President Trump’s latest salvo in the trade war – dubbed “Liberation Day” by the White House – brings a new round of tariffs that could push the U.S. economy further into protectionist territory, according to Goldman Sachs.
The headline measure is a two-part “reciprocal” tariff. First, a blanket 10% tariff will apply to almost all imports from April 5, excluding goods from Canada and Mexico.
Then, from April 9, extra tariffs will be added based on the size of the US trade deficit with each country, a formula that means some nations will face much higher rates than others.
Goldman says the combined tariffs average out to 18.3%, higher than the 15% it had factored into its forecasts.
Impact untangled
But after accounting for exemptions, including key products like autos, energy, and pharmaceuticals, the actual increase in the US effective tariff rate is closer to 12.6%.
Add in tariffs already imposed earlier this year, and the cumulative rise hits nearly 19 points.
Canada and Mexico have emerged relatively unscathed, maintaining exemptions under the US-Mexico-Canada Agreement (USMCA).
Even if those are reviewed in future, USMCA-compliant goods and energy products would remain duty-free, with a 12% tariff applied only to non-compliant imports.
Asia bears brunt
Asia, however, bears the brunt. China now faces a hefty 34% tariff on most goods – more than Goldman anticipated – with similar spikes hitting Vietnam (46%), Taiwan and Thailand (36%), and Indonesia (32%).
The sharp increases stem from a simplified tariff formula based on bilateral trade deficits, which Goldman says results in steeper penalties for many Asian exporters.
One notable feature: Only the non-US content of imported goods will be taxed, provided at least 20% of the product is American-made. While this clause is unlikely to soften the blow for most countries, it could have mattered more for Canadian and Mexican goods.
Goldman warns that the bigger picture isn’t just about the announced tariffs, but what comes next.
Exemptions
The exemptions granted to some sectors, such as critical minerals and semiconductors, are likely temporary, with more targeted measures on the way. That could push the effective tariff rate even higher later this year.
Finally, Trump has scrapped the so-called de minimis rule for China, ending duty-free treatment on small packages under $800.
That change alone could affect a large volume of consumer goods, particularly from Chinese e-commerce platforms.
In short, Goldman sees the new tariffs as broader, steeper, and more complex than initially expected - and believes they may be just the beginning.