What to make of the 2025 US tariff policy?

AT A GLANCE What to make of the 2025 US tariff policy? When Donald Trump was elected President of the United States (US) for the second time in 2024, the world knew that tariffs would again be the US trade policy instrument of choice. Two months into his second term, the President announced universal tariffs on aluminium and steel; a month later, on cars and car parts; and on 2 April 2025, reciprocal tariffs ranging from 11 % to 50 % on imports from countries running a trade in goods deficit with the US, and universal tariffs of 10 % on imports from almost all other countries. As the US Congress is working on a long-term budget reconciliation bill, it is unclear whether the US import tariffs are meant as a permanent source of revenue to partly fund tax cuts, to be renewed and extended in that bill, and/or as 'incentives' for bilateral deals. While the latest tariffs may not even mark the last step, the responses to them fall into three categories: China has opted to retaliate; India and Israel have entered into negotiations to reach a deal with President Trump; and the EU has pursued a staged approach of targeted retaliation and openness to negotiation. Priorities of the America First Trade Policy: An overview On 20 January 2025, President Trump signed an 'America First Trade Policy' presidential memo that directs his administration to look into trade issues organised around three sections, with an outsized role for tariffs. The first section concerns unfair and...