The Trump Tariffs and Its Ramifications

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Introduction: The Road to the "Trump Tariffs"
The Evolution of the "Trump Tariffs"
Typology and Legal Bases of the "Trump Tariffs"
What Did the "Trump Tariffs" Undermine?
Concluding Reflections: Is It Still Possible to Restore Free and Rule-based International Trading System?

1. Introduction: Historical Significance of the "Trump Tariffs"

In 2025, upon entering his second term, President Donald Trump signaled from the outset his intention to deploy "tariffs" not only as a remedy for the U.S. trade deficit but also as an instrument of foreign policy. A tariff is a border tax levied at a specified rate on goods and services as they cross national frontiers in the course of importation or exportation.¹ By their very nature, tariffs constitute instruments of trade and industrial policy, typically imposed at relatively high rates in order to protect particular sectors of domestic industry by affording them a competitive advantage in the domestic market vis-à-vis foreign rivals.

In both developed and developing countries, sectors subject to high tariffs are generally those in which governments seek to shield domestic industries from international competition and foster their competitiveness. As a general pattern, tariffs on automobiles tend to be relatively high in developing countries, whereas tariffs on agricultural products are comparatively high in developed economies. A paradigmatic example may be found in Japan's tariff structure. Japan maintains a zero-percent tariff on automobiles, indicating the absence of a policy intent to protect or nurture its automotive industry through tariff barriers. By contrast, Japan's tariff on imported rice reaches 778 percent on an ad valorem equivalent basis. This extraordinarily high rate reflects both a policy and political determination to insulate rice—regarded as a "sacred" agricultural product—from international competition and to ensure its comprehensive protection.

Historically, tariffs have been closely intertwined with industrial policy. Prior to the Second World War, a representative example was the Smoot-Hawley Tariff Act, enacted by the United States in the wake of the Great Depression triggered by the stock market crash on Wall Street in October 1929. When the global economy descended into synchronized recession, the United States—then the world's largest market—effectively insulated its domestic market from the world economy through this high tariff wall. The result was a further deterioration of economic conditions worldwide, fragmentation of the global market, and intensified competition among the major powers for markets and resources, often in the form of colonial expansion. The ultimate culmination of these developments was the Second World War, which inflicted devastating losses not only on defeated nations such as Japan and Germany but also on the victorious powers and European states more broadly.

Confronted with the catastrophic consequences of economic fragmentation and war, the United States—emerging as the new hegemonic power—invited the Allied nations in July 1944 to Bretton Woods, New Hampshire, to design the postwar international economic order, even before the war with Japan had concluded. The Bretton Woods Conference gave birth to what would become a "free and open international economic order" and marked the institutional beginning of multilateralism. It established the International Monetary Fund (IMF) to ensure monetary stability and the International Bank for Reconstruction and Development (IBRD), later known as the World Bank, as a development finance institution for postwar reconstruction.

Efforts were also undertaken to construct a multilateral framework for international trade. In March 1948, the Charter of the International Trade Organization (ITO) was adopted in Havana, Cuba, raising expectations for the establishment of the first multilateral organization governing international trade. These expectations, however, were ultimately disappointed. Although the U.S. government had promoted the ITO initiative, it encountered opposition in the U.S. Congress. On December 31, 1950, President Harry S. Truman announced via radio broadcast that he would no longer seek congressional ratification of the ITO Charter, and the organization effectively met its demise before coming into existence.

Anticipating the likely failure of the ITO, the United States and its partners had simultaneously advanced the General Agreement on Tariffs and Trade (GATT). Built upon the ITO's foundational principle of non-discrimination, GATT centered on the concepts of most-favored-nation (MFN) treatment and national treatment (NT). While recognizing tariffs as legitimate instruments of domestic industrial protection, GATT was designed to promote trade liberalization through the gradual reduction of tariff rates.

