US Imposes 25% Tariffs on EU Cars and Trucks

If this kind of random imposition of tariffs continues, European manufacturers may simply decide to pack up and leave the US. It'd be a sensible move as they could write off the cost and avoid tax in their own countries.

Tariff-Free Living USA

An American woman investigates whether it possible to live without buying anything imported from overseas:

US Tariff Wall

I've been thinking about the effects resulting from the US wall of tariffs, and the following are the three most important points, in my opinion.

1. Wealth Transfer

Surely the brains in the White House must realise that industries such as garment and shoe manufacturing, shipbuilding, and even mid-size earthmoving equipment manufacturing are not going to be revived by the imposition of tariffs. The simple reasoning - who will work in these revived industries?

It just isn't going to happen.

The reason behind the tariffs must be something else; so how about wealth transfer? The peasants will pay higher prices resulting from the tariffs, and the Wall Street elites will carve off greater profits for themselves and receive windfalls from tax cuts and subsidies.

2. Competitors Benefit

With the US hiding behind a wall, competitors learn to change and diversify. Many suppliers to the US will have become complacent and will have just been doing business because of past practice or habit. Now, shaken from their slumber, they'll examine and reevaluate all supply arrangements and this may mean the US gets jettisoned. This would mean exporters not even bothering to price for US markets, and when it comes to their own inputs, not even bothering to give US companies a call. Likewise, governments may rewrite regulations to effectively shut out US products.

This process will make other countries leaner, more agile and ultimately move ahead of US operators.

3. Countries Trading Amongst One Another & De-Dollarization 

BRICS and other moves will accelerate whereby countries move away from using the US dollar as the default currency used to conduct trade. China has developed a system for direct country-to-country transactions, and this will gather pace. 

If we look at Brazil, they're the world's biggest beef exporter by far. Increasingly, they'll look for other countries to supply their equipment needs while continuing to export their protein worldwide. Also, China has moved away from buying Soy from the US, instead, they now prefer Brazil, Argentina and Australia. The tariff wall incentivises cutting out the US, in both the physical trade of goods and through the payments system.

Conclusion: The US leadership appear unaware of these effects or they don't care, as their own pockets will benefit.

Troubling times ahead indeed.

Trump's Tariffs

Here's a useful graphic outlining the tariffs as they apply to ASEAN and neighbouring countries in Asia:

This is a retrograde step and I think the Trump administration have got this badly wrong. There will be an initial uptick as US importers pay these tariffs, resulting in a lower US deficit, but then things kick in which the US has no control over. For instance, countries will increasingly just deal with one another and ignore the US.

Here's a Bloomberg piece, I presume from their Asia desk:

Tariffs, Brazil and Copper

US President, Donald J Trump has slapped a 50% tariff on goods coming from Brazil. He's said that's due to the prosecution of the former President of Brazil, Jair Bolsonaro. 

What I've noticed is that critics of Trump are rushing to the defense of Brazil. Hang on though, isn't it possible that Donald Trump is correct?

I'll explain: Brazil is not exactly a bastion of free and fair elections, and its judicial system is not highly regarded either. Political candidates are assassinated, elections are stolen, and the police are corrupt. So, it is possible for the election in which Bolsonaro was standing was rigged.

Then, Bolsonaro tried to launch a coup. Brazil has a long history of coups and military rule, so it's also believable that a coup would be a response to a rigged election.

It is also possible that Trump saw all this, and has reacted. The question then needs to be asked, are tariffs an appropriate response? Well, it's one response, I suppose.

Then Trump imposed a 50% tariff on Copper imports. Copper prices shot up after the news, and people are complaining. Well yes, but copper is not an ore that is hard to find and the US has many copper mines, and further mines either sitting there unused, dormant, or undergoing permitting. This is one area where a tariff can have the effect of boosting local production and creating jobs. It's not like the rare earth elements argument, resources which are commonplace but countries like the US lack the refining or processing capacity.

As the actress said to the bishop - it's complicated.

Trump Tariffs Will Fail

Tariffs alone will not see industry return to the US. That's because the Trump administration has no comprehensive plan, apart from tariffs alone. 

The US has been outsourcing for decades, and many industries within the US are now effectively defunct. There is simply no mechanism where you can go back in time and make different decisions. 

I'm thinking the opposite may happen, that some American companies may move out of the US and treat their original base as a branch office. The other side to this is that large American companies may receive waivers from high tariffs, while others, lacking the right connections do not. This would be the worst of all worlds, a kleptocracy and plutocracy mixed together (what would be the word for a combination of both?).

