Trump’s tariffs threaten to slash over $700 billion from global GDP

US President Donald Trump’s sweeping reciprocal tariffs, expected to take effect Wednesday, could slash over $700 billion from global GDP by 2027, according to economic projections made by the Japan External Trade Organization (JETRO) Institute of Developing Economies. The measures could disproportionately harm the US economy through costlier imports.

According to several news sources, an additional 25% tariff on automobiles and auto parts will take effect Thursday, compounding existing levies on Chinese, Canadian, and Mexican goods. 

The White House has framed the move as a long-overdue correction to trade practices that were allegedly employed against the US, but economists warn the repercussions will be more pronounced at home than on foreign soil.

Economists predict a $763 billion GDP loss

The Institute of Developing Economies at Japan’s JETRO estimates that if the tariffs are fully implemented, global GDP could shrink by 0.6% in 2027. Based on the IMF’s 127 trillion GDP forecast, this translates to a 763 billion loss.

Trump has dubbed Wednesday “Liberation Day,” coining the tariffs as a defense against foreign exploitation. “They’ve been taking our jobs, our wealth, and a lot of things for years,” he said. Tomorrow, the press expects to attend the president’s briefing in the elaborate Rose Garden event.

According to JETRO, The US would bear the brunt, with its GDP projected to drop 2.7%, the steepest decline among major economies. Higher import costs, particularly for manufacturers reliant on Chinese components, would squeeze corporate profits and consumer wallets.

American-based companies have already started bracing for disruption. Dollar Tree CEO Michael Creedon Jr. said Tuesday that the discount retailer had offset 90% of the initial 10% China tariff impact through supply chain adjustments and selective price hikes. 

However, the new 20% levy on Chinese goods and fresh Canadian and Mexican duties could cost the chain $20 million monthly.

Are tariffs good for the US?

The Trump administration claims the tariffs could generate $6 trillion over a decade, enough to replace income taxes as a primary revenue source, per Counselor to the President Peter Navarro.

White House Press Secretary Karoline Leavitt doubled down on the government’s plan on Monday, stating: “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.”

Even though foreign companies are said to pay for it, experts stress that US importers will have to pay tariffs up front. Businesses may raise the prices of everything from technology to clothes to cover these costs.

Navarro’s argument that tariffs equate to tax cuts has gained some support among voters, but analysts believe it is misleading, and American citizens stand to suffer just as much as the country’s allies.

Trump imposed a 20% tariff on Chinese goods, up from 10% in February, and a 25% duty on Canadian and Mexican imports, though recent exemptions have arguably softened the blow. The auto tariff, effective April 2, could increase the tensions between the US and its allies.

Europe will retaliate, EU President vows 

Meanwhile, the European Union is ready to respond to Trump tariffs if provoked. European Commission President Ursula von der Leyen said Tuesday that while the bloc prefers negotiation, it holds “a strong plan to retaliate.”

“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 did not disclose any retaliatory measures the EU might take. 

Last month, the bloc imposed tariff countermeasures on up to €26 billion ($28 billion) worth of American exports. The tariffs targeted several US industries, including boats, bourbon, and motorcycles, in response to Trump’s steel and aluminum duties.

According to the United States Census Bureau, the EU was the largest single market for American goods exports last year, surpassing both Canada and Mexico.

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