Under GATT, which entered into force in January 1948, eight rounds of multilateral trade negotiations were conducted, leading to substantial reductions in tariffs—particularly on industrial products—and contributing significantly to the expansion of world trade. The Kennedy Round (1964–67) and the Tokyo Round (1973–79) each achieved average tariff reductions exceeding 30 percent. The Uruguay Round (1986–94) expanded the scope of negotiations beyond industrial tariffs to include agricultural tariffs, resulting in comprehensive tariff cuts. Consequently, average global tariff rates declined to the lower five-percent range, and tariffs gradually lost much of their significance as instruments of domestic industrial protection. Against this long-standing trend, President Trump's tariff policy represented a direct and conspicuous reversal.

This article focuses on the tariff policy of the second Trump administration, analyzing both its policymaking process and its consequences, and concluding with a forward-looking assessment of the international trading system in the post-Trump era.

2. The Evolution of the "Trump Tariffs"

Having won the presidential election of November 2024, President Donald Trump commenced his second term in January 2025. Among the various initiatives of the new administration, a series of tariff measures attracted particular domestic and international attention. These policies were markedly protectionist and fundamentally at odds with the Bretton Woods spirit of "free, non-discriminatory, and multilateral" economic cooperation. While the first Trump administration (from 2017) had already displayed a pronounced protectionist orientation—directed primarily at China as a country and at steel and aluminum as products—the second term broadened both the geographic and sectoral scope of tariff measures. The targets now included numerous countries, among them U.S. allies such as the member states of the European Union and Japan, as well as Canada and Mexico, partners in the North American Free Trade Agreement (NAFTA) established in 1994. The product coverage expanded beyond steel and aluminum to automobiles, semiconductors, and a wide range of durable consumer goods. For the sake of convenience, this article refers to the second Trump administration as "Trump 2.0" and collectively designates the tariffs introduced by presidential executive orders as the "Trump Tariffs." The following section traces the process of their introduction in chronological order.

(1) The Initial Phase: April–May 2025

On April 2, President Trump announced a plan to impose new tariffs on all goods imported into the United States. The plan provided for a baseline tariff of at least 10 percent on all imports. This proposal had already been advanced during the 2024 presidential campaign. The baseline tariff would apply to more than 100 countries, with 57 of them subject to additional surcharges. President Trump termed these surcharges "reciprocal tariffs."

Higher tariff rates were to be imposed on imports from countries characterized by the U.S. administration as "the worst offenders," including the European Union and China. For Chinese products, an additional 34 percent tariff was to be levied on top of the existing 20 percent rate then in force. Imports from the EU were to face a 20 percent tariff, and those from Japan 24 percent. Additional rates of 26 percent for India and 32 percent for Taiwan were also announced. The highest rates were applied to Lesotho (50 percent), Vietnam (46 percent), and Cambodia (49 percent), significantly exceeding those imposed on advanced economies. Exports from Vietnam and Cambodia to the United States had increased substantially during the first Trump administration, reflecting a shift in corporate investment and supply chains away from China.

By contrast, only the 10 percent baseline tariff was applied to countries such as the United Kingdom, Singapore, Brazil, Australia, New Zealand, Turkey, Colombia, Argentina, El Salvador, the United Arab Emirates, and Saudi Arabia.

Holding up a panel listing the targeted countries and their respective tariff rates, President Trump justified the policy by asserting that foreign governments had long exploited the United States through unfair trade practices, including high tariffs and other trade barriers. The new measures, he argued, constituted justified retaliation.

Analysts worldwide warned that an escalating trade war would likely generate higher inflation and slower economic growth in the United States, with some countries facing the risk of recession. Olu Sonola, head of U.S. economic research at Fitch Ratings, predicted that U.S. tariff levels would return to those of 1910, fundamentally altering not only the U.S. economy but also the global economic landscape. Kenneth Rogoff, former Chief Economist of the International Monetary Fund (IMF), remarked that President Trump had "just dropped a nuclear bomb on the international trading system." Professor Gustavo Flores-Macías of Cornell University similarly warned that rising prices were likely to materialize quickly and that the announcement signaled the potential collapse of the international trading system the United States had helped construct after the Second World War.²

On April 4, Japanese newspapers reported retaliatory measures by affected countries. China announced a 34 percent retaliatory tariff on U.S. imports, while Canada declared a 25 percent tariff on U.S.-made automobiles. President Trump responded by threatening an additional 50 percent tariff on China, and on April 9 the cumulative U.S. tariff on Chinese goods reached 104 percent. China, in turn, imposed an additional 41 percent surcharge, bringing its total retaliatory tariff on U.S. goods to 125 percent. A full-fledged retaliatory spiral thus unfolded between the two powers. At the same time, in response to domestic criticism, the Trump administration exempted smartphones from the reciprocal tariffs.

