USA’s Latest Tariff Policy Sparks Global Trade Realignment
On April 2, 2025, President Donald Trump, during his renewed presidential term, signed an Executive Order reintroducing “Reciprocal Tariffs.” This policy mandated that the U.S. impose import duties matching those levied by its trading partners on American exports, aiming to address persistent trade imbalances. The order, invoking the Trade Act of 1974, established a baseline 10% tariff on imports from all countries, with additional surcharges for specific nations—India, for example, faced an extra 27% tariff over standard duties. Key sectors such as pharmaceuticals, semiconductors, and energy were exempted from these measures67.
The policy’s reach was global. The European Union, threatened with a 50% tariff on its goods, entered expedited negotiations with the U.S. after President Trump postponed implementation until July 9, 2025. India responded by proposing steep tariff cuts, seeking to finalize a bilateral trade agreement before the July deadline, while trying to maintain high duties on sensitive agricultural products56.
Impact on the Automotive Sector
The automotive industry was particularly affected. In January 2025, a 25% tariff was imposed on all imported cars—including those from Canada and Mexico—effectively ending exemptions under the USMCA. Major automakers warned of rising costs and potential layoffs, with car prices projected to increase by thousands of dollars. Canada and Mexico responded with retaliatory tariffs, raising fears of a broader trade war10.
Economic and Legal Fallout
Economic analysis from The Budget Lab at Yale found that the average effective U.S. tariff rate surged to 6.9%, the highest since 1969. Consumer prices rose by 0.6% in the short term, translating to a $950 annual loss in purchasing power per household. Projections indicated the U.S. economy would shrink by 0.1% in the long run, with contractions in manufacturing, construction, and agriculture10.
However, on May 28, 2025, a U.S. federal trade court ruled that President Trump’s sweeping reciprocal tariffs were unlawful, stating he had exceeded his authority by imposing these duties without congressional approval. The court issued a permanent injunction against the tariffs, including those on Canada, Mexico, and China. The Trump administration immediately appealed the decision, arguing that the tariffs were necessary to address national economic emergencies and trade deficits1348.
Ongoing Negotiations and Uncertainty
The court ruling has injected uncertainty into ongoing trade negotiations. Key partners like India, China, and the EU are reassessing their strategies, weighing whether to continue talks or leverage the U.S. legal setback to seek more favorable terms2. Meanwhile, the White House maintains that its trade policy will continue, exploring alternative avenues even as legal battles play out3.
“The court does not assess the wisdom or potential success of the President's tariff strategy... This utilization is not permissible not due to its imprudence or ineffectiveness, but because federal law does not permit it.”
— U.S. Court of International Trade1
Outlook
While the U.S. administration contends that these measures will revitalize domestic manufacturing and correct unfair trade practices, critics warn of higher consumer costs, supply chain disruptions, and the risk of a global economic slowdown. With appeals pending and negotiations ongoing, the final shape of America’s aggressive tariff strategy remains uncertain.
Sources:
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Al Jazeera (2025-05-29): U.S. trade court ruling on Trump’s tariffs1
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Times of India (2025-05-29): Impact on India, China, and global negotiations2310
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CNBC (2025-05-29): Federal trade court decision and market reaction4
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PIB India (2025-04-03): Indian government response and bilateral talks6
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White House (2025-04-03): Executive Order on Reciprocal Tariffs7
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The Budget Lab at Yale: Economic analysis (as cited in news reports)