Tariff Weekly: Week March 17

President Donald Trump confirmed plans to impose both broad reciprocal tariffs and additional sector-specific tariffs on April 2, describing it as a "liberating day for our country." The upcoming tariffs have sparked global anxiety, with markets already reacting to initial duties on Canada, Mexico, and China.

"April 2 is a liberating day for our country," Trump told reporters. "We're getting back some of the wealth that very, very foolish presidents gave away because they had no clue what they were doing." The president has already imposed a 20% tariff on Chinese goods and 25% levies on steel and aluminum imports.

Recent reporting suggests the administration is preparing a more targeted approach than initially feared, focusing primarily on what Treasury Secretary Scott Bessent calls the "dirty 15" - countries representing about 15% of U.S. trading partners but a significant portion of trade volume. Officials indicate that only countries without tariffs on U.S. goods and with whom the U.S. has a trade surplus would be exempt.

Secretary of State Marco Rubio suggested that once the U.S. imposes tariffs on its major trading partners, it could engage in bilateral talks with countries on new trade arrangements. "This is global. It's not against Canada, it's not against Mexico, it's not against the EU, it's everybody," Rubio told CBS. "And then, from that new baseline of fairness and reciprocity, we will engage - potentially - in bilateral negotiations with countries."

The EU has delayed its retaliatory tariffs until mid-April to allow for further dialogue, after Trump threatened 200% duties on European alcoholic products. This move came after pressure from France, Spain, and Italy, whose wine industries would be severely impacted. The threat has alarmed European drink firms, with analysts at Jefferies estimating potential losses of €444 million for Campari, €543 million for Remy Cointreau, €1.6 billion for Pernod Ricard, and $1 billion for Diageo.

Economic indicators show U.S. consumers tightening spending amid tariff uncertainty, with retail foot traffic declining by 4.3% year-on-year in early March and consumer sentiment hitting its lowest point since November 2022. Major retailers like Target have warned of profit pressures due to "tariff uncertainty," while fast-food restaurant traffic was down 2.8% in February.

Meanwhile, China has escalated its WTO dispute with the EU over electric vehicle duties, requesting a panel of judges examine Brussels' definitive duties of 8-35% on Chinese EV imports. The EU has responded to U.S. steel tariffs by announcing plans to cut steel import quotas by 15% starting April 1, attempting to prevent cheap steel diverted from the U.S. market from flooding Europe.

The U.S. has agreed to enter WTO consultations with China and Canada over the tariffs while invoking the national security exception, arguing that "issues of national security are political matters not susceptible to review or capable of resolution by WTO dispute settlement."

In a parallel move, the White House has directed federal agencies to fast-track critical minerals production projects in the U.S. to reduce reliance on China for materials essential to batteries and semiconductors. According to the White House, the U.S. is 100% import-reliant on at least 15 critical minerals, with 70% of rare earths imports coming from China.

As businesses prepare for April 2, concerns about a dollar slump are complicating the administration's argument that foreign countries bear the cost of tariffs. The Bloomberg Dollar Spot Index has fallen 1.7% in the past month, undermining Treasury Secretary Bessent's claim that foreign manufacturers will "eat the tariffs" through currency adjustments.

As the business community braces for the announcement, concerns remain about supply chain disruptions, increased consumer costs, and potential retaliation from trading partners that could trigger a broader global trade war. Some Trump allies, including National Economic Council Director Kevin Hassett, have sought to calm markets by suggesting that tariffs won't be as widespread as feared: "I think markets need to change their expectations, because it's not everybody that cheats us on trade, it's just a few countries."