In an interview with CNBC on Tuesday, United States (US) President Donald Trump said that they are getting very close to reaching a trade deal with China and reiterated that the tariff rate on Indian imports will be raised soon.
Key takeaways
“Will be announcing tariffs on semiconductors and chips in the next week or so.”
“We’ll be initially putting a small tariff on pharma, will go up in one year to 150, 250 pct.”
“Fed Chairman Powell is highly political.”
“Many Fed candidates are very good.”
“Might soon announce replacement for Fed Governor Kugler and Fed Chair candidate.”
“US Treasury Secretary Scott Bessent wants to stay where he is.”
Market reaction
The US Dollar Index inches higher following these comments and was last seen gaining 0.3% on the day at 99.00.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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