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What You Need to Know About The Current Trade War<\/h2>\nWhat You Need to Know About The Current Trade War<\/h2>\nFollowing weeks of heavy handed hints from the Trump administration, President Donald Trump announced new reciprocal tariffs on virtually every country<\/a>. Highlights from the initial announcement include a baseline 10% tariff for 180 countries, a 20% tariff on goods from the European Union, a 34% tariff on Chinese goods, and a 25% tariff on all foreign automobiles. Stocks tumbled in the post-market following the announcement. It is unclear how long Trump intends to keep these tariffs in place or if he will rescind them due to economic pressure.<\/span><\/p>\n International governments are choosing different tactics in handling the American president. The European Union is open to negotiation, but has not ruled out adding additional tariffs of their own. China, which is now under an average tariff of 76%, threatened immediate countermeasures if the American tariffs were not lifted. Alternatively, Israel shared that it would <\/span>proactively cancel<\/span><\/a> all tariffs on U.S. imports before Trump\u2019s press conference on Wednesday, April 2nd. Despite this gesture of goodwill, Israel was still included in the \u201cLiberation Day\u201d tariffs and is <\/span>rethinking<\/span><\/a> their strategy.<\/span><\/p>\n Tariffs, tariffs, tariffs. While it may seem like that short word recently came out of nowhere, tariffs have been employed by governments for hundreds of years. William McKinley is well-known for his use of the economic policy, specifically the <\/span>McKinley Tariff of 1890<\/span><\/a>, and Donald Trump put tariffs in place on everything from solar panels and washing machines to raw steel and aluminum during his first term. They can cover a broad range of items, but in short, tariffs are important taxes that countries use to control the price of goods coming in and out of their borders.\u00a0<\/span><\/p>\n We encourage you to read our recent Q&A<\/a> <\/span>with Licensed Customs Broker Kim Cummiskey for more information about the current state of tariffs.<\/span><\/em><\/p>\n Among the different types of tariffs, reciprocal tariffs are especially important because they help countries manage their trade relationships.<\/span><\/p>\n Image courtesy of Mathias Reding<\/p><\/div>\n Reciprocal tariffs are taxes that countries use to respond to tariffs placed on their own goods by another country. This back-and-forth method is often used to push for fairer trade conditions or to protect local jobs from foreign competition. These tariffs have been used for a long time to help countries deal with trade issues.<\/span><\/p>\n The framework governing these tariffs is rooted in international trade agreements such as the <\/span>General Agreement on Tariffs and Trade<\/span><\/a> (GATT). According to the <\/span>World Trade Organization<\/span><\/a> (WTO), \u201cTariffs give a price advantage to locally-produced goods over similar goods which are imported, and they raise revenues for governments.\u201d These legal structures aim to regulate and stabilize international trade flows, although countries may still resort to reciprocal tariffs in response to trade disputes.<\/span><\/p>\n Countries use reciprocal tariffs for several reasons, like fighting back against unfair trade practices or protecting young local industries from bigger foreign competitors. While these tariffs can keep jobs at home, they can also lead to trade wars. This is when countries keep increasing tariffs against each other, which can make products more expensive and disrupt global trade.<\/span><\/p>\n As reported by the <\/span>BBC<\/span><\/a>, the actual formula for how the Trump administration decided the percentages for the new tariffs is relatively simple. The trade deficit for the U.S. and a partner country was divided by total goods imports from that country. That number was then divided by two, and rounded up to the nearest whole number.<\/span><\/p>\n The recent trade disagreements between the U.S. and China show how big of an impact these tariffs can have on the world’s economy. These kinds of disputes can raise prices for shoppers and create problems for businesses around the world, especially those that rely on importing and exporting goods.<\/span><\/p>\n Donald Trump has expressed his deep belief in the power of tariffs to stimulate the American economy, despite misgivings by economists and a volatile stock market. This has been a cornerstone of both his administrations with a <\/span>stated belief<\/span><\/a> \u201cthat increasing domestic manufacturing is critical to U.S. national security.\u201d In addition to the commonly accepted tactics of improving American manufacturing power and working to decrease a government deficit, Trump also <\/span>views tariffs<\/span><\/a> as a way to curb \u201cthe flow of fentanyl and illegal migration into the US.\u201d It is clear the current administration views tariffs as a negotiation tool, threatening exceedingly high tariffs in order to increase pressure on chief executives of neighboring countries like <\/span>Canada and Mexico<\/span><\/a>.\u00a0<\/span><\/p>\n Image courtesy of Bernd Dittrich<\/p><\/div>\n For those in the freight forwarding and international shipping industries, reciprocal tariffs bring both challenges and opportunities. These professionals need to understand the tariffs well because they can change shipping costs and how goods are moved around the world.\u00a0<\/span><\/p>\n One new change shippers should be mindful of is another executive order signed hours before the tariff announcement, closing the loophole on \u201c<\/span>de minimis<\/span><\/a>\u201d goods from China and Hong Kong. Shipments under $800 were able to avoid tariffs, a practice that has been in place since 1938 although the amount was quadrupled from a previous limit of $200 during the Obama administration. This exception will officially end on May 2, 2025 at 12:01 AM.<\/span><\/p>\n There are several ways businesses can lessen the impact of reciprocal tariffs. One way is to spread out where they get their supplies from, so they’re not too reliant on goods from countries with high tariffs. Having flexible shipping plans that can adapt to new tariffs quickly is key to keeping things running smoothly. Additionally, taking advantage of opportunities like <\/span>Automated Clearing House<\/span><\/a> (ACH) payments can make a huge difference in cash flow and bottom line.<\/span><\/p>\n By understanding these tariffs and how they work, businesses and professionals in shipping can better handle the challenges and opportunities they bring. Staying up-to-date and flexible is crucial in a world where trade rules are always changing. It is important to work with an experienced partner, like <\/span>SiShips<\/span><\/a>, who can help businesses of all sizes navigate the uncertainty.<\/span><\/p>\nUnderstanding Reciprocal Tariffs<\/h3>\n
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The Role of Reciprocal Tariffs in International Trade<\/h3>\n
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Navigating Reciprocal Tariffs in International Shipping<\/h3>\n
Stay Up to Date with Sheltered International<\/h2>\n