US President Donald Trump’s recent tariff threats against 10 countries have led to concerns that the United States is becoming an unreliable trading partner, prompting the formation of new trade blocs.
What tariffs have been threatened in 2026?
The Trump administration has threatened new tariffs on 10 countries in the past two weeks. On January 18, Mr. Trump announced a 10 percent tariff on eight European countries due to their opposition to the US attempt to annex Greenland. Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Great Britain were included in this list, with the tariffs initially slated to take effect on February 1.
The import tax was planned to increase to 25 percent on June 1, continuing until a deal was reached for the US to purchase Greenland — an Arctic island that is part of the Kingdom of Denmark, a NATO member. However, Mr. Trump dropped those flagged tariffs within days after agreeing to a “framework of a future deal” on Greenland with NATO’s chief Mark Rutte.
“This solution, if consummated, will be a great one for the United States of America and all NATO nations,” Mr. Trump said.
On January 25, Mr. Trump said he would place a 100 percent tariff on goods imported from Canada if it proceeded with its trade deal with China. He stated that Mark Carney believed Canada would become a “Drop Off Port” for China to send goods into the United States, a claim Mr. Trump disputed.
The Canada-China deal reduced Canada’s import tax on Chinese electric vehicles from 100 percent to 6.1 percent, with an annual import cap of 49,000 vehicles in 2026, rising to 70,000 by 2030. Beijing also lowered tariffs on Canadian canola seeds from 84 percent to about 15 percent.
The Trump administration also threatened to increase tariffs on South Korea due to delays in approving a trade deal announced last year, potentially raising tariffs from 15 percent to 25 percent on products like automobiles, lumber, and pharmaceutical drugs.
What could be the impact of the tariffs on the US?
Economist Warwick McKibbin, a former board member of the Reserve Bank of Australia, said Mr. Trump’s recent announcements continued the chaos seen since the so-called Liberation Day tariffs imposed in April last year. He stated, “The US used to be a reliable trading partner, and now it’s a completely unreliable trading partner.”
Economist Amy Auster, director of the Policy Institute Australia, noted that the impact of trade policy shifts is slower to materialize than financial market reactions. She highlighted a recent study by the National Bureau of Economic Research examining the long-term impacts of Brexit, estimating a 6 to 8 percent reduction in Great Britain’s GDP by 2025, along with decreased investment, employment, and productivity.
Professor McKibbin modeled scenarios of the initial “Liberation Day” tariffs, finding potential for higher prices for US consumers and slower global economic growth. He stated, “The [short-term] impact is like breaking your arm, but the long-term impacts of these tariffs are like cancer.”
The world diverting away from the US
Since the beginning of the year, longstanding trade negotiations with major trading blocs have been finalized. The European Union agreed to a trade deal with Mercosur, which includes Argentina, Paraguay, Brazil and Uruguay, expected to increase EU exports to the region by almost 40 percent by 2040. The EU also struck a trade agreement with India, projected to double EU exports to India by 2032.
University of Technology Sydney economist Roy Green said these deals, decades in negotiation, were accelerated by Mr. Trump’s policies. He stated, “But with the advent of Trump, they’ve all been accelerated towards conclusions that do not include the US.”
Ms. Auster noted the difficulty of completely bypassing the US, particularly in financial markets, as the US bond market is dominant and the US dollar is the primary currency. However, she believes diversification away from the US is a growing consideration.
For the first time since 1996, global central banks have added more gold to their reserve holdings than US government debt, largely driven by China and India. Professor McKibbin said this poses risks to the US economy due to its mounting debt, which exceeds its defense budget and is second only to social security spending.
He stated, “So the US needs people to lend it money to finance its excess spending.” He added, “Because at some point, countries or people, the private sector don’t want to hold US government securities.”
Professor Green said there are signs of this shift occurring, with countries diversifying into other currencies, including the Australian dollar, leading to depreciation of the US dollar.
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