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Trump’s triple-digit tariff essentially cuts off most trade with China, says economist

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U.S. President Donald Trump attends a cabinet meeting at the White House in Washington, D.C., U.S., April 10, 2025.

Nathan Howard | Reuters

President Donald Trump’s tariff increase on imports from China would basically end most trade between that country and the U.S., according to economist Erica York.

“It depends on how narrowly the tariff is applied or how broadly it’s applied, but generally if you get north of a triple-digit tariff, you are cutting off most trade,” the vice president of federal tax policy at the Tax Foundation’s Center for Federal Tax Policy said on CNBC’s “The Exchange” on Thursday. “There may still be some things without any substitutes that companies just have to foot the bill, but for the most part, that cuts it off.”

Her remarks came amid the market wiping out some of its monster gains seen on Wednesday. The market accelerated declines on Thursday once a White House official confirmed to CNBC that the U.S. tariff rate on Chinese goods now stands at 145%. That total includes the recent hike to 125% from 84% that Trump announced Wednesday as well as a 20% fentanyl-related duty that the president had previously put into effect.

On Wednesday, Trump announced that he’s temporarily reducing the tariff rates on imports from most countries, except China, to 10% for 90 days. In a Cabinet meeting Thursday, the president declined to rule out the possibility of extending the 90-day tariff reprieve.

Taking into account the China tariffs, the baseline 10% levies still in place and other sector tariffs, Trump has still taken the country into its most protectionist stance in decades, even with the pause.

“It’ll take the average tariff rate still to highs that we haven’t seen since the 1940s, so this is major,” the economist added. “It’s huge cost increases. It’s an economic hit. It’s clearly not setting us on a very good path.”

The Tax Foundation estimates that all of the new Trump tariffs will lead to an increase in federal tax revenues of $171.6 billion for this year. That would make Trump’s tariffs the biggest tax increase since 1993, more than the hikes under both former presidents George H.W. Bush and Barack Obama, the institution revealed.

China has said it won’t flinch if trade dynamics were to escalate into a trade war. Just hours prior to Trump’s tariff pause announcement, China raised its retaliatory levies on U.S. imports to 84% from 34%, which went into effect Thursday.

Even with Trump’s reversal, York stressed that the market isn’t in the clear just yet, saying “it’s not like the threat went away entirely.”

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Economics

The judge losing his patience with the Trump administration

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DONALD TRUMP likes picking fights with judges. In 2016 Mr Trump said a judge’s Mexican heritage rendered him incapable of fairly adjudicating fraud cases against Trump University, a for-profit institution that closed in 2011. Two years later the president condemned a ruling against his immigration policies as a “disgrace”. Lawsuits against him during the Biden years—including one for conspiring to steal the 2020 election—spurred many attacks.

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Economics

Jobs report April 2025:

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Job growth was stronger than expected in April despite worries over the impact of President Donald Trump’s blanket tariffs against U.S. trading partners.

Nonfarm payrolls increased a seasonally adjusted 177,000 for the month, slightly below the downwardly revised 185,000 in March but above the Dow Jones estimate for 133,000, the Bureau of Labor Statistics reported Friday.

The unemployment rate, however, held at 4.2%, as expected., indicating that the labor market is holding relatively stable.

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Economics

Euro zone inflation, April 2025

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Shoppers buy fresh vegetables, fruit, and herbs at an outdoor produce market under green-striped canopies in Regensburg, Upper Palatinate, Bavaria, Germany, on April 19, 2025.

Michael Nguyen/NurPhoto via Getty Images

Euro zone inflation was unchanged at 2.2% in April, missing expectations for a move lower, flash data from statistics agency Eurostat showed Friday.

Economists polled by Reuters had been expecting the reading to come in at 2.1% in April compared to March’s 2.2% as inflation has been easing back towards the European Central Bank’s 2% target.

Core inflation, which excludes more volatile food, energy, alcohol and tobacco prices, accelerated to 2.7% from March’s 2.4%. The closely-watched services inflation print also picked up again, coming in at 3.9% compared to the previous 3.5% reading.

The increase in services inflation was likely “driven mainly by Easter timing effects,” Franziska Palmas, senior Europe economist at Capital Economics, said in a note. These effects would reverse in the coming month, she added, suggesting that this left the door open for further interest rate cuts from the European Central Bank.

“We think the services rate will decline significantly in the rest of this year as US tariffs weigh on activity and the labour market continues to weaken,” Palmas added.

ECB President Christine Lagarde told CNBC last week that “we’re heading towards our [inflation] target in the course of 2025, so that disinflationary process is so much on track that we are nearing completion.”

Lagarde and other policymakers last week warned the picture for inflation was less clear in the medium-term, with factors such as potential retaliation countermeasures from Europe against U.S. tariffs and fiscal shifts like Germany’s major infrastructure package coming into play.

Lagarde said the ECB would be “data dependent to the extreme,” when making interest rate decisions. The central bank last cut interest rates last month, taking its key rate — the deposit facility rate — to 2.25%, down from highs of 4% in mid-2023.

An interest cut in June seems appropriate amid many deflationary forces, ECB governing council member says

Several major euro zone economies had already earlier in the week released their latest inflation figures, which are harmonized for comparability across the bloc. Germany’s statistics office said Wednesday it expects consumer prices to have risen by 2.2% in April, below the previous month’s reading but slightly higher than expected. Meanwhile French harmonized inflation came in at 0.8%, also slightly ahead of expectations.

Data released earlier this week indicated that the euro zone economy could be picking up steam, with the bloc’s gross domestic product rising 0.4% in the first quarter of 2025, according to a preliminary reading. This was higher than the forecast of 0.2%, and followed a revised 0.2% growth print in the last quarter of 2024.

Growth is however widely expected to slow in the coming months due to the global tariff fallout.

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