By bizarre coincidence, albeit one not entirely denuded of all logic, President Trump dubbed Friday 4 April ‘Liberation Day’, because it was then that he launched his first major salvo of increased customs tariffs across the world, but the expression would start to take on new justification the following day, in other forms and with very different objectives. For on Saturday 5 April, human tidal waves crashed onto the streets of the most major American cities, expressing a ‘liberation of the collective voice’ against infringements of civic rights, inclusion, diversity and social security, redundancies in the federal administration, immigration policy, attacks targeting scientists, cynicism towards Ukraine, etc. Demonstrations were also held in London and Berlin.
This opposition movement had nothing to do with the Democrat party, towards which public opinion remains lukewarm (27%). Certainly, the party has not voiced much criticism of the new powers that be. Alone of his party, the 83-year-old Senator of Vermont, Bernie Sanders, took up his pilgrim’s staff and departed on a national tour to speak out against the oligarchy in power, attended by thousands of people. Less overtly, among the less political strata of the population, discontent had already been mounting since February, when the inflation inherited from the Biden era had not been brought under control, jobs were being cut, the cynical attitude towards the people of Palestine outraged many, while the country was also alienating its nearest neighbours (Mexico and Canada) and making unrealistic plans (taking over Greenland and the planet Mars). The most unpopular political figure was Elon Musk: fresh protests targeted Tesla cars, sales of which went into freefall, in both the New World and the old, particularly Germany.
On 25 March, elections for the senator of a single district in Pennsylvania saw the outgoing Republican seat taken by a Democrat. On 1 April, Democrat Susan Crawford won one of the seven seats of the Supreme Court of Wisconsin, beating Brad Schinnel, even though he was backed by Elon Musk’s fortune. Obviously, we cannot infer from this that the Democrats will emerge triumphant from the mid-term elections (November 2026), but the most important thing to note is the most recent opinion poll on Trump’s popularity: with just 43% in favour, the verdict is a tough one. No President in 70 years has lost so much popularity so quickly after taking up office – with the exception of Trump himself, in 2017.
He firmly believed that with a decision that was as unprecedented as it was wide-ranging, he could reverse the trend. He had already slapped high tariffs on Mexico and Canada, then delayed them by a month. On 12 March, he raised tariffs on steel and aluminium from the European Union to 25%; the EU will respond in the very near future (see EUROPE 13598/1 and other article). But when the big day, Liberation Day, came, virtually every country in the world be affected, with the notable exception of Russia. A second round of tariff increases will take place this Wednesday 9 April.
In the President’s mind, the tariffs imposed by the other countries are an offence against American’s greatness. He must therefore put an end to them, using the principle of reciprocity. The calculation method is crude and complex in equal measure. It consists of converting existing import taxes on American goods into ‘objective’ percentages, also taking account of non-tariff barriers (sanitary, environmental and other standards, but also VAT) and various political parameters. Under this calculation, the EU is penalising the USA to the tune of 39%.
This method has been criticised by most economists; the decision-makers, moreover, disregarded the fact that certain entities – Saint Pierre et Miquelon (taxed at a level of 50%), French Polynesia (10%) and Réunion (37%) – are not States, but territories of France and therefore of the EU. There is a legal heresy in this. In any case, the poorest countries, particularly those of Southeast Asia, have been very hard hit.
China immediately reacted by slapping the same tariff straight back onto imports of American products (34%). At the time of writing, on the other hand, more than 50 countries had declared their inclination to enter into negotiations with Washington.
For the EU, the new increase will be 20% (with exemptions for pharmaceutical products and wood, for the time being). The Commission’s position is well-known: yes to immediate negotiations, but retaliatory measures are being prepared. The European Trade Ministers discussed this at their meeting on 7 April (see EUROPE 13616/1)). As the 27 countries will not be affected to the same extent, it is vital that they do not react individually (which is already happening, at least verbally) and that they maintain perfect unity in adversity, as they did after the momentous event that was Brexit.
Notwithstanding its erratic or disproportionate aspects, the economic policy of the Trump administration can be unpicked. By getting rid of federal jobs and, more particularly, with the proceeds of these new tariffs, the money raised will subsequently be enough to lower taxes, which will support demand. Additionally, the likely drop in value of the US dollar will reduce the country’s enormous level of public debt and, even more importantly, stimulate American exports. President Trump is also inviting businesses, particularly from Europe, to invest in the United States. This is less likely to happen, given the anti-European feeling that prevails in the country and the losses generated by the increased customs tariffs. The ‘European patriotism’ of business leaders will therefore be one of variable geometry.
The downsides of this policy have already been flagged up by observers. It is beyond question that the new taxes will generate inflation in the United States, thereby reducing the purchasing power of the average American. Furthermore, the stock market indices are all very low at the moment, which will affect huge numbers of small savers and pensioners. On top of this, there is the unpopularity of the United States in other countries, which will lead consumers to boycott products from across the pond. Tourism is already in freefall: bookings to the US are down by 25%. The world’s biggest exporters, starting with China, will redirect sales of their products to other countries, such as Europe, which are jointly working on an assessment of the likely influx (see EUROPE B 13616A2).
In this context of destabilisation, global recession cannot be ruled out. It will be interesting to see how the WTO (which the United States are no longer financing) will succeed in proving its worth. But the world’s eye will also be on the European Union, to see how ensures that it is respected. Its culture and DNA are far more conducive to diplomacy and negotiation than to firmness, which is all that counts with this particular opposite number.
We can avoid a scene like this coming to pass: in the Oval Office, the Vice President turns to his boss and says “I told you so, Europe is soft. They’re pathetic!”
Renaud Denuit