China Taking Over

I'm from the world of concrete and so I know this to be true: in the last three years China has poured more concrete than the US poured over the hundred years of the twentieth century.

The world is turning on its axis, China is now ascendant.

And when it comes to universities, China rules. We'll all need to start learning Chinese as much of their research is in that language. Heh, I can read a little Japanese so I am at least familiar with Chinese characters. You know the type of thing, Chinese on the page looks like a chicken walked into a pot of ink and then wandered across the page. The good part of knowing this is that at least it's not as hard as English to learn.

245% Tariffs

This is now getting ridiculous. The US has increased its tariff on imports from China to 245%. But electronics such as smart phones and laptop computers are exempt, so what effect will these tariffs have on China? Not much, is my estimation.

Looking into this, I find that clothing, along with toys and sporting goods make up over a quarter of all US imports from China. Going into the summer therefore, the US will be missing out on cheap baseball bats and balls. And the price of clothing at Walmart will skyrocket as even alternative suppliers such as Vietnam and Bangladesh have had high tariffs placed on them (although now paused for 90 days).

On the other side of the equation, China has stopped supplying rare earth minerals, which it has a market share globally of 95%. Plus, China has stopped buying logs, beef and soybeans from the US. It can obtain all these from other suppliers; soybeans from Brazil, beef from Argentina, logs from New Zealand and so on. 

Also, I see that China has stopped dealing with Boeing, including buying spare parts. Little known is that Airbus has an assembly facility in China, so they'll be gaining there, and China has its own airplanes, an industry it put effort into since Trump 1.0. They could see where things were headed and planned ahead.

Factor in also, China is building fast rail links, it does not rely on air travel as much as other countries do, it is similar to Japan in that respect.

China's president, Xi Jinping is visiting ASEAN countries right now, shoring up relationships. The ASEAN region is China's biggest trading partner. Something I think the US has got badly wrong, it singled out this region for punitive tariffs, effectively driving China and the ASEAN countries together.

In short, I don't see China backing down as it can do without the US. Anything it finds it really does need, it can afford to do without until a substitute is found. Reportedly, the US has asked Europe to decide, them or China. I'm assuming Europe will buckle and choose the US. But any country watching this would be wise to observe and do nothing. What we are witnessing is a huge act of self-harm and Europe may be about to jump onto a sinking ship. 

Ray Dalio on a Bigger Problem

The founder of hedge fund, Bridgewater Associates explains where we are at right now:

Tariffs and Trade Southeast Asia

ASEAN countries are faced with economic challenges, both as the trade war ramps up, but also due to changes in consumer demand. For instance, in 2024 car production in Thailand contracted 30%, with Suzuki and Subaru shutting down altogether. 

Indonesia is a critical source of nickel, required for use in batteries. I wonder, are there viable nickel deposits in the Nelson and Marlborough areas, has New Zealand looked hard enough?

Effect of Tariffs

Law firm, England & Knight have put up the following page summarising the full effect of China's counter-tariffs:

https://www.hklaw.com/en/insights/publications/2025/04/chinas-comprehensive-retaliation-against-us-tariffs

Note that Red States will bear the full impact of effective bans on poultry, pork, wheat and soybeans. China can easily replace these supply lines with output from Brazil, Argentina, New Zealand and Australia.

Further, Canada and Mexico are still where they are:

China Responds

China has hit back at the US by implementing an 84% tariff on imports of US goods. This seems quite cleverly pitched as the measure isn't countervailing, meaning a reply with equal force, but it will be debilitating for US exporters. Good news for other exporters though:

It's About Wealth Transfer

A lot to unpack here, no idea who this bloke is, but he's very bright. I like his idea that what we're seeing now is huge wealth transfer - again. That's because the US must always import some things, it simply has to. So these imports will be tariffed, making the price of everything in the US much higher. The US doesn't have the manufacturing capacity to substitute with its own output. 

So, people on lower incomes will pay higher prices, an effective tax in other words. Small business will be driven to the wall, they're collateral damage. The winners will be large corporates which can fund the imports, and the difference between retail prices and the cost of production will be subsidised by the taxpayer. The people end up paying twice, another wealth transfer. Sounds logical, and explains why the takedown of the US economy. 

