Stocks in Asia and Europe Fall Sharply as Trump Doubles Down on Global Tariffs: Live Updates

Mr. Trump’s moves have caused financial markets to plummet, foreign leaders to issue condemnations and officials to warn about inflation and slowing economic growth.

What are tariffs, and who pays for them?

A tariff is a government surcharge on products imported from other countries.

Tariffs are paid by the companies that import the goods. For example, if Walmart imports a $10 shoe from Vietnam — which faces a 46 percent tariff — Walmart will owe $4.60 in tariffs to the U.S. government.

What happens next?

• Walmart could try to force the cost onto the Vietnamese shoe manufacturer, by telling it Walmart will pay less for the product.

• Walmart could cut into its own profit margins and absorb the cost of the tariff.

• Walmart could raise the price of the shoes at its stores.

• Or, some combination of the above.

Economists found that, when Mr. Trump put tariffs on China in his first term, most of that cost was passed on to consumers. But economic studies found that his tariffs on foreign steel were a bit different; only about half of those costs were passed on to customers.

Why is Trump imposing tariffs?

The president and his advisers say their goal is to make the tariffs so painful that they force companies to make their products in the United States. They argue that this will create more American jobs and push up wages.

But Mr. Trump has also described tariffs as an all-purpose tool, forcing Canada, Mexico and China to crack down on the flow of drugs and migrants into the United States. The president also maintains that tariffs will rake in huge sums of revenue that the government can use to pay for tax cuts.

Economists say that tariffs cannot simultaneously achieve all of the goals that Mr. Trump has expressed. In fact, many of his aims contradict one another. The same tariffs that are supposed to boost U.S. manufacturing are also making life painful for U.S. manufacturers, by disrupting their supply chains and raising the cost of their raw materials.

“All of these tariffs are internally inconsistent with each other,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics, a Washington think tank. “So what is the real priority? Because you can’t have all those things happen at once.”

How were the tariffs calculated?

The White House put out a complicated-looking formula, but one explanation appears to be straightforward: the gap between what America exports to a country and what it imports.

Mr. Trump’s point of view appears to be that any trade deficit — the value of goods the U.S. imports from a country, minus what the U.S. sends it as exports — is bad, and tariffs will be applied until it is eliminated.

He has long described bilateral trade deficits as examples of America being “ripped off” or “subsidizing” other countries.

In the White House tariff calculations, countries that send the United States more goods than they buy were deemed to have “unbalanced” trade and will face higher tariffs.

This formula doesn’t account for the fact that some countries are better at making certain products, a concept known as comparative advantage. And economists say it is nonsensical to force countries to exactly equalize their exports and imports to and from the United States.

How have financial markets reacted?

Wednesday’s announcement set off a global rout in stock markets as worries deepened about a trade war. Those worries were largely confirmed after China retaliated against Mr. Trump’s sweeping tariffs with steep levies of its own on U.S. goods.

The S&P 500, the benchmark U.S. index, fell 6 percent on Friday, bringing its losses for the week to 9.1 percent. It was the steepest weekly decline since the early days of the coronavirus pandemic in March 2020.

Losses were widespread, hitting technology companies as well as firms that rely on Chinese manufacturing in their supply chains. Apple shares dropped more than 13 percent over the week. Shares in Caterpillar, which makes construction equipment, tumbled nearly 11 percent.

How have U.S. trading partners responded?

China said it would impose 34 percent tariffs on all U.S. products, matching the levies that Mr. Trump announced this week on Chinese goods. It also barred 11 American companies from doing business in China, and customs authorities said that they would halt chicken imports from five of America’s biggest agricultural exporters.

The European Union said it was preparing countermeasures to the new Trump tariffs, after announcing earlier retaliatory measures that were concentrated on a wide variety of goods, including whiskey, motorcycles and women’s clothing. E.U. officials are also considering trade barriers on services, using a new trade weapon that was developed only in 2021 to target Big Tech and Wall Street.

Canada has vowed to defend its workers, businesses and economy from new tariffs and threats from Mr. Trump. Prime Minister Mark Carney recently said it was clear that the United States was “no longer a reliable partner.”

In March, after U.S. steel and aluminum tariffs took effect, the Canadian government said that it would impose new retaliatory tariffs on $20 billion worth of U.S. imports, on top of the 25 percent tariffs announced previously.

Mexico made a major effort to fend off tariffs, sending more than two dozen accused cartel leaders to the United States to face criminal charges and dispatching troops to fentanyl laboratories and the U.S. border.

Britain tried to cultivate closer ties to the U.S. but still got swept into Mr. Trump’s tariffs.

South Korea convened an emergency task force and vowed to “pour all government resources to overcome a trade crisis.”

Brazil said it was also evaluating retaliatory measures.

Australia said it would not respond with retaliatory tariffs, as Anthony Albanese, the prime minister, vowed not to “join a race to the bottom that leads to higher prices and slower growth.”

Which countries are exempt?

Russia was notably absent from the countries, large and small, that were hit with new U.S. tariffs.

Treasury Secretary Scott Bessent said Moscow was spared because sanctions imposed on the country after its invasion of Ukraine effectively halted U.S.-Russian trade.

But trade data paints a more complicated picture. Last year, Russia still exported about $3 billion worth of goods to the United States, according to U.S. trade figures, mostly fertilizer and platinum.

North Korea, Cuba and Belarus, which are also subject to tough sanctions, were also excluded from the new levies.

What happens next?

Jerome H. Powell, the chair of the Federal Reserve, warned on Friday that President Trump’s tariffs risk stoking inflation and slowing down growth.

Many analysts quickly downgraded their forecasts for economic growth, saying that tariffs would push up prices for consumers and costs for businesses, slowing demand and economic activity.

Nancy Lazar, chief global economist at Piper Sandler, estimated the U.S. economy might contract 1 percent in the second quarter. She had previously expected a flat quarter. “It’s an immediate hit to the economy,” she said.

Economists at Fitch Ratings said in a note Thursday that the tariffs had significantly raised the risk for a recession in the United States. It said that tariffs would result in higher consumer prices that would squeeze real wages and weigh on consumer spending.

How could tariffs affect consumer prices?

Mr. Trump’s tariffs target countries that supply a wide variety of goods to the United States. For American families, the very likely result is higher prices at grocery stores, car dealerships, electronics retailers and clothing outlets.

Avocados, tomatoes and strawberries imported from Mexico are some of the first places where shoppers might notice an uptick in prices.

It could take longer for prices to rise for durable goods, like cars, because of existing inventory, or if companies expect the tariffs to be temporary.

The Yale Budget Lab estimated that Mr. Trump’s new auto tariffs, which took effect on Thursday, would raise vehicle prices 13.5 percent on average, the equivalent of an additional $6,400 for the price of an average new 2024 car. In total, American households would pay $500 to $600 more, on average, as a result of the tariffs, the group estimated.

Mr. Trump has argued the price increases would be minimal compared with other economic benefits, and has repeated that sentiment. Over the weekend, the NBC News correspondent Kristen Welker asked the president whether he was concerned that tariffs could make cars more expensive. Mr. Trump replied that he “couldn’t care less.”

“If the prices on foreign cars go up, they’re going to buy American cars,” he said of consumers.

What does it mean to be American made?

Nearly half of all vehicles sold in the United States are imported, as well as nearly 60 percent of the parts used in vehicles assembled in the United States.

Since the North American free trade zone was created in 1994, American and foreign-owned automakers have built supply chains that cross the borders of the United States, Canada and Mexico.

For example, the 2024 Chevrolet Blazer, a popular sport utility vehicle made by General Motors, is assembled at a plant in Mexico using engines and transmissions that are produced in the United States.

What is the history of tariffs in the U.S.?

1789: At its founding, the United States relied heavily on tariffs to finance the federal government and protect domestic manufacturers, as proposed by Alexander Hamilton, the first Treasury secretary.

1828: The federal government passed tariffs averaging 38 percent to shield the country’s manufacturing sector from foreign competitors. These were labeled the “Tariff of Abominations” by Southern states, whose economies relied on exporting raw materials and importing manufactured goods, leading to a constitutional standoff.

1930: The Smoot-Hawley Tariff Act of 1930 was enacted after the stock market crash of 1929, in an attempt to protect U.S. businesses. Instead, as described in “Ferris Bueller’s Day Off,” the tariffs “did not work, and the United States sank deeper into the Great Depression.”

1934: Franklin D. Roosevelt signed the Reciprocal Trade Agreements Act, which gave the president the authority to negotiate bilateral trade agreements. This set the stage for more than 90 years of liberal free trade policies.

Reporting was contributed by Mark Landler, Eshe Nelson, Alexandra Stevenson, Andrew Duehren, June Kim, Karl Russell, Colby Smith, Ian Austen, Vjosa Isai, Annie Correal, Keith Bradsher and Alan Rappeport.