Tax is higher than expected
On the afternoon of April 2 in the US (dawn 3/4 Vietnam time), US President Donald Trump announced plans to apply reciprocal tax rates targeting all countries around the world. Accordingly, the White House declared The basic tax rate of 10% will apply to all imported goods speech From every country, effective from 5/4.
Many countries are subject to higher tax rates. Specifically, China faced the 34%tax rate (added with 20%of the previous tax announced, a total of 54%, effective from 9/4), the European Union (EU) 20%, Vietnam 46%, and Taiwan (China) 32%…
Last weekend, Mr. Trump imposed a 25% tax on imported cars (effective from 3/4) and separate tax rates targeting China, Canada, and Mexico. However, on the morning of April 3 (Vietnam time), the Trump administration announced that Canada and Mexico will be exempted from basic tax rates of 10%. The 10% tax rate will only take effect when the original 25% tax rate applied to Canada and Mexico imported goods is terminated or suspended.
According to international media, these are tax rates higher than expected and immediately affected many markets on a global scale.
The US stock market plummeted in the session after closing. The S&P 500 ETF index decreased by 2.2%, reflecting concerns about increasing import costs and inflation pressure. The NASDAQ-100, which focuses on technology companies depending on the global supply chain, plummeted with 3.3%. Investors are concerned that tariffs will interrupt the supply chain, especially with items such as electronic components from China and Taiwan (China).
Contrary to securities, gold price (safe shelter) soared nearly 20 USD, reaching $ 3,140/ounce on the morning of April 3. At dawn, sometimes yellow to the new peak, nearly 3,160 USD/ounce. Oil price also increased, with WTI oil climbing more than 0.7% to 71.7 USD/barrel, due to concerns about transportation and production increased when tariffs on Canada and Mexico – two large supply of oil for the US. Meanwhile, the dollar is under sharply decreased, with DXY index takes nearly 0.4%, to 103.86 points. This weakness reflects the psychology that Trump’s protection policy can harm the US economic position in the long run.
These fluctuations show that the market is responding strongly to the uncertainty that the tariff policy brings. Investors and businesses are trying to judge whether this is a threat to force concessions, or the first step for a comprehensive trade war.
Mr. Trump’s protectionism – turning on a global economy
Donald Trump’s economic strategy is quite clear, pursuing protectionism instead of Globalism, with the slogan “America First” (America above all) to regenerate the economy wallpaper in a more beneficial way for the United States.
First of all, is high taxation to protect domestic production, withdraw or re -negotiate trade agreements …
Trump’s reciprocal tariff policy is considered to be able to push the world into a new period of economic instability. With high -voltage tax on major economies like China (54%) and EU (20%), and developing countries like Vietnam (46%), the global supply chain will be under unprecedented pressure.
The affected countries may respond to the corresponding tariffs, resulting in an escalating trade war. Canada and the EU have signaled retaliatory measures, while China may continue to reduce the price of yuan to support exports, increasing monetary tensions.
With the newly announced tax rates, in the medium term, global consumer goods, from electronics to food, is expected to increase due to escalating import costs in almost all countries. Countries that depend on export to the US may witness the economic growth slowing down if the market is not found instead. In contrast, countries are less affected, such as Russia or some South American countries, can benefit temporarily from filling the gaps in the supply chain.
In the long term, if the tariff is maintained, the global trade structure may change permanently. Multinational companies will be forced to restructure the supply chain, transfer production to the US or to other countries that are not subject to high taxes. However, this process is expensive and time -consuming, which can reduce global economic efficiency. The International Monetary Fund (IMF) warned that a comprehensive trade war could cause global GDP to decrease by 0.5-1%/year in the next decade.
For the US, tariff policies promise both benefits and risks. According to Mr. Trump’s argument, tariffs will protect the domestic manufacturing industry, create jobs and reduce trade deficit. In the short term, some industries such as steel and domestic cars can benefit from imported goods. However, economists warn that this benefit will be overshadowed by increasing costs for US consumers and businesses.
In the medium term, inflation in the US may increase sharply when the price of imported goods – accounting for a large proportion, about 15% of GDP – escalate.
Goldman Sachs Bank has just warned of the status of the US when Mr. Trump’s tariffs threaten inflation and grow slowly. Accordingly, Mr. Trump’s tariff policy will increase basic inflation to 3.5%by 2025. Economic growth will slow down to only 1%, decreasing from 1.5%. Goldman Sachs forecast that unemployment rate increased to 4.5% and the recession rate increased to 35%.
Goldman warned that the risk of increasing inflation, a combination of low growth and high inflation will eventually occur for nearly five decades. The company is currently expected to make three -time reduction of 0.25 percentage interest rates by 2025, increasing compared to the previous forecast of two cuts.
With a higher tax rate than expected, scenarios may be worse.
In the long term, if the countries are strong, American exports – especially agricultural products and energy – will be hurt. Big production states such as Texas (oil) or Iowa (agriculture) may suffer heavy losses. Moreover, the uncertainty from the tariff policy can cause businesses to delay investment, weakening the growth motivation that Mr. Trump expects. Barclays Bank forecasts S&P 500 may decline sharply in 2025 if the trade war escalates.
