WASHINGTON >> The trade war President Donald Trump promised has begun, threatening the world economy and straining the United States’ longstanding alliances in Europe and Asia.

Goods imported from dozens of countries and territories are now going to be taxed at sharply higher rates, and that is expected to drive up the costs of everything from cars to clothes to computers.

These tariffs — which can run as high as 50% — are meant to punish countries for trade barriers that Trump says unfairly limit U.S. exports and cause it to run huge trade deficits.

Even countries with which the U.S. enjoys trade surpluses — meaning it sells to them more than it buys, such as the United Kingdom and Argentina — are being targeted with a minimum tariff of 10%.

For decades, global commerce abided by tariff rates agreed to by the U.S. and 122 other countries during the 1980s and 1990s. On Wednesday, Trump detonated that arrangement, saying that other countries had exploited the system and “ripped off” the United States for years, causing its once-mighty manufacturing base to shrink.

“Our country has been looted, pillaged, raped and plundered,” the president said in the Rose Garden.

Global financial markets recoiled on Thursday. On Wall Street, the Dow Jones industrial average dropped 1,679 points, or nearly 4%, and the U.S. dollar fell against other major currencies — a sign that investors are worried about the U.S. economy.“This is a game changer, not only for the U.S. economy but for the global economy,” said Olu Sonola, head of U.S. economic research for Fitch Ratings. “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.”

Doing what he said he’d do

During the presidential campaign, Trump repeatedly talked about imposing a “universal tariff” of 10% to 20% on all imports — and the new 10% baseline tariffs fit the description.

He also threatened to hit imports from China with 60% tariffs, and he’s now slapping a “reciprocal” tariff of 34% on China — on top of the 20% levies he’d announced earlier this year.

Combine the new tariffs on China with the ones left over from his first term, and from President Joe Biden’s, and the full tax on Chinese goods will now approach 70%, said Julian Evans-Pritchard of Capital Economics.

“It’s extreme, but it aligns with what Trump campaigned on,” said Erica York, vice president of federal tax policy at the Tax Foundation.

Nobody knows if the tariffs will prove permanent or if the U.S. will lower or drop them in response to other countries negotiating to reduce their own tariffs and other trade barriers.

Even before Wednesday’s bombshell, the president had been lobbing tariffs with abandon in his second term. He restored 25% tariffs from his first term on steel and aluminum, imposed 25% levies on cars and light trucks, hit China with 20% import taxes and levied 25% tariffs on some Canadian and Mexican imports.

Initial impacts

The Yale Budget Lab estimates the Trump administration’s tariffs would increase consumer prices by 2.3% in the short run, and cost the average household $3,800 in higher prices this year. The figure includes the impact of the 10% universal tariff announced Wednesday, plus much higher tariffs on about 60 countries, as well as previous import taxes on steel, aluminum and cars.

Inflation could top 4% this year, from 2.8% currently, while the economy may barely grow, according to estimates by Nationwide Financial.

The tariffs he announced on “Liberation Day” alone will push up prices by 1.3%, the Yale lab calculates — a $2,100 tax on households. Clothing prices will go up 17% as higher import tariffs hit textiles from Southeast Asia and Bangladesh.

The lab says that Trump’s tariffs will reduce U.S. economic growth — which was 2.8% in 2024 — by 0.9 percentage points this year.

Still, Trump offered an upbeat reaction Thursday when asked about the stock market drop as he left the White House to fly to his Florida golf club.

“I think it’s going very well,” he said. “We have an operation, like when a patient gets operated on and it’s a big thing. I said this would exactly be the way it is.”

Historical perspective

The Yale Budget Lab estimates that the 2025 tariffs — including Wednesday’s — would lift America’s effective average tariff rate to 22.5%. That would be up from 2.5% last year and the highest level since 1909 — even higher than the notorious 1930 Smoot-Hawley tariffs that are widely blamed for worsening the Great Depression. Economists note that the United States engages in much more trade now than it did then.

Before lawmakers ratified the 16th amendment to the Constitution in 1913, introducing a national income tax, tariffs supplied a big share of the federal government’s revenue — more than 90% at times in the mid-1800s. The U.S. moved from tariffs to income taxes to raise more money to finance an expanding government, collect more revenue from the wealthy and make the economy more efficient by reducing trade barriers and encouraging competition.

Trump wants to return to those days and replace income tax collections with tariffs. Last year, tariffs accounted for less than 2% of federal revenue, while 51% came from the income tax and 36% from Social Security and Medicare taxes.

World economic impact

The damage will also extend to Europe, Southeast Asia and China. “We can expect global economic growth to start plummeting as trade flows decline, prices increase and businesses put off investments,” said Wendy Cutler, a former U.S. trade official who is now vice president at the Asia Society Policy Institute.

Between the so-called reciprocal and baseline tariffs, Trump hit allies and adversaries, rich and poor countries, and those open and closed to U.S. exports.

Even Singapore, perhaps the freest-trading economy in the world, is getting slugged with the 10% levies, belying Trump’s claims to be balancing other countries’ protectionist policies, said Scott Lincicome, a trade analyst with the libertarian Cato Institute.

“This is not reciprocal at all,” Lincicome said. “Getting to real numbers on foreign trade barriers and their effects on U.S. trade numbers would require lengthy investigations and would take months, if not years, to produce. ... They might as well have pulled the numbers out of a hat.”

Taiwan, a U.S. ally, faces a 32% tariff, not much less than geopolitical rival China’s 34%.

Canada and Mexico

Trump’s trade policies toward America’s northern and southern neighbors have been erratic. He has twice announced and then suspended or watered down 25% tariffs on Canadian and Mexican goods, ostensibly to get them to do more than crack down on fentanyl and immigrants crossing into the U.S. illegally.

Last month, Trump suspended the 25% duties on Canadian and Mexican goods that comply with the US-Mexico Canada Agreement, a trade pact he negotiated with the two countries in his first term. On Wednesday, the White House said that USMCA-compliant imports could continue to enter the United States duty free.

Once the two countries have satisfied Trump’s demands on immigration and drug trafficking, the tariff on the rest of their imports would drop from 25% to 12%, the White House said.

“The obvious winners were Canada and Mexico,” Neil Shearing and Paul Ashworth of Capital Economics wrote in a commentary.

On Wall Street

As market indexes around the world plunged in reaction, analysts and investors expressed bewilderment.

In imposing “reciprocal” tariffs, the Trump administration modified its estimates to include adjustments for what it deemed currency manipulation or even other taxes, with analysts questioning the analytical basis for doing so.

“They might as well have been in a room throwing darts at a dart board,” said Andrew Brenner, head of international fixed income at National Alliance Securities.

“Trump is going to war with countries on this,” he said. “It’s ridiculous. It shows no comprehension as to what he is doing to other countries. And it is going to hurt the U.S.”

The market reaction clearly reflected the sense of surprise that gripped Wall Street after the tariffs were announced Wednesday.

“The numbers are shockingly high compared to what people were expecting and it is inexplicable in many ways,” said Peter Tchir, head of macro strategy at Academy Securities. “I think it’s a disaster.”

This report contains information from the New York Times.