The world is paying more for global trade than it was a year ago. Trades are getting more expensive. US President Donald Trump’s trade policy has upended trade relationships that countries have spent decades building through layers of diplomacy. The so-called “reciprocal” tariffs that Trump widely imposed on April 2 this year are still evolving. The crude graph he presented to the world on the day the president dubbed “Liberation Day” became obsolete within a few months.
The White House is constantly tweaking its trade policy, making changes that leave traders stunned. Business rates are experiencing extreme volatility. Businesses and merchants must adapt to Trump’s every new move. And Trump has taken many steps in this whirlwind dance. “The policy-implied effective tariff rate has fluctuated substantially this year, starting at 2.4% in early January and peaking at around 28% following the announcements on April 9 and 13,” notes Yale University’s Budget Laboratory, which closely tracks import taxes.
On April 2, Trump imposed a universal minimum tariff of 10% on all imports, hitting his traditional trading partners the hardest. For the European Union, for example, I have imposed an additional tariff of 20%. Since then, the White House has adjusted tariffs under agreements that included other concessions. In the last two weeks it has eased trade tensions on many food products.
Trump’s chaotic tariff policy is shifting the balance of power in global trade. Countries that have been hit with lower tax rates have become more competitive overnight, while those facing higher levies are losing attractiveness. After the latest negotiations, the 15% tariff seems to be the reference point for trading partners.
This is precisely one of the points highlighted last week by the European Commission to improve the economic forecasts of the bloc. The EU executive cites the “relative advantage for the EU economy” compared to countries or blocs facing higher US tariffs to explain the upward revision of its projections. Although it offers a certain competitive advantage, the new trade policy still fails to convince economists, companies and families.
Sophie Altermatt, economist at Julius Baer, cites the recent US trade deal with Switzerland, which reduces tariffs from 39% to 15%. “Switzerland now faces the same tariff rate as the EU, eliminating its competitive disadvantage in the US market.” He continues: “Although the agreement offers some relief to exporters, their situation remains difficult. Even with the agreement, the US tariff rate is significantly higher than before President Trump took office.”
While 15% represents a benefit for trading partners, it is still much higher than at the beginning of the year. As a result of the recent changes, “citizens are facing an average effective fare rate of 14.4%, the highest since 1939,” according to calculations by Yale’s analytics department.
This, of course, has consequences: “Over the past 12 months, 77% of business owners say costs have increased,” according to the latest Bank of America Business Owners Report, which points to inflation and tariffs as the top concerns for small business owners.
A report from the Consumer Technology Association (CTA) finds that nearly half of those who plan to spend less this upcoming holiday season attribute their decision to economic concerns, largely due to rising prices caused by tariffs.
Economists point out that ads are one thing and actions are another. US Trade Representative Jamieson Greer recently lamented the slow progress of the EU-US trade deal. I noticed that Europe has yet to reduce tariffs on US imports. He also pointed out that China has not yet finalized a deal on rare earths, although US Treasury Secretary Scott Bessent expects a deal before next Thursday, when American families will celebrate Thanksgiving. But the reality is that the details still need to be worked out.
In any case, Trump’s erratic trade policy raises questions about whether he has used tariffs to gain political influence over his trading partners, as if he were using tariffs as a bargaining tool to achieve other goals. For example, Europe was pressured to invest billions in the United States and increase defense spending to benefit American companies, while Mexico was forced to tighten border controls.
Economists often remind us that everything has a cost. Raising tariffs also has repercussions: U.S. families are grappling with rising costs of living. “Heightened political concerns about US consumers’ perceptions of inflation appear to be pushing to reduce the tariffs US importers pay on food products,” says Paul Donovan, chief economist at UBS.
The debate over the affordability crisis has spread like wildfire across the United States following Zohran Mamdani’s victory in the New York City mayoral elections. The socialist politician made the cost of living a central theme of his campaign. Since then, the White House has tried to regain the initiative with measures aimed at lowering the cost of living, including some tariff cuts.
For this reason, Trump has approved several substantial changes in the last two weeks. He reached an agreement with Argentina, Ecuador, Guatemala and El Salvador to reduce trade tariffs on a wide range of products not made in the United States. The next day I issued an executive order exempting 200 staple foods from tariffs, including beef and other meat products, bananas, pineapples and other tropical fruits, coffee, and vegetables, among others.
It also reached an agreement with Switzerland to reduce trade tariffs from 39% to 15%. The same rate now applies to major U.S. trading partners, such as the European Union and Japan, following trade deals reached last summer. This seems to be the new benchmark.
Brazil’s tariffs were also adjusted last week. The country still has a general rate of 50%, but the Republican president has exempted a wide range of food products – including coffee, coconut and beef – from tariffs.
“Bilateral negotiations with Latin American countries will be limited in scope due to the rules of the Mercosur trade pact. Other tariff reductions have not necessarily reduced consumer prices,” according to Paul Donovan.
In fact, according to Yale University, tariffs are regressive taxes. In a study released last week, the research center concluded that a household in the lowest income decile – the 10% with the lowest income – faces a real income loss of $920, while an average household in the highest decile – the 10% with the highest income – loses $3,871. While the absolute amount is higher for wealthier families, it proportionately represents a much smaller reduction in income. In other words, low-income families bear a tariff burden of 2.4%, compared to 0.8% for the richest, three times higher. Vulnerable households spend a larger share of their income on goods exposed to tariffs, such as clothing, shoes, electronics and vehicles. Tariff rates on these products had not been this high since the start of World War II.
Sign up to our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition
