☕ China's major tariff response

Good morning.

As we discuss in today’s newsletter, we’re waking up to one of the first severe retaliations to President Donald Trump’s Liberation Day tariffs, with China imposing a 34% tariff on all imported US goods from April 10. It means there will likely be another day of red on the stock market, as private companies (big and small) try to calculate their next move.

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Some headlines from this morning:

• The Pentagon’s internal watchdog will launch an investigation into the use of commercial messaging app Signal by top Trump administration officials. Republican and Democrat Senators called for the investigation following allegations that The Atlantic editor, Jeffrey Goldberg, was mistakenly added to a group chat with high-level officials, including VP JD Vance. It’s alleged Defence boss Pete Hegseth shared confidential details of an impending military attack in the group chat. The announcement comes just a day after The Washington Post revealed National Security Advisor and group chat member Mike Walz used Gmail for government business.

• Hungarian President, Viktor Orbán, has withdrawn from the International Criminal Court (ICC). Orbán announced the move hours after Israeli PM Benjamin Netenyahu landed in Hungary, despite an ICC warrant against him. ICC prosecutors have accused Netanyahu, his former Defence Minister Yoav Gallant, and Hamas leaders of war crimes. Members of the court must arrest anyone on their soil with an active warrant. Earlier this week, Orbán, who has overseen an increasingly authoritarian administration welcomed the impending visit from Netanyahu and vowed not to act on the warrant, calling the court “a political tool.”

• The Senate has confirmed TV personality and heart surgeon Doctor Mehrmet Oz asis the new head of the Centers for Medicare and Medicaid Services, 53-45. Oz will oversee the administration of the programs as a new Republican spending package approaches, which some say will include cuts to the healthcare programs. Republicans have denied this. Oz, who unsuccessfully ran for a Pennsylvania Senate seat in 2022, has previously said Medicaid recipients should have to work and criticized low payments to doctors.

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The death toll from an earthquake in Myanmar has surpassed 3,000, with over 4,000 people injured.

The 7.7 magnitude earthquake hit Myanmar on 28 March.

Large parts of the country are yet to be reached by emergency services, with the death toll expected to continue rising.

Ceasefire

Last week, Myanmar’s military declared a state of emergency in multiple regions.

The military has been in charge since a coup in 2021. Since that time, the military has been fighting multiple rebel groups.

On Wednesday, the military announced a temporary ceasefire against these rebel groups until 22 April as part of earthquake recovery efforts.

Aid

The ceasefire comes after the Brotherhood Alliance, a major resistance group, alleged the military had fired upon a convoy of Chinese Red Cross trucks.

The military claimed they had not been notified of the convoy’s route and had fired into the air to halt it.

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President Trump’s Liberation Day tariffs significantly impacted global markets yesterday, as foreign leaders began to evaluate their strategies in response.

A baseline 10% tariff on all imports into the US will come into effect on April 5. This includes tariffs on imports from nations that don’t currently have tariffs on US goods.

Several nations, described as the "worst offenders", were singled out for further reciprocal tariffs, which will be added to the 10% baseline on April 9.

The Formula

The White House revealed the formula used to calculate the reciprocal tariffs.

To calculate a reciprocal tariff, a country’s trade deficit in goods with the US was divided by its exports to the US, turned into a percentage, and then halved.

If the formula produced a result at or below 10%, that country only received the 10% baseline tariff.

Let’s talk through an example: China.

The US buys $295 billion more from China than the $440 billion China buys from the US.

295 divided by 440 is 67%. With a round-up, half of 67% equals the current reciprocal tariff rate on China of 34%

Some of the world’s poorest countries, like Madagascar and Lesotho, face 47% and 50% tariffs because they cannot afford to import many US goods - a factor punished by this formula.

Europe 

The European Union was subject to a 20% tariff. The EU Commissioner said the Union would present a united front, starting with negotiations but preparing countermeasures as a fail-safe.

Meanwhile, the UK, subject to a 10% tariff, has published a 417-page list of US products exported to the UK that may be subject to tariffs. It stressed that a deal with the US was preferable.

Asia 

Asian nations were hit hard; Japan and South Korea, two major US trading partners, were subject to tariffs of more than 20% despite massive investment in the US.

China, whose 34% reciprocal tariff was added to a pre-existing 20% tariff, has promised “ to safeguard its rights and interests" if the tariffs are not removed immediately. Earlier this morning, it imposed its own 34% tariff on all imported US goods. Taiwan called its own 32% tariffs "highly unreasonable."

Vietnam attracted a severe 46% tariff, partly due to massive exports to the US from Apple’s manufacturing plants in Vietnam. Apple stocks took their biggest single-day hit in history, losing $300 billion in market value after the announcement.

Americas

Canada, temporarily exempt from all Liberation Day tariffs whilst subject to a separate 25% tariff on some goods, promised retaliation.

Meanwhile, in the South, Brazil said they were evaluating ‘countermeasures’ to a 10% tariff.

Stock Market and local impact

In the US, the White House defended the heavy losses on Wall Street, telling traders to “trust in President Trump”.

The S&P 500 recorded its worst day since June 2020. Some economists predicted revenue from tariffs would result in higher inflation, causing some to forecast a recession this year.

Everyday items will also be affected; according to Axios, fresh food prices will rise by up to 4% and overall food by 2.8%.

Analysts also note there is some instability as to whether the tariffs will indeed come into effect, and remain in place - the Trump administration has left the door open to negotiations with individual nations over the coming weeks.