Hawley Tariff Act in 1930, we were told it would protect the U.S. from foreign competition and save jobs in the country; the same phrase we hear today. The actual result was the Great Depression, the worst economic catastrophe in our history."
Unlike the Republican Party today, which continues to enthusiastically support or remain silent on President Trump, Reagan was proud of the American people for "staying true to his legacy by rejecting the siren song of protectionism" and concluded that "our peaceful trading partners are not our enemies. They are our allies. We must be wary of demagogues willing to declare a trade war against our friends, weakening our economy, our national security, and the entire free world. All while cynically waving the American flag. The expansion of the international economy is not a foreign invasion; it is an American triumph, for which we work hard, and essential to our vision of a peaceful, prosperous, and free world." Words that diverge from the current economic mainstream in the White House today.