In May, reports indicated that the EU was considering retaliatory measures amounting to approximately ¥15 trillion. Meanwhile, the United States reached its first tariff agreement with the United Kingdom. Under the agreement, tariffs on up to 100,000 U.K.-manufactured automobiles were reduced to 10 percent, surprising observers in many countries. This U.S.–U.K. arrangement subsequently served as a template for other bilateral tariff negotiations.

(2) Progress in Bilateral Negotiations over "Reciprocal Tariffs" : June–July 2025

From May onward, bilateral negotiations advanced. The most significant development was the U.S.–China agreement of May 13, under which both sides agreed to reduce their respective tariff rates by 115 percentage points. This understanding was reaffirmed at ministerial-level talks in June.

As the worst-case scenario in U.S.–China relations appeared to be averted, the United States shifted negotiating energy toward Japan and Vietnam. On July 3, a bilateral agreement was reached with Vietnam, which successfully reduced its reciprocal tariff rate from 46 percent to 20 percent.

Negotiations with Japan proved more protracted and contentious. On July 2, President Trump publicly expressed skepticism about reaching an agreement and suggested the possibility of imposing tariffs of 30–35 percent instead, bringing bilateral brinkmanship to a climax. For Japan—whose automobile exports to the United States had declined by 24.7 percent year-on-year—it was politically and economically untenable to accept U.S. demands at face value. At the same time, Japanese automobiles remained a competitive threat to U.S. manufacturers. ³A final agreement was reached only on July 23. The two governments agreed to set automobile tariffs at 15 percent (consisting of the original bound rate of 2.5 percent plus an additional 12.5 percent), to apply a 15 percent reciprocal tariff, and to package the arrangement with ¥80 trillion in Japanese investment in the United States.

On July 28, the United States and the European Union also agreed on a 15 percent reciprocal tariff. Semiconductors and pharmaceuticals were settled at the same 15 percent rate, mirroring the Japanese arrangement. During this period, however, a renewed hardline tendency emerged. Dissatisfied with Brazil's treatment of former President Jair Bolsonaro—sometimes dubbed the "Trump of Brazil"—President Trump announced a 50 percent tariff on Brazilian products. Canada was similarly notified of a 35 percent tariff, ostensibly due to insufficient cooperation on countering synthetic opioids such as fentanyl.

(3) Executive Orders and Implementation: August 2025–February 2026

Following the conclusion of multiple bilateral negotiations, President Trump signed an executive order on August 1, with the reciprocal tariffs entering into force on August 7. Additional tariffs bringing the total rate to 50 percent were imposed on India as a sanction for continuing to import Russian crude oil.

By this stage, adverse effects on the U.S. economy were becoming increasingly evident. Employment growth slowed, and the Dow Jones Industrial Average fell sharply.⁴ The second-quarter trade deficit widened by 27 percent year-on-year, reflecting a pre-tariff surge in imports. On August 30, a U.S. federal court issued its second ruling declaring the Trump Tariffs unlawful, prompting the administration to appeal to the Supreme Court. (An earlier ruling of May 29 had been temporarily stayed by an appellate court.)

With respect to Japan, disagreements over the details of the July 23 agreement led to the abrupt cancellation of Minister Akazawa's planned visit to Washington on August 29, reportedly due to unresolved issues concerning the ¥80 trillion investment package and automobile tariff reductions. Ultimately, on September 4—during his tenth visit to the United States—Minister Akazawa secured agreement on implementing the tariff deal and on drafting a joint document regarding investment. The reduction in automobile tariffs took effect on September 16, lowering the rate from 27.5 percent (2.5 percent plus an additional 25 percent) to 15 percent (2.5 percent plus 12.5 percent). On September 26, President Trump announced a 100 percent additional tariff on pharmaceuticals, though Japan's rate was capped at 15 percent.

