Donald Trump set to announce ‘Liberation Day’ tariffs within hours—Will they save or sink the US economy?

US President Donald Trump is set to impose sweeping reciprocal tariffs on multiple nations, including allies and adversaries. The new tariffs, introduced on what Trump calls "Liberation Day," aim to bolster US manufacturing while retaliating against countries for what he claims are unfair trade practices.

"April 2, 2025, will go down as one of the most important days in modern American history," said White House press secretary Karoline Leavitt. "These tariffs will take effect immediately."

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Scope of the tariffs

The reciprocal tariffs build upon previous trade measures, including 25% taxes on auto imports, levies on China, Canada, and Mexico, and expanded tariffs on steel and aluminum. Trump has also targeted countries that import oil from Venezuela and is planning additional import taxes on pharmaceutical drugs, lumber, copper, and computer chips.

Economic impact and consumer costs

The economic risks are significant, with many experts warning of potential downturns and increased consumer costs.

A study by the Budget Lab at Yale University estimates that a universal 20% tariff could cost the average US household between $3,400 and $4,200 annually, according to AP report.

White House trade adviser Peter Navarro has suggested the tariffs could generate $600 billion annually, marking the largest tax increase since World War II.

Treasury Secretary Scott Bessent has assured lawmakers that the tariffs would be adjustable, stating, "They will be capped and can be negotiated downward by other countries."

The administration argues that the tariffs will drive domestic production and job growth.

"They’re not going to be wrong," Leavitt insisted. "The president has a brilliant team of advisers who have been studying these issues for decades. We are focused on restoring the golden age of America and making it a manufacturing superpower."

Backlash

However, critics argue that similar tariffs in Trump’s first term failed to trigger the promised manufacturing boom.

"We are not seeing indications of the boom that the president promised," said Heather Boushey, former member of the Biden administration’s Council of Economic Advisers. "It's a failed strategy."

The tariffs have sparked sharp criticism from Democratic lawmakers, who accuse Trump of using them to offset planned tax cuts favoring the wealthy.

"Almost everything they do, including tariffs, seems aimed at getting those tax cuts for the wealthy," said Senate Democratic leader Chuck Schumer.

Even within the Republican camp, there is caution. House Speaker Mike Johnson acknowledged the potential challenges but expressed confidence in Trump's approach.

"It may be rocky in the beginning," Johnson said. "But I think that this will make sense for Americans and help all Americans."

Global retaliation looms

US trading partners are preparing countermeasures in response to Trump's tariffs. Canada has already retaliated against the 25% levies linked to fentanyl trafficking, while the European Union has imposed tariffs on $28 billion worth of US goods, including bourbon. Trump, in turn, has threatened a 200% tariff on European alcohol.

European Commission President Ursula von der Leyen emphasised that the EU was not seeking confrontation but would retaliate if necessary.

"We do not necessarily want to retaliate, but we have a strong plan, and we will use it," von der Leyen said.