EDITORIAL: President Donald Trump declared 2 April Liberation Day, “the day of our economic independence” as he unveiled 10 percent tariffs on all imports into the United States, with higher tariffs on around 60 countries/trade blocs (allies and foes alike).
He added that the reciprocity was not full claiming that “we will charge them approximately half of what they are and have been charging us…I could have done that, I guess, but it would have been tough for a lot of countries and we didn’t want to do that.” As retaliatory measures are under consideration by several of the affected countries, including long-term allies South Korea, Japan, the European Union, as well as rival China the US Treasury Secretary Scott Bessent warned against any retaliation to US tariffs as it would result in further escalation.
Long-term ally Canada, spared the base 10 percent tariffs applied to other car makers, vowed that Canada will fight the US with force and counter measures though it did not provide any details.
The US trade deficit for goods and services in 2024 was 918 billion dollars against 784.9 billion dollars in 2023 – a 3.1 percent increase – with the goods deficit rising to 1211.7 billion dollars last year but with a surplus in services of 293.3 billion dollars, a 14.9 billion increase from the year before.
The affected countries maintain that this surplus may be taxed as a retaliatory measure with the largest exporters of services to the US being the UK, Germany, Canada, Japan and Mexico. The US exported services to Ireland (83.1 billion dollars), the UK (80.9 billion dollars), Canada (69.5 billion dollars), Switzerland (52.4 billion dollars) and China (42.2 billion dollars).
The most tariffed country after the Liberation Day announcement is China with 34 percent tariffs, accounting for 13.4 percent share of US imports with a positive trade balance with the US of 292 billion dollars followed by the EU with 20 percent new tariffs, 18.5 percent of US imports registering a positive trade balance of 241 billion dollars followed by Vietnam with 46 percent new tariffs accounting for 4.2 percent of US imports and registering 123 billion-dollars trade surplus.
India will have 26 percent new tariffs, with only 2.7 percent of the share of US imports with a 46 billion-dollar surplus with no doubt non-tariff barriers that India imposes on its trading partners included.
Pakistan will be slapped with 29 percent new tariffs with exports to the US in 2023 estimated at 5.1 billion dollars against imports from the US valued at 2.1 billion dollars giving Pakistan a surplus of 3 billion dollars.
The impact on Pakistan as opposed to other tariffed countries will be devastating, given that the country is facing a major challenge in shoring up its foreign currency reserves, heavily reliant on the three friendly countries for roll-overs for the past four to five years, will no doubt suffer a further reduction in export earnings as and when these tariffs come into effect.
This signals the end of the old international trade order based on the premise that free movement of goods and services (including capital) as well as people would have globally beneficial implications and with its demise renders its international guardian, World Trade Organisation, redundant.
However, this is the second blow to the old international world order which came under threat due to the policies of previous US administrations through the over-use of sanctions as a foreign policy tool that led to strengthening of the BRICS (Brazil, Russia, India, China and South Africa) to eleven full members and with requests for full membership piling up with each passing day.
The demand is for establishing an alternate to the Western controlled SWIFT (Society for Worldwide Interbank Financial Telecommunication) system and the slow but steady decline in the use of the dollar as a reserve currency.
As the world struggles to come to terms with a further blow to the old international order through the new tariffs, it is not clear whether allies and rivals would be able to reach agreements with the US to scale down their surpluses though in the short term if US consumers do not change their consumption patterns it stands to reason that US tax collections would rise dramatically that can then be passed on to the US consumers to mitigate their opposition to the tariffs.
It is, therefore, important to note that the predominance of the dollar and the US as the largest consumer of global trade is unlikely to retain its position and could hasten the establishment of an alternate to the SWIFT systems by the BRICS countries.
Copyright Business Recorder, 2025
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