In October, U.S.–China tensions resurfaced following China's announcement of export controls on rare earths.⁵ The Trump administration responded by declaring that additional tariffs on China would be raised to 100 percent beginning in November. One week later, however, President Trump acknowledged that such a rate was "not sustainable" and signaled openness to dialogue. On October 27, China announced a one-year postponement of the rare earth export controls, and the United States refrained from imposing the additional tariffs. On November 5, China lifted its retaliatory tariffs on U.S. soybeans. Once again, the most severe scenario was avoided. Around this time, the expression "TACO" ("Trump Always Chicken-out") began circulating, referring to the perceived pattern of announcing harsh measures only to retract them in the face of strong opposition.

On December 8, China reported that its 2025 trade surplus had exceeded one trillion dollars for the first time, indicating that despite reduced exports to the United States under the Trump Tariffs, exports to other markets had surged. On December 9, President Trump signaled approval for semiconductor exports to China by Nvidia, suggesting an improvement in bilateral relations and paving the way for his planned visit to China in April of the following year.

In 2026, while tensions with China stabilized, frictions with Iran intensified. President Trump declared that countries engaging in business with Iran would face an additional 25 percent tariff, once again clarifying his intention to use tariffs as an instrument of diplomatic leverage. He also signaled the possibility of imposing 100 percent tariffs on Canadian products in response to Canada's efforts to conclude a trade agreement with China. Conversely, on February 3, U.S.–India negotiations concluded with a reduction of tariffs on India from 50 percent to 18 percent, following India's decision to halt purchases of Russian crude oil—another illustration of the administration's use of high tariffs as diplomatic leverage.

A decisive turning point occurred on February 20, when the U.S. Supreme Court ruled the reciprocal tariffs unconstitutional.⁶ The Trump 2.0 administration had relied on the International Emergency Economic Powers Act (IEEPA) as its legal basis. While IEEPA authorizes the President to "regulate" trade in response to national emergencies, it does not explicitly authorize the imposition of tariffs. The Court concluded that IEEPA does not grant the President the authority to levy tariffs. The ruling did not address whether previously collected tariffs must be refunded, leaving that issue to further judicial proceedings.⁷

3. Typology and Legal Bases of the "Trump Tariffs"

The so-called "Trump Tariffs" may be classified into several distinct categories:

(1) The Original "Trump Tariffs"

The first category is the original tariff measures introduced during the first Trump administration from 2017 onward. These include tariffs on steel and aluminum implemented on March 23, 2018, under Section 232 of the Trade Expansion Act of 1962. The primary rationale cited was the protection of U.S. national security. Although Japan and the European Union were initially exempted, these exemptions were subsequently revoked. Tariffs were imposed at rates of 25 percent for steel and 10 percent for aluminum.

The first Trump administration also introduced tariffs directed at China under Section 301 of the Trade Act of 1974, on the grounds that China engaged in unfair trade practices, including forced technology transfer. The Section 301 tariffs were imposed on a wide range of Chinese goods in multiple tranches and eventually raised the average U.S. tariff rate on Chinese imports to approximately 20 percent. These measures constituted a significant escalation in U.S.–China trade tensions and were retained into the second Trump administration.

(2) Tariffs under the International Emergency Economic Powers Act (IEEPA)

The second category consists of the so-called "reciprocal tariffs," the most sweeping and controversial measures introduced by Trump 2.0. These were implemented through presidential executive orders under IEEPA, with the administration claiming that trade deficits constituted a national emergency. Under these orders, a baseline tariff of 10 percent was applied to all imports, while additional surcharges were imposed on selected countries deemed to be "the worst offenders."

