President Donald Trump’s reciprocal tariffs on various countries took effect at 12:01 a.m. Eastern Time on August 7, marking a significant shift in the global trade landscape. As the world’s largest market, the United States’ implementation of these tariffs is expected to inevitably bring major changes to the flow of the global trade order, which has long aimed for a tariff-free free trade system. With protectionism gaining renewed momentum, concerns are mounting that the world could be drawn into a ‘tariff war’ as countries impose tariffs to protect their own interests, facing significant economic uncertainty.

■ A New Phase with Reciprocal Tariffs.
Since taking office on January 20, President Trump has aggressively pursued the high-tariff policies he promised during his campaign. His first targets were Mexico and Canada, which share borders with the U.S. and are the country’s top two trading partners, as well as China, the U.S.’s primary strategic rival. Trump imposed punitive 25% tariffs on these countries, citing their insufficient efforts to curb the inflow of fentanyl into the U.S. On April 2, Trump escalated his approach by announcing a ‘tariff bomb’ of a 10% base tariff plus additional country-specific tariffs (+α) on 57 economic entities to address trade imbalances. For other economies, he unilaterally declared a 10% base tariff. Trump called this moment a “day of liberation” for the U.S., but it plunged the world into chaos. His unpredictable moves, such as entering a 90-day tariff truce with China through separate negotiations, added to the uncertainty.

■ Leveraging the Massive U.S. Market
Following Trump’s ultimatum-style ‘tariff letters,’ negotiations gained momentum in their final stages. The United Kingdom (10% reciprocal tariff), Vietnam (20%), the Philippines (19%), Indonesia (19%), Japan (15%), the EU (15%), and South Korea (15%) successively finalized trade agreements with the U.S. Trump capitalized on the U.S.’s position as the world’s most powerful nation and largest market, using the high dependence of these countries on U.S. exports and their competitive dynamics as leverage. Countries that reached agreements with the U.S. have described the outcomes as “holding their own” or “the best possible deal,” but the U.S. secured substantial economic benefits simply by slightly reducing the initially high tariff rates as a gesture of goodwill. In this regard, The New York Times (NYT) criticized in an August 4 article that Trump’s tariff policy has devolved into a “revenue collection activity” by negotiating lower tariff rates in exchange for massive investments in the U.S.

■ The Tariff War Continues
The official implementation of reciprocal tariffs on August 7 does not mark the end of the ‘Trump-driven tariff war.’ The U.S. is still negotiating with some countries that have yet to finalize reciprocal tariff rates. The most prominent target is China, the U.S.’s global rival. With the current tariff truce set to expire on August 11, the U.S. and China agreed to pursue an additional 90-day tariff truce during high-level talks on July 28–29, but Trump has not yet approved this extension.
For countries like Brazil, Russia, and India, high tariffs are being used as political and diplomatic pressure tools, complicating negotiations. In Brazil’s case, Trump issued an executive order imposing a 40% additional tariff on top of the 10% reciprocal tariff, citing political persecution of former President Jair Bolsonaro, a close ally. This would result in a 50% tariff rate, the highest globally at present. The ‘tariff diplomacy’ between the U.S. and BRICS nations (Brazil, Russia, India, China, and South Africa) is expected to continue for the foreseeable future. Beyond individual country negotiations, a more significant variable is the item-specific tariffs Trump has hinted at announcing next week. Trump remains steadfast on the 50% tariffs on steel, copper, and aluminum, which he emphasized early in the tariff war. In a CNBC interview on August 5, Trump foreshadowed item-specific tariffs on semiconductors and pharmaceuticals, stating, “Initially, we’ll impose a small tariff on pharmaceuticals, but in a year or up to a year and a half, it will rise to 150%, and later to 250%.”

■ Expected Impact on the Global Economy
Trump has presented an optimistic outlook, claiming that his tariff drive will lead to increased investments in the U.S., revitalizing American manufacturing, creating jobs, and reducing the trade deficit. On July 30, he told reporters at the White House, “Through tariff negotiations, we are literally earning trillions of dollars for the country.” This tangible success is seen as reinforcing his core political slogan, “MAGA” (Make America Great Again), and galvanizing his supporter base.
However, concerns about the potential side effects of Trump’s tariff policies persist. On July 31, The New York Times noted that the reciprocal tariffs “will increase the risk of price hikes for U.S. businesses and consumers due to taxes (tariffs) imposed on importers.” The Wall Street Journal expressed concern that “while U.S. companies have so far absorbed the increased costs from tariffs, some will soon pass these costs onto consumers.”