President Trump Announces, Suspends Global Reciprocal Tariffs

On April 2, President Trump announced new reciprocal tariffs on all trading partners. Since then, tariff increases for all countries except China have been placed on hold for 90 days, but across-the-board 10 percent tariffs on goods from all countries except Canada and Mexico remain in place. Canada and Mexico remain subject to additional duties of 25 percent.

Outlook

• Notwithstanding President Trump's public statements, the odds of a near-term negotiated détente to the emergent U.S. / China trade war are small and rapidly diminishing.
• The next 90 days will see a flood of countries seeking negotiated guarantees against additional tariffs. The success of this will hinge on their willingness to repeal policies and end practices seen as discriminating against U.S. firms while hardening their economic and security policies against Chinese trade, investment and influence. Tariffs may be re-imposed on insufficiently compliant countries.
• President Trump has signaled he wants to be personally involved in negotiations, which may make it impractical to conclude negotiations with all willing partners within 90 days. However, another deferral of duties is not guaranteed.
• Separate additional duties are likely on pharmaceuticals, semiconductors, lumber products, copper products, metals and minerals, and Chinese-made container ships.

Other Impacts

• China's retaliations may include both tariff and non-tariff measures targeting U.S. companies. U.S. agricultural exports are prime targets for additional retaliatory tariffs.
• In the past, China's non-tariff retaliations have included imposition of export restrictions, antitrust investigations, blocking licenses and permits, arbitrary interpretation and enforcement of regulations, and additions to China's Unreliable Entities List (its sanctions regime). Future retaliations are likely to follow a similar course.
• U.S. importers reliant on Chinese products that have not already diversified their supply chains may have difficulty finding acceptable suppliers in third countries without long waiting lists.

Analysis

On April 2, President Trump signed an executive order directing that a 10 percent additional duty be levied on all trading partners, starting on April 5th. It also directed that tariffs be increased on certain countries (see Annex I) starting April 9th. However, these tariffs would not apply to certain products already subject to tariffs (e.g., steel and aluminum) and products for which tariffs would be announced in the near future (e.g., pharmaceuticals, see Annex II).

The reciprocal tariff executive order stated that the U.S. would increase tariffs on countries if they took retaliatory action. President Trump and the official White House X (formerly Twitter) account reinforced this message:

DO NOT RETALIATE AND YOU WILL BE REWARDED

— The White House (@WhiteHouse) April 9, 2025

Shortly thereafter, China announced it would retaliate against the new tariffs. On April 8th, President Trump increased the Annex I rate on China by 50 percent, from 34 percent to 84 percent.

On April 9th, the President announced that for countries that had not retaliated, there would be a 90-day pause on country-specific tariff increases. During the 90 days, countries would be subject only to the across-the-board 10 percent "baseline" tariff. However, he sharply increased additional duties on China to 145 percent.

China's retaliation while other trading partners held back is unsurprising. Chinese and U.S. interests are even more sharply divergent now than during President Trump's first term.

China failed to live up to the terms of the January 2020 Phase One agreement. More importantly, the Phase One deal papered over deep, longstanding distrust and grievances that would be difficult to reconcile with any single agreement (hence the implicit anticipation of a Phase Two deal). The U.S. has had two decades of experience with Chinese industrial espionage, discriminatory policies, and disregard of its negotiated commitments. The Phase One deal, which followed years of other broken promises and "run out the clock" delaying tactics, did little to put an end to this behavior. China, for its part, is highly sensitive to any appearance of having been cowed into submission by the United States. Chinese President Xi Jinping is constrained by a weak domestic economy and anti-U.S. hardliners in Beijing to whom he cannot appear to have capitulated. And Trump's Cabinet and advisory team is stacked with some of the most outspoken China hawks in American politics, such as Peter Navarro and Marco Rubio, who see China as a clear and present danger to U.S. national security and who favor economic decoupling.

