Trump's Tariff Policy Causes a Stir: August 1st "Tariff X-Day" - Alliance Bonds or Nationalism?

1. The Return of Trump's "Trade Shock Doctrine"

On the afternoon of Saturday, July 12, Eastern Time, President Donald Trump released two official documents on his Truth Social. The recipients were Ursula von der Leyen, President of the European Commission, and Claudia Sheinbaum, President of Mexico. The message was concise: "Starting at 12:01 AM on August 1, a uniform additional tariff of 30% will be imposed on EU and Mexican products.

Further increases will be applied if there is retaliation." This move instantly strained the U.S.'s relations with its two major trading partners—blocks that accounted for about one-third of U.S. imports as of 2024. Reuters

2. Background: The 90-Day "Negotiation Grace Period" Was an Empty Promise

In April this year, the Trump administration hinted at imposing tariffs of 20% on the EU and 25% on Mexico, calling them "Liberation Day Tariffs," while setting a 90-day grace period. However, negotiations stalled, and one trade official anonymously stated, "The EU conceded on withdrawing digital taxes, but gaps remained on agricultural and pharmaceutical products." As the grace period expired on July 9, the White House immediately proposed the 30% plan. Hardliner Peter Navarro, Chief Economic Advisor, reportedly told those around him, "Now is the time to fire additional rounds while the stock market is high and the economy is booming." Politico

3. Three Justifications

1. Fentanyl Crisis
   In response to the influx of synthetic opioids via Mexico, the U.S. has been applying tariff pressure based on the "International Emergency Economic Powers Act (IEEPA)." The presidential letter this time also specifically mentions "insufficient cartel eradication."

2. Massive Trade Deficit with the EU
   The U.S.-EU goods trade deficit in 2024 was 197 billion euros (approximately 215 billion dollars). Trump argues this is contrary to "reciprocity."

3. Defense of Domestic Industries
   According to the Tax Foundation, the series of tariffs will raise the average U.S. applied rate to 16%, the highest since 1941. Tax Foundation

4. Immediate Reactions on Social Media: A Mirror of Division

• Conservative Influencer @KobeissiLetter
  posted "BREAKING: 30% on EU and Mexico! Rates will increase if there's retaliation!" garnering 12,000 likes in an hour. X (formerly Twitter)

• Investment Advisor Liz Simmie
  warned, "Negotiations with the EU are ruined, the market will react on Monday." X (formerly Twitter)

• Progressive Group @DemsAbroad
  criticized "#TrumpTariffs will raise pharmaceutical costs," with over 3,000 retweets. X (formerly Twitter)

• On TikTok
  a comedian satirized "Trump's Tariff Math," with over 2 million views. TikTok

5. Official Reactions from Involved Countries

• EU: President von der Leyen posted on X, "We will continue dialogue, but will take proportional countermeasures if necessary." The Federation of German Industries (BDI) stated, "It will hit the automotive and chemical sectors."

• Mexico: President Sheinbaum called for "calm and resolute negotiations" in a speech in Sonora, emphasizing that sovereignty is non-negotiable. Reuters

6. Economic Impact Estimates

According to the dynamic model by the Tax Foundation—

• 2025: U.S. GDP ▲0.8%, Employment ▲245,000

• Cost per U.S. Household: +$1,182 (2025), +$1,442 (2026)

• Tariff Revenue: Annual increase of $156 billion—the largest tax increase effect since 1993. When considering retaliatory tariffs (currently $330 billion scale), an additional GDP ▲0.2%.
  Tax Foundation

7. Joys and Sorrows by Industry

While the U.S. manufacturing industry (steel and aluminum) welcomes it as "regaining competitiveness," the retail and logistics industries are wary, saying it will "hit the Christmas sales season."

8. Market and Political Readings

Wall Street saw Dow futures drop by 1.1% in after-hours trading immediately following the announcement. However, since 2025, Trump has repeatedly "reduced or postponed at the last minute," and a J.P. Morgan report analyzes a "50% possibility of a negotiation card." Within the Republican Party, lawmakers from manufacturing states support it, while those from agricultural states oppose it. The Democratic Party aims to make it a point of contention in the 2026 midterm elections, focusing on "impact on household finances."

9. Ripples on the International Order

The EU is considering filing a complaint with the WTO, and Belgian government sources have proposed the creation of a "European Trade Defense Office (ETBO)." Mexico has hinted at using arbitration procedures in the USMCA annex. The Chinese Ministry of Foreign Affairs criticized, "The U.S. is a destroyer of multilateralism," while also wanting to maintain a freeze on tariffs on its own country.

10. Scenarios for the Next 90 Days

1. Negotiation Settlement (Probability 30%): The EU offers to withdraw digital taxes and ease tariffs, reducing 30% to 10%.

2. Gradual Implementation (40%): The U.S. implements it on some items, excluding pharmaceuticals and semiconductors.

3. Full Implementation + Retaliation (30%): The EU imposes retaliatory tariffs worth 2.1 billion euros, and Mexico imposes 10 billion dollars. The U.S. further raises it to 50%.

Experts predict that "if Scenario 3 occurs, it will take at least three years to recover the supply chain."

11. Conclusion

The 30% tariff symbolizes the economic nationalism of Trump's second term, but the "strength" praised by supporters is also a double-edged sword that undermines trust with allies. History shows the example of the Smoot-Hawley Act in the 1930s accelerating the Great Depression. Will the President actually pull the trigger on August 1, or will he once again loosen the reins at the last minute and stage a "deal"? Only 20 days remain for negotiations. The world is watching with bated breath.