New Zealand's Tariff Rate - Liberation Day USA

I see reports on New Zealand being listed as charging the US a 20% tariff on its goods. In fact, NZ charges about 1.9% on average, plus 15% GST. The total of the two is 16.9%, the tariff being paid by the end-user, while the GST is refunded to the importer when they file their periodic GST return. 

However, this is NOT the methodology America appears to have used. How did NZ get listed at 20%? The US appears to have looked at the trade balance, currently NZ exports to the US, about $1.1 billion more than it imports from the US ($4.5 billion). Thus, the $1.1 billion surplus represents 19.65% of NZ's exports ($5.6 billion). They've rounded that 19.65% up to 20%. 

Any country whose surplus increases from hereon will likely face increases in tariffs if that surplus becomes a greater percentage of its exports to the US. The US is effectively saying, you need to buy more from us, if you want to sell more to us. You cannot buy nothing and expect to sell more. Do you see?

I'm sure NZ officials do not understand this methodology, so if you're reading this, please contact the NZ government and inform them. 

Trump Tariff List

Here is a list of what each country faces. Brexit seems to have avoided the worst since it has left the EU. 

https://www.bbc.com/news/articles/c1jxrnl9xe2o

10% baseline for all countries, with the following only facing that baseline rate (amongst others):

• United Kingdom
• Singapore
• Brazil
• Australia
• New Zealand
• Turkey
• Colombia
• Argentina
• El Salvador
• United Arab Emirates
• Saudi Arabia

Punitive rates, as follows on some countries:

• European Union: 20%
• China: 54%
• Vietnam: 46%
• Thailand: 36%
• Japan: 24%
• Cambodia: 49%
• South Africa: 30%
• Taiwan: 32%

Plus; 25% tariff on all car imports to the US.

Canada and Mexico have nothing added to the measures already introduced against them.

Trump's Tariff Regime

Here is a brief rundown on Donald Trump's 'reciprocal' tariffs:

Liberation Day

April 2nd., 2025 is almost here and we will soon find out what effect Trump's tariff regime will have on world trade. While I think it unlikely, I wouldn't be surprised if some overseas based manufacturers pull out of the US market altogether, just to make doing business simpler. 

https://apnews.com/article/trump-new-tariffs-liberation-day-import-taxes-118d73f50e5133ef3d9598aed6661a6c

As he announced 25% auto tariffs last week, he alleged that America has been ripped off because it imports more goods than it exports.

“This is the beginning of Liberation Day in America,” Trump said. “We’re going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they’ve been taking over the years. They’ve taken so much out of our country, friend and foe. And, frankly, friend has been oftentimes much worse than foe.”

<snip>

The Republican president plans to tax imported pharmaceutical drugs, copper and lumber. He has put forth a 25% tariff on any country that imports oil from Venezuela, even though the United States also does so. Imports from China are being charged an additional 20% tax because of its role in fentanyl production. Trump has imposed separate tariffs on goods from Canada and Mexico for the stated reason of stopping drug smuggling and illegal immigration. Trump also expanded his 2018 steel and aluminum tariffs to 25% on all imports.

Will Trump Tariffs Work?

Things are about to become riskier when reciprocal tariffs kick in:

New Zealand and its Fuel Supply

New Zealand shut down its only oil refinery in 2022. The way things are currently headed, NZ could end up with no fuel as it lacks the ability to refine its own oil.

World shipping, especially crude oil shipments along with the shipping of finished fuels, is about to be disrupted. That's the effect of tariffs, especially the 10% tariff applied by the US on Canadian oil imports. 

Canada will now likely start exporting their surplus crude by ship to refineries worldwide. This diversion of oil away from pipelines will take up a percentage of the global tanker fleet. More crude oil being transported by ship, will result in more finished fuels being taken from those refineries by ship as well. 

This should result in an increase in supply of fuel globally, and so reduce prices. However, there is only a limited number of tankers out there and if they're all working on something else, how many will be available to deliver petrol, diesel and aviation gas to NZ bearing in mind it is two weeks to NZ and then two weeks back running empty. Hmm?

That's right, NZ is at the end of the queue and may find itself unable to obtain spare capacity as all ships are working somewhere else.

What's Coming Next from Donald Trump?

Donald Trump talked to reporters after he arrived at Joint Base Andrews, near Washington DC. He outlined further measures, including stopping aid to South Africa, and tariffs on the EU but not on the UK at this stage. He seemed to suggest that the trade balance between the UK and US can be addressed.