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Trump announces 10% baseline tariff

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Higher reciprocal tariffs on many US trading partners

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US stock futures, Asian share markets fall sharply

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World's No. 2 economy China vows countermeasures

By Andrea Shalal and David Lawder

WASHINGTON, April 2 (Reuters) - President Donald Trump's

decision to slap a 10% tariff on most goods imported to the

United States, as well as higher duties on dozens of countries

from rivals to allies, has intensified a global trade war that

threatens to stoke inflation and stall growth.

The sweeping duties announced against the serene

backdrop of the White House Rose Garden on Wednesday immediately

unleashed turbulence across world markets and drew condemnation

from other leaders now faced with the end of decades of trade

liberalization that have shaped the global order.

As Asia awoke to the news on Thursday, Japan's Nikkei

hit an eight-month low while U.S. and European stock futures

dropped sharply following weeks of volatile trading. U.S. stocks

have erased nearly $5 trillion of value since mid-February.

China, the world's second-largest economy, faced with a

fresh 34% tariff on top of the 20% Trump previously imposed,

urged the United States to immediately cancel its latest levies

and vowed countermeasures.

U.S. Treasury chief Scott Bessent urged other nations

not to retaliate, moves that could lead to dramatically higher

prices for consumers on everything from bicycles to wine. "If

you retaliate, that's how we get escalation," Bessent told CNN.

Close U.S. allies were not spared Trump's ire, including the

European Union, which faces a 20% tariff, and Japan, which is

targeted for a 24% rate. Tokyo said it was leaving all options

to respond to the "extremely regrettable" duties.

The base 10% tariffs go into effect on April 5 and the

higher reciprocal rates on April 9.

The effective U.S. import tax rate has shot to 22% under

Trump from just 2.5% in 2024, according to the head of U.S.

research at Fitch Ratings.

"That rate was last seen around 1910," Olu Sonola said in a

statement. "This is a game-changer, not only for the U.S.

economy but for the global economy. Many countries will likely

end up in a recession. You can throw most forecasts out the door

if this tariff rate stays on for an extended period of time."

The "reciprocal" tariffs, Trump said, were a response to

duties and other non-tariff barriers put on U.S. goods. He

argued that the new levies will boost manufacturing jobs at

home.

"For decades, our country has been looted, pillaged, raped

and plundered by nations near and far, both friend and foe

alike," Trump said.

Outside economists have warned that tariffs could slow the

global economy, raise the risk of recession, and increase living

costs for the average U.S. family by thousands of dollars.

Canada and Mexico, the two largest U.S. trading partners,

already face 25% tariffs on many goods and will not face

additional levies from Wednesday's announcement.

Even some fellow Republicans have expressed concern about

Trump's aggressive trade policy.

Within hours of Wednesday's announcement, the Senate voted

51-48 to approve legislation that would terminate Trump's

Canadian tariffs, with a handful of Republicans breaking with

the president. Passage in the Republican-controlled U.S. House

of Representatives, however, was seen as unlikely.

Trump's top economist, Stephen Miran, told Fox Business on

Wednesday the tariffs would work out well for the U.S. in the

long run, even if they cause some initial disruption.

"Are there going to be short-term bumps as a result?

Absolutely," Miran, the chairman of Trump's Council of Economic

Advisors, told the network's "Kudlow" program.

ENDING 'DE MINIMIS'

The reciprocal tariffs do not apply to certain goods,

including copper, pharmaceuticals, semiconductors, lumber, gold,

energy and "certain minerals that are not available in the

United States," according to a White House fact sheet.

Following his remarks, Trump also signed an order to close a

trade loophole used to ship low-value packages - those valued at

$800 or less - duty-free from China, known as "de minimis." The

order covers goods from China and Hong Kong and will take effect

on May 2, according to the White House, which said the move was

intended to curb the flow of fentanyl into the U.S.

Chinese chemical makers are the top suppliers of raw

materials purchased by Mexico's cartels to produce the deadly

drug, U.S. anti-narcotics officials say. A Reuters investigation

last year showed how traffickers often route these chemicals

through the United States by exploiting the de minimis rule.

China has repeatedly denied culpability.

Trump is also planning other tariffs targeting

semiconductors, pharmaceuticals, and potentially critical

minerals, the official said.

Trump's barrage of penalties has rattled financial markets

and businesses that have relied on trading arrangements that

have been in place since the middle of last century.

Earlier in the day, the administration said a separate set

of tariffs on auto imports that Trump announced last week will

take effect starting on Thursday.

Trump previously imposed 25% duties on steel and aluminum

and extended them to nearly $150 billion worth of downstream

products.

Tariff concerns have already slowed manufacturing activity

across the globe, while also spurring sales of autos and other

imported products as consumers rush to make purchases before

prices rise.

European leaders reacted with dismay, saying a trade war

would hurt consumers and benefit neither side.

"We will do everything we can to work towards an agreement

with the United States, with the goal of avoiding a trade war

that would inevitably weaken the West in favor of other global

players," Italy's prime minister, Giorgia Meloni, said.

U.S. Representative Gregory Meeks, the top Democrat on the

House Foreign Affairs Committee, said he would introduce

legislation to end the tariffs. Such a bill has little chance of

passing the Republican-controlled Congress, however.

"Trump just hit Americans with the largest regressive tax

hike in modern history - massive tariffs on all imports. His

reckless policies are not only crashing markets, they will

disproportionately hurt working families," Meeks said.

(Additional reporting by Kanishka Singh and Steve Holland;

Writing by Andy Sullivan, Joseph Ax and John Geddie; Editing by

Alistair Bell, Diane Craft and Lincoln Feast.)