As noted above, these measures were later ruled unconstitutional by the Supreme Court on February 20, 2026, on the grounds that IEEPA does not authorize the imposition of tariffs.

(3) Tariffs as Sanctions and Instruments of Foreign Policy

The third category includes tariffs used explicitly as sanctions and as instruments of foreign policy leverage. These measures targeted countries such as India, Brazil, Canada, and Iran, and were justified not primarily on trade grounds but on broader diplomatic or political considerations. The imposition of tariffs as sanctions—such as the additional 50 percent tariff on India for importing Russian crude oil, and the threatened tariffs on countries doing business with Iran—illustrates the administration's willingness to weaponize tariffs for geopolitical objectives.

Such measures represent a significant departure from the traditional understanding of tariffs as instruments of trade and industrial policy, and have raised concerns about the erosion of the rules-based international trading system.

(4) Tariffs under Domestic Trade Remedy Laws

The fourth category includes tariff measures implemented under established domestic trade remedy laws, such as anti-dumping and countervailing duties. While these mechanisms are commonly used by many countries and are generally consistent with World Trade Organization (WTO) rules when properly applied, their broader use in a context of heightened protectionism contributes to the overall restrictive trade environment.

4. What Did the "Trump Tariffs" Undermine?

The "Trump Tariffs" undermined the international trading system in multiple ways. First, they weakened the principle of non-discrimination, a cornerstone of the Bretton Woods and GATT/WTO system, by imposing differentiated tariff rates on different countries. The introduction of "reciprocal tariffs" in particular institutionalized discrimination as an explicit policy tool.

Second, they eroded multilateralism by shifting the focus from multilateral negotiations under the WTO framework to bilateral bargaining backed by tariff threats. The U.S.–U.K. agreement served as a template for subsequent bilateral negotiations, reinforcing the trend toward bilateralism.

Third, they challenged the rule of law in international trade by relying on contested domestic legal bases and by disregarding established multilateral dispute settlement mechanisms. The Supreme Court ruling on the unconstitutionality of the reciprocal tariffs highlighted the legal fragility of the measures and underscored the tension between executive power and legal constraints.

More broadly, the Trump Tariffs contributed to uncertainty and fragmentation in the global economy, raising concerns about inflation, reduced growth, and the potential for recession in multiple countries.

5. Concluding Reflections: Is It Still Possible to Restore Free and Rule-based International Trading System?

The Bretton Woods system, led by the United States in the aftermath of the Second World War, embodied three foundational principles: freedom, non-discrimination, and multilateralism. By contrast, what Trump 2.0 has brought about may be characterized as their antithesis—protectionism, discrimination, and bilateralism. At the World Economic Forum in Davos this year, Prime Minister Mark Carney of Canada warned that "the rule-oriented system is over... we are now in the midst of rupture, not in transition," underscoring the gravity of the current juncture.

If the United States can no longer be relied upon to lead the reconstruction of a free and open trading order, then serious efforts must be undertaken to build such a system even in its absence. Like-minded countries should initiate a new round of multilateral trade negotiations, while actively incorporating countries of the Global South to foster confidence-building and to pursue comprehensive liberalization.

As an initial step, Japan should assume a central role in linking the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with the European Union—potentially including the United Kingdom—and in expanding a network of FTAs and EPAs to encompass Mercosur and African countries. Through the creation of such an interconnected framework, it would be possible to generate a critical mass sufficient to sustain a rule-oriented trading system.

It seems only by articulating and implementing such a grand design that the present crisis of the international trading system could be overcome.

(Yorizumi Watanabe, Professor Emeritus, Keio University)

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July 2021, "Thailand's Security Policies and Threat Perceptions" written by Saya Kiba, Associate Professor, Komatsu University, Faculty of Intercultural Communication.

July 2021, "Myanmar's Security Perceptions and the February 1 Coup d'Etat" written by Yoshihiro Nakanishi, Associate Professor, Kyoto University.

July 2021, "Australia's Security Perceptions and the "Asia Threat"" written byTomohiko Satake, Senior Fellow, Defense Policy Division, Policy Studies Department, NIDS .

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