Small Package Trade Loophole Expires on May 2

The Trump Administration is likely to launch more targeted tariffs in the coming weeks and months, while leaving the door open to delaying others. Here are some of the possibilities, according to recent reports:

On April 11, China raised tariffs on U.S. imports to 125%, in response to Trump’s recent retaliatory tariffs.

On April 9, Trump abruptly announced via Truth Social that he would be hiking the tariff on China to 125% effective immediately; it was confirmed on Thursday that the total tariff on China is 145% including the previous 20% levy. Trump also paused all other wide-reaching “reciprocal” tariffs for 90-days.

The president said on Truth Social, “At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable.”

China’s Ministry of Finance, in a statement announcing the tariffs on the U.S., indicated that it would not respond further if Trump escalates the trade war. “Given the current level of tariffs, U.S. goods exported to China are no longer market-viable,” the statement said.

Trump’s proclamation is just the latest twist in the tariff saga that has spurred volatility in the markets and heightened uncertainty among consumers for months. The reciprocal tariffs that Trump announced last week had gone into effect after midnight on April 9, but are now paused at 10% for the 90-day period.

» MORE: Value of the U.S. Dollar, Explained

Prior to Trump’s latest move, Canada, China and the European Union responded on April 9 with retaliatory tariffs that would take effect on varying timelines. However, on April 10 the EU said it was pausing its retaliatory tariffs for 90 days.

Canada imposed 25% tariffs starting on April 9 on auto imports from the U.S. that don’t comply with the United States-Mexico-Canada Agreement put in place in 2019.

China increased tariffs on U.S. goods from 84% on April 10 to 125% on April 11. In addition to tariffs, China took other steps to make it harder for U.S. companies to do business in the country. It set export controls on a dozen companies and added six others to an “unreliable entity list.”

The EU announced on April 10 that it would pause its retaliatory tariffs against the U.S. for 90 days to allow for negotiations. The previous day, the EU had approved a response to Trump’s steel and aluminum tariffs. The response did not address Trump’s 20% “reciprocal” tariffs on the EU, which have now been paused at 10% for 90 days. The EU approved a plan that would apply three rounds of tariffs to a range of U.S. goods valued at $23 billion. With the pause now in place, it’s unclear what the timing of those rounds would be.

Global financial markets have plummeted in the face of the spreading trade war sparked by Trump’s trade moves. On April 8, U.S. stock indexes mounted a brief rally before slumping and ending the trading day in negative territory once again.

On April 9, in Trump’s Truth Social Post, he said that more than 75 countries had reached out to the United States to negotiate.

A growing number of U.S. business leaders and even congressional Republicans have publicly criticized Trump’s tariffs, and economists have raised concerns that his policies are dramatically raising the possibility of a recession.

"I don't want anything to go down, but sometimes you have to take medicine to fix something," Trump told reporters on April 6, after two days of a dramatic sell-off on Wall Street.

The tariffs on China were set at 54% in Trump’s announcement last week, but after China said it would retaliate with additional duties on U.S. goods, Trump threatened to add another 50% to the tariff on Chinese goods. The White House confirmed the additional tax on Tuesday, which brought the total tariff on China to 104% on April 9 until Trump added another 21% tax. Then on April 10, the White House confirmed that the total tariff on Chinese imports has hit 145%.

On March 26, President Donald Trump announced he would add a 25% tariff on finished cars that are imported into the United States, to go into effect on April 3. An additional 25% tariff on auto parts would go into effect “no later than May 3,” according to Trump’s executive order.

The tariffs will include American brands that are assembled in other countries. According to the New York Times, almost half of all vehicles sold in the U.S. are imported. Top suppliers of imported cars are, in descending order, Mexico, Japan, South Korea, Canada and Germany.

Trump previously added 25% tariffs on Mexico and Canada, but suspended parts of those tariffs, including autos. That suspension is set to expire in April.

On March 12, Trump’s new 25% tariffs on all steel and aluminum imports went into effect, which prompted swift retaliation from the European Union and Canada.

The top importers of steel to the U.S. include Canada, Mexico, Brazil, South Korea, Japan, Germany, China, Taiwan, Vietnam and Algeria, according to the International Trade Administration.

The European Commission is responding with measures of its own. It says that since the U.S. tariffs on imports from the EU are worth $28 billion, the U.S. will face tariffs worth the same amount for its exports to member countries.

The European Union retaliated quickly with what it called a two-step approach:

• The suspension of existing 2018 and 2020 countermeasures against the U.S. will end on April 1. 

• There will be a package of new tariffs on U.S. exports that will begin mid-April. 

President of the European Commission Ursula von der Leyen said in a statement, “We firmly believe that in a world fraught with geopolitical and economic uncertainties, it is not in our common interest to burden our economies with tariffs. We are ready to engage in meaningful dialogue.”

On March 12, Canada also responded with 25% retaliatory tariffs on C$29.8 billion ($20 billion) worth of imported U.S. goods. The tariffs will include steel and aluminum, as well as products like computers, sports equipment and cast iron products, according to Canada’s Finance Minister Dominic LeBlanc. The new import tariffs began on March 13.

On March 13, Trump posted on Truth Social that he may levy a 200% tariff on alcohol coming from the EU. He said it was in response to the EU’s new 50% tariff on whiskey for U.S. imports. “ This will be great for the Wine and Champagne businesses in the U.S.,” Trump wrote.

