Global Trade Pressures

Apr 4, 2025

Current State and Geopolitical Pressures

Insight: New US Tariffs

It has now been 36 hours since President Trump announced a wave of new US tariffs on April 2. By now, the news has reached every corner of the globe.

Responses from the top three trading partners

In this time, the United States' three largest trading partners have issued their responses:

Mexico: Mexico celebrated being spared from the otherwise more punitive US tariffs that had threatened its trading relationship with the US. The country has expressed its intent to continue engaging with the Trump Administration on trade matters.
Canada: Canada expressed dissatisfaction. It announced plans to take reciprocal measures in response and incentivize investment in Canada for auto production.
China: China declared its intention to address the matter with the World Trade Organization. Additionally, it announced i) export restrictions on sixteen firms for certain rare earths to prevent the use of dual-use products; ii) introduced a 34% tariff on all US goods starting April 10, and iii) added eleven US entities to its “unreliable entities” list.

Responses from other countries

Other nations are still evaluating their responses and potential countermeasures to the new US tariffs.

One thing is clear: for some countries, the unchanged tariff rates could significantly impact their economies, particularly those heavily reliant on trade with the United States—the world’s largest consumer market with unparalleled spending power.

Notably, the US depends on imports for certain products and materials, such as cocoa from the Dominican Republic and vanilla from Madagascar, certain minerals and other items that are not native to the United States or grown in the United States.

What is excluded from the new US tariffs announced?

The following items are excluded from the new tariffs:

Pharmaceuticals
Semiconductors
Items already subject to the earlier set of U.S. tariffs announced in 2025, including steel, aluminum, automobiles and automobile parts, copper, and lumber.
Items listed in Annex II of the executive order, which includes certain types of copper, lumber, energy products, and critical minerals, among others.
All articles subject to 50 USC 1702(b), such as books and informational materials, including but not limited to, publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds, etc.
All articles from a trade partner subject to rates set forth in Column 2 of the Harmonized Tariff Schedule of the United States. Typically, from countries that do not have normal trade relations with the U.S. and generally are subject to a higher duty rate.
All articles that may become subject to future Section 232 tariffs. Section 232 allows the President to adjust the imports of goods, including tariffs, if excessive foreign imports threaten national security.

Outlook

In the short term, the new US tariffs are expected to disrupt production, consumer behavior, spending power, and various economies by affecting supply chains and prices.

The rapid implementation timeline—set for April 5 and April 9, 2025—leaves businesses with little time to develop strategic plans to manage costs and risks.

Taking steps to readily and immediately assess impact across the business and the supply chain systems should be a priority. While strategies to address supply chain challenges and costs exist, they may require time to implement. In such a rapidly changing environment, taking advantage of a cooling-off period to assess options could be a viable approach.

President Trump’s tone during the April 2 announcement suggested room for negotiation. He emphasized the benefits of producing, manufacturing, and investing in the United States, noting that goods made domestically would not be subject to the tariffs.

Ultimately, the new US tariffs are likely to compel countries to either negotiate swiftly or implement countermeasures, with businesses and consumers bearing the brunt of the costs.

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Disclaimer:

The contents of this insight are intended for general information only. illumina CPA Group, Inc. is not, by means of this communication, rendering professional advice or services. Before making any decisions or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.