Even if a fresh round of negotiations were undertaken, it is unlikely that it would achieve meaningful concessions or a lasting and mutually satisfying de-escalation. Such a reconciliation would likely require a complete restructuring of China's longstanding economic, trade and industrial policies. The U.S. would almost certainly reprise its demands that China reverse longstanding policies like state-subsidized and directed industrial overproduction, artificial suppression of the yuan, forced technology transfer policies, and industrial espionage. China's treatment of its ethnic Uyghur minority and threats of "reunification" with Taiwan by any means necessary would also likely be raised.

However, President Xi and the Chinese Communist Party have signaled that these issues are not up for debate. After Trump won the 2024 presidential election, China kicked off its engagement with the incoming Trump administration by outlining for then-President Biden four red lines:

“The Taiwan question, democracy and human rights, China’s path and system, and China’s development right are four red lines for China. They must not be challenged.

In other words, China's economic and trade practices that have led to the hollowing out of the U.S. industrial base and the evaporation of millions of U.S. jobs and, by extension, the issues that are most likely to cause further deterioration in U.S. - China relations, China claims as its inviolable and sole right to dictate and considers off limits to discussion. Thus, while political and economic pain may limit how quickly a U.S. / China decoupling occurs, a decoupling of some sort appears unavoidable. This will be highly disruptive for companies whose supply chains still depend on China.

The 90-day suspension of tariff increases on countries other than China is a temporary reprieve, not a reversal. President Trump and his team have not abandoned their vision of high tariff walls, nor are they cowed by the threat of recession; they were halted only by a flood of negative investor sentiment and a selloff of U.S. Treasuries that appeared to foreshadow an impending market collapse. They moved too quickly and triggered political and economic barriers, but the ultimate goals of President Trump and his advisors have not changed. As soon as the administration believes it is feasible to resume tariff increases without exceeding a certain threshold of pain to the American economy and consumers, it will do so.

In the meantime, President Trump and his negotiating team will be busy talking with countries seeking a negotiated firewall against the new tariffs. It's not clear what U.S. negotiating goals will be, but they may include requiring the foreign partner to:

• Align their export control regime with the U.S.,
• Apply restrictions on inbound investment from China,
• Provide greater cooperation in Customs enforcement to address tariff circumvention,
• Agree to reduced or zero tariffs on U.S. goods,
• Remove discriminatory non-tariff barriers, standards and practices,
• Reform and liberalize their currency controls,
• Apply quotas or other measures to address trade deficits, and
• Agree to purchase agreements.

Anticipating this, Vietnam has already announced it will clamp down on customs fraud, in recognition that it has been China's top route for circumventing U.S. tariffs. According to Reuters:

Official trade data show Vietnam's exports to the U.S. in recent years have been fuelled by imports from China, with inflows from Beijing closely matching the value and swings of exports to Washington.

It has also announced it will strengthen its export controls to keep sensitive U.S. technology from being re-exported to China. Other countries are likely to follow suit.

Recommendation

Executives and supply chain teams should examine their supply chains and determine if they rely on suppliers in countries that meet one or more of the following conditions:

1) Comparatively high import duties on U.S. products,

2) Prominent goods surpluses with the U.S., and

3) Substantial non-tariff barriers. Consider reviewing USTR's 2025 National Trade Estimate Report on Foreign Trade Barriers, which highlights non-tariff barriers likely to be targeted by U.S. negotiators.

Countries with high import duties, high goods surpluses with the U.S., and/or substantial non-tariff barriers are at higher risk for resumption or escalation of tariffs if negotiations fail. Countries that tick all three of these boxes (such as Vietnam) are at especially high risk, as are countries with substantial economic ties to China. At the same time, countries that are highly dependent on exporting to the U.S. and/or are highly dependent on the U.S. for defense have greater incentive to reach a deal - even a painful one.

Based on this assessment, supply chain teams should pre-emptively increase sourcing flexibility by developing relationships and placing trial orders with alternative suppliers in lower-risk countries, to preserve optionality should tariffs be re-applied after 90 days. If it is possible to remain profitable while doing so, sourcing from U.S. suppliers and manufacturers will entail the least risk.