Trump signs reciprocal tariffs plan
Linda Yueh comments on plans to hit exports from countries that Trump says have unfair trade policies
The Trump administration is finalising plans to target exports from countries that have trade policies that the US President deems to be unfair to the US.
Trump has now unveiled a sweeping plan to impose “reciprocal” tariffs on America’s trading partners, potentially heralding greater disruption for the global economy.
London Business School's Dr Linda Yueh appeared on the Yahoo!Finance Catalysts programme (Friday 14 February 2025), to explore the effect on company earnings and the impact on markets as these new tariffs begin to take effect.
"It is absolutely a big issue for companies," said Yueh. "These are taxes being imposed on company goods as they are sold into the US market so these tariffs are essentially an increase in production costs. I think what is uncertain is when these tariffs are going to fall and where are they going to fall."
Impact on "connector countries"
Dr Yueh observed that for many companies planning to place their supply chains through so-called "connector countries", such as Mexico and Vietnam - countries that offer ways to move production out of, for example, China - the new Trump tariffs present significant challenges in terms of how to organise future production and distribution arrangements.
Five countries - Vietnam, Indonesia, Mexico, Poland, and Morocco - have been dubbed "economic connectors", or "connector countries". These countries have sufficiently developed economic capabilities to navigate geopolitical rivalry and benefit from the configuration of present-day global supply chains.
In the past, such countries have been able to leverage the 'friendshoring' and 'nearshoring' approaches of both the US and China in order to attract more greenfield investment.
Longer term uncertainties
The reconstituting of existing supply chains presents a raft of longer term uncertainties said Dr Yueh. "If we think that the Trump administration has a dislike of what it deems to be 'unfair trade' - and having a trade surplus is a proxy for that - the 'reciprocal' tariffs plan will generate higher costs and impact trade for several years to come," said Dr Yueh.
If however tariffs are introduced as an invitation to countries to negotiate, and they ultimately do not effect supply chains used by trade surplus countries then, said Dr Yueh, "I think the situation will be less sticky".
"Value-added taxes, or VAT, is one example, the Trump administration believes, of countries imposing 'unfair' taxes on US goods. These [VAT or GST taxes] are used by around 170 countries, which is effectively the entire world. Such a measure would be almost unprecedented in terms of tariff impositions."
