Liberation to start you week

The new tariff regime unveiled by the U.S. today represents a stark escalation in trade policy and potentially a structural break from decades of relative tariff stability. The announced rates are at the high end of expectations, and there appears to be little in the way of a mechanism for de-escalation.

The proposal is typically unilateral: rather than being contingent on reciprocal trade relations, the tariffs are explicitly cast in terms of bilateral trade imbalances. This is a departure from the rules-based international order under the WTO, in which tariffs are normally multilaterally negotiated and founded on reciprocity.

Coming into force next Wednesday, the U.S. is set to levy a tiered tariff regime. Trading partners against which the U.S. has big deficits will be slapped with a bespoke "reciprocal" ad valorem duty—a charge on top of any other tariff or charge—while all other imports are slapped with a blanket 10% tariff as of Saturday.

The duties are for merchandise entered for consumption and are on top of other federal import charges. Collectively, this new paradigm lifts the average trade-weighted U.S. tariff rate to an estimated 29% (or around 23% if one excludes USMCA-qualifying goods), rates not seen in over a hundred years.