Trump's Tariffs: Impact on US Economy and Global Trade

Following the 2024 US election, President Trump has implemented new tariffs on steel and aluminum imports. These tariffs follow similar measures from his first term, initiated in March 2018, which imposed a 25% tariff on steel and a 10% tariff on aluminum, citing national security. During his first term, these tariffs primarily affected allies such as Canada, Mexico, Europe, South Korea, and Japan. Ford reported a $750 million reduction in net profits in 2018 due to increased raw material costs, leading to reduced worker bonuses. GM experienced a $1 billion net result cut. Harley-Davidson moved production to Thailand to avoid European tariffs. Trump renegotiated the North American Free Trade Agreement (NAFTA) and eventually exempted Canada and Mexico from border taxes. A similar agreement was signed with Europe, expiring in March. ING Group analysts report that Vietnam faces significant exposure, with steel and aluminum exports to the US accounting for 0.3% of its GDP in 2024. South Korea also faces exposure, despite current tariff-free export quotas. China, Korea and Vietnam may feel the impact of Trump's 'America First' policy, due to their large trade surplus with the US. Vietnam was the fifth largest steel supplier to the U.S. in 2024 with $1.7 billion worth of shipments, according to the American Iron and Steel Institute. The aluminum tariffs will increase the existing 10% tariff on Vietnamese aluminum by 15 percentage points. The tax hike is expected to reduce Vietnam's aluminum exports to the U.S., which currently account for 60% of all exports, according to the Vietnam Aluminum Profile Association. The Heritage Foundation estimates that extending the Tax Cuts and Jobs Act (TCJA) of 2017 will decrease federal revenues by $4.2 trillion over the next decade. Some congressmen estimate the need for $5.5 trillion, considering immigration control and military funding. A universal tariff of 10% could raise approximately $2 trillion, while a 20% tariff could generate $3.3 trillion. In a few weeks, the Trump Administration took steps to cut staff. Thousands of officials have resigned. Elon Musk dismantled USAID, an agency of 10,000 people and $44 billion in spending. Despite the media impact, its budget is less than 1% of federal spending.