Last week, President Donald Trump announced a sweeping series of tariffs, sparking immediate global unease. Big corporations clammed up, smaller businesses panicked, and the stock market took a dive. Adding insult to injury, even the highly anticipated Switch 2 preorders were delayed. Then, just as the largest tariffs took effect, Trump declared a 90-day pause. But this ‘pause’ is far from a reprieve, leaving a confusing and complex web of taxes in its wake.
Trump initially imposed a 10 percent base tax on goods from nearly every country, alongside significantly higher tariffs—sometimes reaching 50 percent—on key trading partners, including existing tariffs on goods from Canada and Mexico. This base rate went into effect immediately, with Trump refusing to back down from his stance despite international negotiations. China retaliated with its own tariffs, prompting Trump to threaten an additional 50 percent hike on Chinese goods, raising the total to a staggering 104 percent. These increased tariffs went into effect on Wednesday.
However, a sudden shift in Trump’s stance led to the announcement of a 90-day pause, citing calls from over 75 countries. The White House, however, has struggled to clarify the specifics, leaving many unsure which tariffs apply to which countries. While the 10 percent hike remains, the pause curiously excludes Canada and Mexico, which have their own separate tariff concerns. Further complicating matters, Trump has hinted at future tariffs on specific goods, making the situation incredibly volatile.
The confusion extends to the very nature of tariffs. For those unfamiliar, tariffs are taxes on imported goods, levied upon arrival at the border and based on the item’s value. Trump’s approach includes tariffs based on both import type and country of origin. Let’s break down the current, albeit potentially fleeting, state of affairs.
Steel, aluminum, and automobiles currently face a 25 percent tariff globally, with exceptions for countries with existing trade agreements. Canada and Mexico were initially targeted with a 25 percent tariff on all goods, although this doesn’t affect goods covered by the USMCA. Canada has responded with retaliatory tariffs, while Mexico’s response remains uncertain.
China has been a central focus, with tariffs fluctuating wildly. The initial 20 percent tariff has been repeatedly increased in response to retaliatory measures from China, culminating in a current rate of 145 percent. China’s counter-measures have included reducing access for Hollywood films in the Chinese market.
Low-value packages from China and Hong Kong are also affected by changes to the de minimis tax exemption. This directly impacts budget online retailers who previously avoided import taxes by shipping directly to consumers. The exemption has been removed, resulting in significantly higher taxes on even inexpensive goods.
Other countries initially facing higher tariffs have seen these temporarily reduced to the 10 percent baseline rate for 90 days, pending further negotiations. The European Union, for instance, has suspended its retaliatory tariffs for the same period. However, the threat of significantly higher tariffs remains. Chips and pharmaceuticals are reportedly the next targets for additional tariffs, leaving the future uncertain and the ‘pause’ anything but reassuring.
