New tariffs are being introduced across the board. On Wednesday, President Donald Trump announced a 10% tariff applicable to all countries, with the exception of goods compliant with the United States-Mexico-Canada Agreement (USMCA) trade agreement. Some countries will be affected more than others, as Trump aims to create a level playing field by enforcing reciprocal tariffs.
1. "Worst offenders" list sees certain countries facing higher tariffs
In addition to the blanket 10% tariff, goods imported from countries where Trump claims high tariffs are already imposed will face increased tariffs upon entering the U.S. This list includes 60 countries, notably China, which will face a combined tariff rate of 54% due to an additional 34% tariff over existing tariffs of 20%. Cambodia and Vietnam are also subject to high tariffs of 49% and 46% respectively. Imports from the European Union will encounter a 20% tariff rate.
While Canada and Mexico are not on the "worst offenders" list, their non-USMCA-compliant goods will still incur a 25% tariff. A noteworthy change is the removal of the pause on tariffs for foreign-made automobiles.
2. Tariffs to be implemented shortly
Consumers will soon feel the impact of these tariffs. Tariffs on foreign automobiles will become effective at midnight on Thursday. The general 10% tariff will be implemented on April 5, followed by customized rates for goods from countries facing higher tariffs on April 9.
This timeline allows businesses little time to adjust. Large retailers such as Walmart, Target, and Costco are exploring ways to mitigate the impact on consumers, including negotiating with Chinese suppliers to absorb some of the tariff costs. Should this fail, retailers may be forced to either increase consumer prices or compromise their already narrow profit margins, which generally fall within single digits.
3. De minimis exemption closure
A contentious issue has been the de minimis exemption, which allows low-cost goods under $800 to avoid tariffs. Effective May 2, this will no longer apply, with a 54% tariff rate affecting these items, including those from companies such as Shein and Temu (owned by PDD Holdings). This could significantly increase costs for consumers, potentially prompting these companies to raise prices. Amazon, which launched a discount store named "Amazon Haul," could benefit from this change as it offers competitively priced products.
Investor outlook
While tariffs are set to increase prices and potentially impact business margins, they may be temporary. Trump’s approach involves negotiation, and tariffs might be reduced over time. Companies like Walmart and Costco are expected to adapt to these changes. Investors are advised not to panic but to focus on quality businesses with strong margins, which are better positioned to navigate these challenges.