US President Donald Trump’s recent trio of executive orders has sparked significant upheaval in the global economy, complicating his efforts to reduce inflation. A central component of these orders is a 10 per cent tariff on Chinese imports, aimed at curbing fentanyl production. This move could potentially result in over US$1 trillion in tax increases over the next decade, implemented without congressional approval and with acknowledged risks of increased inflation and job losses.
Under the International Emergency Economic Powers Act of 1977, these tariffs were declared in response to what Trump labels “unusual and extraordinary” threats, particularly related to drug trafficking and illegal immigration. In practical terms, Canada faces a 25 per cent tariff on imports, and Mexico similar tax rates, while Chinese products incur the additional 10 per cent charge. These tariffs, characterised as being absorbed by foreign producers, ultimately burden American consumers through higher prices.
Though Trump can adapt the tariffs based on retaliatory actions from these countries, this strategy may lead to escalating trade tensions, particularly as counter-tariffs are anticipated from Canada and Mexico. Moreover, the legislation may be shielded from immediate congressional intervention, establishing a precarious economic landscape shaped by executive decisions.