The response from the EU and Canada arrives on the heels of a preemptive retaliation by the Canadian province of Ontario, which announced it would add a 25% surcharge on electricity imports to the U.S. Then, on March 11, Trump announced he would double the steel and aluminum tariffs on Canada to 50%. However, Ontario announced it would suspend the surcharge following a phone call with U.S. Secretary of Commerce Howard Lutnick. Trump then called off the added tariff.

During Trump’s first presidency, he imposed a 25% tariff on aluminum and a 10% tariff on steel from Canada, Mexico and the European Union. The tariffs continued under Biden. Trump’s new policy increases the steel tariff from 10% to 25% and reinstates the 25% tariff on aluminum. Trump also said that no countries are excluded from these tariffs.

On March 6, Trump paused new tariffs on Mexican and Canadian imports included in the 2020 free trade deal, known as the United States-Mexico-Canada Agreement. The pause will be in effect until April 2.

The 25% tariffs on Canada and Mexico went into effect on March 4. An additional 10% tariff has also been levied on Chinese goods, bringing the total added tariff to 20% — those remain in effect.

A White House official told CNBC that some 50% of Mexican imports and 38% of Canadian imports are covered by the trade agreement.

Beyond the delay of the tariffs on Canada and Mexico, the only exemption is a one-month reprieve for automakers on related import purchases.

Trump has long said the tariffs are punitive, meant to curb drug trafficking into the United States. He has also claimed they’re meant to entice companies to bring more manufacturing back to the U.S. Following the official start to the tariffs, Trump posted on Truth Social, “If companies move to the United States, there are no tariffs!!!”

Trade partners retaliate

China retaliated with tariffs on agricultural imports from the U.S. That includes 15% tariffs on chicken, wheat, corn and cotton imports. There will also be 10% tariffs on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products. Those tariffs went into effect on Monday.

Canada has announced retaliatory 25% tariffs on C$155 billion ($107 billion) of U.S. products. Tariffs on C$30 billion of U.S. goods began on Tuesday and the remaining tariffs on an additional C$125 billion are expected to begin 21 days later. Trudeau has said that, for now, Canada will not be removing its tariffs on the U.S.

Mexico President Claudia Sheinbaum originally said that Mexico will announce its own retaliatory tariffs on March 9, but any announcement will likely be delayed until Trump’s pause ends.

How did we get here?

Mexico, Canada and China are the three top trading partners for the U.S. Both Mexico and Canada are more dependent on the U.S. than vice versa, which means the economic impact could be greater to those two countries than to the U.S. China, meanwhile, has the largest share of trading in the world.

On Jan. 31, Trump first announced new tariffs including a 10% tariff on China and a 25% tariff on all goods imported to the U.S. from Mexico and Canada with one exception: Oil from Canada would face a 10% tariff. On Feb. 3, leaders from Canada and Mexico negotiated a one-month delay of the tariffs by promising to beef up border patrol efforts.

But on Feb. 4 the initial 10% tariff on China still went into effect. China responded with retaliatory tariffs ranging from 10% to 15% on a specific set of energy products, cars and agricultural machinery. These tariffs went into effect on Feb. 10.

Then on Feb. 7, Trump suspended tariffs on small packages from China. Prior to the announcement, the United States Postal Service USPS, in order to comply with the sweeping 10% tariff, briefly stopped accepting any packages from China. All packages from China under $800 will be imported tariff-free to the U.S.

On Feb. 1, Canada announced retaliatory tariffs. But following a call with Trump days later, Canadian President Justin Trudeau said Canada’s tariff on the U.S. would also be pushed back by one month.

What happens next?

Retaliatory tariffs would increase prices on goods imported from the U.S. and could potentially lead to a trade war.

Estimates by Peterson Institute for International Economics (PIIE) show 25% tariffs on Mexico and Canada would slow growth and accelerate inflation. U.S. consumers would see prices rise on goods coming from those countries. Consumers would also see higher prices for goods manufactured in the U.S. that require supplies from those countries.

The Observatory of Economic Complexity (OEC) which supplies global trade data, says the chief products that Mexico exports to the U.S. are computers, cars, as well as motor vehicles, parts and accessories. The U.S. exports mainly refined petroleum, motor vehicle parts and accessories, as well as petroleum gas to Mexico.

Canada primarily exports crude petroleum, cars and petroleum gas to the U.S. Meanwhile, the U.S. mainly exports cars, refined petroleum and delivery trucks to Canada.

China exports a wide variety of products and supplies to the U.S. including telephones, computers, electric batteries, light fixtures and motor vehicle parts, and accessories. The U.S. mainly exports soybeans, cars, petroleum gas, integrated circuits and crude petroleum to China.

More tariffs are on the way

On Jan. 27, Trump said he plans to enact tariffs on steel, aluminum, copper, pharmaceuticals, computer chips and semiconductors, in the hopes of bringing manufacturing back to the U.S.

Trump said tariffs on computer chips and semiconductors from Taiwan could be anywhere from 25% to 50% or even up to 100%. Tariffs on chips and semiconductors could lead to higher prices for computer products including smartphones.

In response, the Taiwanese government said the current business model with the U.S. is a win-win, while the Taiwan economy ministry called the two nations’ semiconductor businesses “highly complementary to each other.”

The Taiwan Semiconductor Manufacturing Co. (TSMC) — the largest producer of semiconductors in the world — is investing $65 billion in Arizona for new chip manufacturing plants, as part of the Biden administrations’ CHIPS and Science Act. The Act also gave funding to U.S. companies for the creation and expansion of chip manufacturing plants.