World braces for Trump's 'liberation day' tariffs

US President Donald Trump is expected to announce a new list of global tariffs on Wednesday, increasing a trade war that has hit financial markets and heightened uncertainty over America's economic outlook.

The White House on Tuesday said Mr Trump was still putting finishing touches on the “liberation day” tariffs, which will be announced from the Rose Garden.

“He's with his trade-in-tariff team right now, perfecting it to make sure this is a perfect deal for the American people and the American worker,” press secretary Karoline Leavitt told reporters. “April 2, 2025, will go down as one of the most important days in modern American history."

She said that Mr Trump's measures would improve American industrial competitiveness and reduce the nation's trade deficits.

On Sunday, White House aide Peter Navarro said he expects the tariffs to deliver $6 trillion in revenue over the next 10 years. But because consumers bear the brunt of increased costs, experts say the tariffs could amount to the biggest peacetime tax rise in US history.

Mr Trump has offered few details on the tariffs he plans to announce, although The Wall Street Journal reported that he could impose a flat 20 per cent tariff on most trading partners. He could also impose more sector-specific measures.

So far, Mr Trump has imposed 25 per cent tariffs on steel and aluminium products, a tariff of 25 per cent on cars and car parts and raised tariffs on all Chinese imports by a total of 20 per cent.

The month-long delay on tariffs on goods from Mexico and Canada, and a 10 per cent tariff on some Canadian energy, is also set to expire this week.

America's trade partners have responded with retaliatory tariffs.

“Europe did not start this confrontation,” EU Commission President Ursula von der Leyen said in a speech on Tuesday. “We do not necessarily want to retaliate but we have a strong plan to retaliate if necessary.”

Meanwhile, Chinese state media on Monday said Beijing is seeking to jointly respond to tariffs with Japan and South Korea. Japanese and Korean officials said there has not been a decision on co-ordinated action with China, the Journal reported, but that the three countries held trade discussions over the weekend.

So far, the Middle East has been spared Mr Trump's tariff plans, but the region could still be indirectly affected.

Aluminium and steel tariffs will have a limited impact on the Gulf's exports, analysts said. Meanwhile, countries in the region with currencies tied to the US dollar could face tighter monetary policy due to the Federal Reserve keeping interest rates elevated. This could dampen investment in the private sector and lower real economic growth, according to an analysis from S&P Global.

Markets brace for impact

Mr Trump's tariff saga has caused disruptions in global markets, as most economists say tariffs would lead to higher inflation and lower economic growth. Mr Trump previously said tariffs would cause a “little disturbance” but would lead to higher US production.

The S&P 500 and Nasdaq Composite are coming off their worst quarters since 2022, shedding 4.01 and 9.5 per cent respectively in the year so far. The Dow Jones Industrial Average is down 0.95 per cent since December 31.

Goldman Sachs, JP Morgan and Pimco have all raised the probability of a US recession this year due to the lingering uncertainty over tariffs.

International Monetary Fund managing director Kristalina Georgieva said declining consumer and investor confidence could dim growth prospects, although it is not “dramatic” so far. However, the IMF last week said it is not forecasting a US recession.

And Federal Reserve officials are assessing whether tariffs will lead to a one-time bump in inflation, or if that effect will be more drawn-out.

“It can be the case that it's appropriate sometimes to look through inflation if it's going to go away quickly without action by us, if it's transitory. And that can be the case in the case of tariff inflation,” Fed chairman Jerome Powell said last month.

Tariff uncertainty comes as inflation stubbornly remains above the Fed's 2 per cent target. However, median Fed forecasts still anticipate the central bank would deliver two rate cuts this year to bring the federal funds rate down to about 3.9 per cent.