US Reciprocal Tariff Announcement: Implications and Exceptions

#tariffs #trump #trade #war #usmca #markets

President Trump has announced the implementation of reciprocal tariffs, arguing that these are lower than the taxes the affected countries impose on US products.

In the announcement and the table presented, neither Canada nor Mexico were included. This omission is significant, especially considering the exemptions granted to goods exported to the United States under the United States-Mexico-Canada Agreement (USMCA). The exclusion of these trading partners represents positive news for the region.

According to the New York Post, the tariffs are calculated by dividing the current US trade deficit with each target country in half.

Example: China:

• Tariffs China charges the US, including currency manipulation and trade barriers: 67%
• 67 / 2 = 33.5
• Reciprocal tariffs applied by the US: 34%

Prime Minister Ford of Canada has expressed his country's willingness to eliminate tariffs if the United States does the same.

Fun Fact: Additionally, the Trump administration has imposed a 10% tariff on the Heard Island and McDonald Islands, an uninhabited territory with a population of zero and inhabited only by penguins, according to the New York Post.

During periods of high volatility, it is recommended to focus on fluctuations in market sentiment. Short-term price movements will be driven by changes in sentiment, rather than fundamental factors.

Market sentiment will tend to polarize, and investor positioning will follow this trend. It is advisable to avoid trying to "catch a falling knife"—that is, not trying to buy assets in a pronounced downtrend.

Rather than fearing volatility, it is suggested to look for opportunities to capitalize on it.

-- Erick Ikki, ikkinomics