President Trump’s major new tariff plan, set to kick in this Wednesday, could wipe over $700 billion off the global economy by 2027, forecasts from Japan’s JETRO Institute of Developing Economies warn. It’s feared these tariffs might actually hurt the US economy most, by making imports more expensive.

Reports suggest that another 25% tariff on cars and auto parts will come into play on Thursday, adding to existing tariffs already in place on goods from China, Canada, and Mexico.

The White House presents this as a necessary fix to what they see as unfair trade practices against the US. However, economists are warning that the biggest impact will be felt right here at home, not abroad.

Economists predict a $763 billion GDP loss

The Institute of Developing Economies at JETRO in Japan estimates that if these tariffs are fully applied, the global GDP could contract by 0.6% in 2027. Based on the IMF’s $127 trillion GDP forecast, that’s a staggering $763 billion wiped off the global economy.

Trump is even calling Wednesday “Liberation Day,” framing these tariffs as a defense against foreign exploitation. “They’ve been taking our jobs, our wealth, and a lot of things for years,” he stated. The press is expected to be at the White House Rose Garden tomorrow for the president’s briefing on this.

JETRO predicts the US will take the biggest hit, forecasting a 2.7% drop in US GDP – the sharpest decline among major economies. They say rising import costs, especially for manufacturers who rely on parts from China, will hurt company profits and household budgets.

American companies are already preparing for trouble. Dollar Tree CEO Michael Creedon Jr. mentioned on Tuesday that the discount chain had managed to offset 90% of the impact from the initial 10% China tariffs by tweaking supply chains and slightly raising prices.

However, this new 20% tariff on Chinese goods, plus the new duties on Canada and Mexico, could cost Dollar Tree a whopping $20 million every month.

Are tariffs good for the US?

The Trump administration, through figures like Peter Navarro, claims these tariffs could generate a massive $6 trillion over ten years – even enough to replace income tax as a main source of government money.

White House Press Secretary Karoline Leavitt reiterated the government’s stance on Monday, saying: “The president will be announcing a tariff plan that will roll back the unfair trade practices that have been ripping off our country for decades.”

Despite the idea that foreign companies pay tariffs, experts point out that US importers are the ones who actually pay them upfront. Businesses are likely to pass these costs on to consumers, meaning prices could go up on everything from tech gadgets to clothing.

While Navarro’s idea that tariffs are like tax cuts is gaining some traction with voters, analysts think it’s misleading. They argue that Americans could end up suffering just as much as US allies.

Trump’s tariff plan includes a 20% tariff on Chinese goods (up from 10% in February) and 25% duties on imports from Canada and Mexico, although some recent exemptions might ease the impact a bit. This new auto tariff, effective April 2nd, risks further escalating tensions between the US and its allies.

Europe will retaliate, EU President vows 

Meanwhile, the European Union is gearing up to respond if Trump’s tariffs go ahead. European Commission President Ursula von der Leyen announced on Tuesday that while the EU prefers to negotiate, they are ready with “a strong plan to retaliate” if necessary.

“We will approach these negotiations from a position of strength. Europe holds a lot of cards, from trade to technology to the size of our market,” she explained. “But this strength is also built on our readiness to take firm countermeasures if necessary. All instruments are on the table.”

Leyen didn’t say exactly what retaliatory measures the EU might take. 

Just last month, the EU already slapped countermeasures on up to €26 billion ($28 billion) worth of US exports. These tariffs targeted American-made boats, bourbon, and motorcycles, as a response to Trump’s earlier steel and aluminum tariffs.

Data from the US Census Bureau shows that the EU was the biggest buyer of American goods last year, even more than Canada and Mexico.

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Source: cryptopolitan.com