President Donald Trump signed a long-anticipated executive order Wednesday for “reciprocal tariffs” on goods from other nations, saying “jobs and factories will come roaring back into our country.”
But investors initially reacted negatively to the moves in after-hours trading, and Georgia businesses expressed fears the import taxes will send costs higher and harm consumers.
Trump announced a minimum baseline tariff of 10% on most all foreign goods, though higher rates will be charged on goods from many key U.S. trade partners. For countries charged higher rates, the administration factored in taxes charged on U.S. goods and noncash values for trade barriers.
Credit: TNS
Credit: TNS
Trump said reciprocal tariffs on many countries will be close to about half the cost of tariffs and impediments charged by those countries, as he held up a chart during a news conference in the Rose Garden.
The chart listed dozens of countries and showed tariffs of 34% on goods from China, 20% for the European Union, 10% for the United Kingdom, 46% for Vietnam, 32% for Taiwan and 24% for Japan. Trump had already imposed 25% taxes, on Mexican and Canadian imports, though many of those are on hold.
Credit: AP
Credit: AP
The top five import markets for Georgia are Mexico, China, South Korea, Germany and Vietnam, according to the Georgia Department of Economic Development.
“This is all pretty insane … to be brutally blunt about it,” said Alex Durante, senior economist at the nonpartisan Tax Foundation.
“I truly think that this is probably one of the most (economically) damaging policies I’ve certainly seen, you know, in the last … several decades,” he said.
Credit: AP
Credit: AP
Calling tariffs “tools of mutual destruction” that hurt the U.S. economy and hurt trade partners even more, Georgia State University professor Sina Golara said there is a silver lining.
According to Golara, “it’s likely that some of these tariffs will be short-lived and lead to trade deals that lower tariff rates for both countries.”
That the tariffs were less than he feared could temper the negative effects.
Still, he said, “economic growth will slow, domestic production may decline, the job market could weaken and recession risks may increase.”
Trump’s tariff announcement was not well-received on Wall Street. S&P 500 futures dropped about 2% immediately after Trump’s announcement as investors absorbed the news.
The Federal Reserve Bank of Atlanta’s GDPNow indicator isn’t an official forecast, but it is a sort of “nowcast” of the pace of economic growth. On Feb. 19, about a month after Trump was sworn in, GDPNow had the U.S. economy growing in the first quarter at an annualized rate of 2.3%. That gauge fell to -2.4% as of March 6. As of Tuesday, it stood at -3.7%.
Other groups, such as Goldman Sachs, have also increased their odds for a recession.
Consumer confidence has also slumped.
“If new trade deals happen soon, the economy may avoid the feared damage,” according to Golara.
Cannon Carr, a partner at EP Wealth Advisors who oversees the Atlanta office, said small businesses he advises have been bracing for increased costs.
Subcontractors in construction have been adding wording to contracts to allow them to increase prices. Suppliers to companies in electronics, retail and the automotive industry are also expecting higher costs.
“It does mean higher prices for consumers,” Carr said.
For small businesses, the tariff threat has been “creating uncertainty, if not chaos,” according to Carr. Some companies “essentially pressed pause” on major decisions, capital commitments and contracts, because their costs have been unpredictable.
For Felipe Arroyave, the past three months have been “a complete nightmare.”
The founder and president of Atlanta-based Spectrum International Group, a specialty contact lens manufacturer with customers in nearly 70 countries, Arroyave has been buffeted by Trump’s tariff policies and the international response to them.
Credit: Handout
Credit: Handout
“One day we wake up and there’s tariffs, and the next day we wake up and the tariffs are delayed for 30 days,” Arroyave, visibly stressed, told The Atlanta Journal-Constitution. “We’re caught in the middle.”
Arroyave imports some of the raw materials for his contact lenses from China and some finished lenses from Canada, meaning he must pay the import taxes Trump has instituted against the countries.
But he also exports his goods. All 2,500 of his customers are overseas. So, in some cases, Arroyave also has to pay tariffs that other countries have instituted in retaliation to Trump administration policies.
He’s had to raise prices 25-30% in the last three months because of the wave of taxes he’s facing, and he’s worried if he has to raise prices again, he could lose clients.
This uncertainty is also putting him at risk of losing customers, because they want certainty in pricing that a different manufacturer could provide.
Some companies may be able to make a shift and bring production into the United States or shift to sourcing domestically. However, Carr noted, “shifting the supply chain can take, you know, 12-18 months, or even as long as three years. So it’s hard to move quickly.”
Arroyave does see how the tariffs could lead to a boost in domestic production.
“I love some of the things that the U.S. (is) doing. I think hopefully we’re going to create more jobs. It’s going to be great for American-made products,” he said. But the uncertainty has hurt.
As Trump announced reciprocal tariffs, the European Union plans its own countermeasures, including tariffs on a range of American goods.
Credit: TNS
Credit: TNS
‘Interpreting and understanding’
Trump’s broad sweep of new tariffs comes as 25% import taxes on foreign automobiles are set to start Thursday. Those tariffs will also hit foreign auto parts.
The supply chains for cars and trucks are complex. U.S. brands assemble some cars for the American market in other countries, such as Canada and Mexico. Many foreign brands assemble vehicles here, but not all, and many rely on foreign parts.
Cox Automotive Chief Economist Jonathan Smoke estimated last week that tariffs on Mexican and Canadian auto parts would add about $3,000 to the price of vehicles built in the U.S. The average price of cars made in Mexico and Canada, for instance, are expected to increase by $6,000.
Credit: Steve Schaefer/AJC
Credit: Steve Schaefer/AJC
U.S. automakers also fear retaliation against their vehicles from foreign countries.
“We’re spending a lot of time interpreting and understanding what the tariff implications are for us of course in the United States but importantly recognizing that, in particular, Europe may respond,” Rivian CEO RJ Scaringe told Bloomberg on Tuesday.
Rivian is based in California and operates one factory in Illinois but is planning a $5 billion electric vehicle plant in Georgia. The company has said it expects to start construction in 2026 with vehicles rolling off its future assembly lines east of Atlanta in 2028.
Scaringe said the “production footprint” could change depending upon how things shake out.
Experts say the sweeping tariffs Trump is placing on China and other trading partners could also squeeze American farmers even tighter.
Christopher Barrett, an agricultural and development economist at Cornell University, said it’s likely Trump’s tariffs will push up the cost of fertilizer, fuel and other inputs farmers rely on.
At the same time, the U.S. could face retaliatory tariffs on many of its top agricultural exports, including corn, wheat, soy, beef, pork, dairy and poultry. In Georgia, which produces more chickens for meat than any other state, the pain could be especially acute.
“Most farmers lose money farming in a normal year,” Barrett said. “This will be an especially bad year, and the vast majority will lose money … in some cases, lots of it.”
Still, some farmers like Chris Goodman are willing to give Trump’s tariff maneuvers a shot.
Goodman, who grows cotton, peanuts and snap beans on his 1,600-acre farm in Tift County — about 40 miles east of Albany — said he was crushed by rising production costs under President Joe Biden.
Goodman said Trump’s moves during his first term were painful for his business, but he said right now, tariffs are the least of his worries.
“We’ll try it again and see if it gets better,” Goodman said.
‘Reciprocal tariffs’
President Donald Trump announced a baseline 10% tariff on all foreign goods starting this weekend. Taxes on goods from dozens of countries, including key trade partners like China, the European Union, Japan, India, South Korea and Vietnam will be far higher and take effect starting April 9. Separately, 25% tariffs on foreign autos and auto parts start Thursday.
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