In a dramatic and highly anticipated policy shift, President Donald Trump has reignited the trade war flames, this time with a sharper blade. On April 2, in a fiery White House Rose Garden announcement, he unveiled a sweeping set of tariffs aimed at reducing America’s trade deficits and reasserting its leverage on the global economic stage.
The most headline-grabbing component? A 10% blanket tariff on all imports — with reciprocal tariffs for countries running large trade surpluses against the U.S., hitting as high as:
Below you can find the more extended table about all tariffs:
These new trade penalties are shaking markets, alarming allies, and ushering in what could become a full-blown global trade realignment.
Forget matching tariffs. Trump’s administration scrapped the idea of mirroring other countries’ rates or calculating the full spectrum of non-tariff barriers (taxes, subsidies, regulations, etc.). Instead, they opted for a simpler, more symbolic route: target the trade balance directly.
According to an official statement by the U.S. Trade Representative (USTR), the formula for calculating these “reciprocal” tariffs was:
(Trade Surplus / Total Exports to U.S.) ÷ 2
Take China as an example:
This same calculation was applied to Japan, South Korea, and the EU. Countries with more balanced trade — or those where the U.S. had a surplus — were still slapped with the 10% baseline tariff, which is now the new global entry fee to the American market.
A more technical version of the formula included these parameters:
But as reported by Bloomberg, the elasticity terms were chosen in such a way that they cancelled each other out, reducing the formula to a simple multiple of the trade imbalance. This makes the tariffs more symbolic and political than economically optimized.
“Driving trade deficits to zero became the core goal,” the USTR wrote, admitting that calculating every policy and non-tariff measure was “complex, if not impossible.”
The fallout is global. Countries with large trade surpluses and industrial economies tightly integrated with U.S. demand are especially exposed.
Even traditional U.S. allies like Canada, Australia, and Mexico are not spared — all are subject to the minimum 10% baseline.
Markets weren’t ready for how broad and aggressive this tariff regime would be. Traders had priced in a more “measured” approach. What they got instead was a shockwave.
Equities:
S&P 500 futures: ↓ 2.8%
Nikkei 225 (Japan): ↓ 3.7%
Euro Stoxx 50: ↓ 1.7%
Apple: ↓ 7.1% (China supply chain exposure)
Nike, Gap, Lululemon: ↓ 7%+ (Vietnam-based sourcing)
Bonds:
U.S. 10Y Treasury yield: ↓ to 4.06%
Japanese and Australian bonds: yields plunged
Commodities:
Copper, aluminum, zinc: All down, on fears of declining industrial demand
Gold: Up to $3,149.74/oz — a new all-time high
Oil (WTI): ↓ 2.2% to $70.11
“Investors are moving into safe havens. The dollar dropped, while gold and yen soared,” — Bloomberg Markets Live
Seeing the reactions of the markets, what is certainly striking is the reaction of the bond, which was not expected, given that with these tariffs that could bring inflation the FED may find it difficult to cut rates. This leads one to think that investors are thinking more about the recession/stagflation scenario than the inflation scenario. If so, all market movements would be justified.
Therefore, it will now become crucial to constantly monitor the so-called hard data, after surveys have already shown marked pessimism about the future. If traders begin to see negative impacts on hard data, the risk-off situation could worsen.
The world is not taking this quietly.
China: “Firm opposition” and threat of “countermeasures to protect our interests.” Beijing may restrict investments and consumer goods exports.
EU Commission President Ursula von der Leyen: “We’re preparing for further countermeasures if negotiations fail.”
Australia: “Irrational and damaging to strategic partnerships.”
Treasury Secretary Scott Bessent, in damage-control mode, told Bloomberg:
“As long as you don’t retaliate, this is the high end of the number.”
Translation? Play ball or risk even steeper penalties.
Under Heavy Fire:
Holding Up:
Trump’s new tariff regime isn’t just tough — it’s a total break from post-WWII globalization. The U.S. is no longer positioning itself as a steward of open trade. It’s now aggressively demanding bilateral parity — even if that means triggering a trade war.
The implications are massive:
Moody’s warns that unemployment could peak at 7.3% by early 2027, with a 25% market correction a real possibility if retaliation escalates.
This isn’t a skirmish. This is a structural reset of global commerce. And unlike the 2018–2019 trade war, the new regime is broader, more aggressive, and less predictable.
“We’re not just negotiating deals. We’re rewriting the rules.”
— Senior White House advisor
With diplomatic tensions mounting and markets struggling to reprice risk, businesses, investors, and policymakers must prepare for volatility — and possibly a new global trade order.
Sources: Bloomberg (Krishnamoorthy, Wingrove), Reuters (April 3, 2025), USTR, image data via official U.S. documents and Reuters graphics