The Cabinet Office published "World Economic Trends 2025 I," Chapter 2, Section 2, providing a comprehensive analysis of the second Trump administration's trade policy and its economic impacts.
Trends in U.S. Trade Policy
The second administration has newly utilized the International Emergency Economic Powers Act (IEEPA), enabling swift tariff measures through "national emergency" declarations. The number of executive orders signed in the first month increased dramatically from 13 in the first administration to 70, achieving accelerated policy implementation.
For product-specific tariffs, steel and aluminum face uniform additional tariffs of 25% from March 12, rising to 50% after June 4, with all exemption measures eliminated. The scope of derivative products has been expanded to include beer cans and white goods. Automotive and parts face 25% additional tariffs from April 3, with exceptions established for USMCA compliance.
For country-specific tariffs, tariffs on China were raised in stages from 10% on February 4 to a cumulative 145% on April 10. However, following U.S.-China ministerial-level consultations in Geneva on May 12, an agreement was reached to reduce tariffs to 54% from May 14, with a temporary reduction to 30% for 90 days. China also reduced its tariffs from 125% to 34%, temporarily lowering them to 10%.
"Reciprocal Tariffs" took effect on April 5, imposing basic 10% additional tariffs on virtually the entire world. Country-specific surcharge rates are set for 57 countries and regions, with major countries facing Japan 24%, China 34%, EU 20%, and India 26%. Exemptions are designated for Section 232 investigation items, postal services, semiconductors, and others.
Impact of Trade Policy on Goods Trade
March 2025 recorded the largest goods trade deficit in history at $87.0 billion (imports $275.9 billion, exports $189.0 billion). Front-loading imports ahead of tariff measures were prominent, with non-monetary gold from Switzerland surging in January, and pharmaceuticals from Ireland increasing by $15.45 billion in March. April saw significant decreases in imports of consumer goods, industrial raw materials, and automotive parts due to reaction effects.
Regarding retaliatory measures by various countries, China raised tariffs in stages to 125% on April 11 but shifted toward relaxation following May consultations. Canada set 25% retaliatory tariffs on CAD $155 billion worth of goods, actually implementing CAD $30 billion worth, but suspended the remaining CAD $125 billion worth due to U.S. measure reviews. Mexico chose a dialogue approach, refraining from retaliatory measures.
Impact of Trade Policy on Prices
Tariff measures directly increase import prices, pushing up domestic competing product prices and causing downstream industry spillover effects through increased input costs. The 50% tariff on steel and aluminum increases costs for construction and manufacturing industries, while the 25% automotive tariff pushes up vehicle prices. "Reciprocal tariffs" cause widespread increases in daily necessity prices, along with cost increases from supply chain disruptions and sourcing changes.
Financial markets experienced significant volatility when "reciprocal tariffs" were announced, with over 75 trading partners reportedly requesting consultations. The comprehensive tariff system construction utilizing IEEPA represents a historic turning point, with medium- to long-term challenges including consistency with the WTO system and risks of deteriorating relations with allies.