There’s Nowhere to Hide as Tariffs Reshape Global Trade

By  Dominic DeSapio Marc Gilbert Keith Halliday Sarah Lichtblau Michael McAdoo, and  Cristián Rodríguez-Chiffelle
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The new US tariffs announced on April 2, including a “minimum baseline tariff” of 10% and higher “reciprocal trade tariffs” on goods from some 60 countries, expand the Trump administration’s trade targets from a few nations and sectors to the vast majority of the global economy. In addition to higher costs for US companies and consumers, two things are clear. First, we are entering a new era of trade and economic relations. The president’s tariffs, which are on top of levies already imposed, have moved well beyond a few bilateral trading relationships or sectors of interest. Second, uncertainty will be a defining attribute of much of global trade for the foreseeable future, not only with respect to the possibility of further tariffs (next week, next month, or next year) but also the stability and reliability of the US’s relationships with its trading partners and the resulting global ramifications.

Management decision making just got a lot more complicated. Every company, regardless of sector or location, needs to build tariffs and the related uncertainty into its planning and operating model. Here’s what we know right now and what it looks like it means for US and global businesses.

Every company, regardless of sector or location, needs to build tariffs and the related uncertainty into their planning and operating model.

What We Know

Before April 2, the second Trump administration had largely targeted or threatened tariffs on a few trading partners (such as China, Mexico, Canada, and the EU) and industries (like autos and steel and aluminum). Now, the president has imposed broad tariffs designed to level trade imbalances between the US and its international partners.

The new tariffs are planned to be rolled out quickly, with the 10% global baseline tariff going into effect on April 5 and country-specific tariffs on April 9. Canada and Mexico were exempted from the latest tariffs but are still subject to earlier levies, with certain sectoral and product-specific exemptions, as well as to the global steel and aluminum tariffs.

There are exemptions for certain products deemed important to the strategic interests of the US, including pharmaceuticals, semiconductors, and certain metals, minerals, and energy resources.

The new tariffs will “stack” on top of most tariffs already in place, with exceptions for the Section 232 tariffs (such as those on steel, aluminum, and automobiles). All imported autos were subject to a 25% levy under an earlier-announced Section 232 measure. The “reciprocal trade” tariff rates range from the 10% baseline up to 50% for Lesotho. The total tariffs on goods from China will jump to 54% (it did not receive Canada and Mexico’s exemption), and those levies could go as high as 74% if the proposed duty on countries buying Venezuelan oil is also imposed. There are exemptions for certain products deemed important to the strategic interests of the US, including pharmaceuticals, semiconductors , and certain metals, minerals, and energy resources.

We expect most affected countries to both attempt to negotiate with the Trump administration and retaliate with increased tariffs of their own or other trade and nontrade measures. The EU, for example, has announced a four-week window for negotiation before it retaliates. A new front in the tariff war could be opened with levies on US services (such as internet streaming services, cloud computing, and software), enormous parts of the US economy that have so far been kept out of the fray.

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What It Means

These are the biggest changes to the world trading system since the General Agreement on Trade and Tariffs came into effect in 1947. The president’s move seems to imply that the US will no longer follow the “most favored nation” (MFN) principle, which requires each member of the World Trade Organization to apply the same tariff rates for all its WTO trading partners (unless a free trade agreement is in force). Retaliation from many US trading partners would, in effect, mean the end of the MFN principle and mark the beginning of prolonged bilateral negotiations for country-specific tariff rates and implementation schemes. Each “deal” could be distinct with its scope limited to the parties involved. Factors in these negotiations could (and already do) extend beyond economic considerations to encompass such issues as border security, immigration, and national defense spending.

Developing a full understanding of peer companies’ tariff-affected cost structures is critical.

The new tariffs may provoke traditional trading partners to explore new alliances and develop deeper trade relationships that exclude the US. South Korea, Japan, and China are reportedly working on a joint response, for example, as are Canada and Mexico. Companies will have to monitor, analyze, and potentially try to shape many individual sets of “deals.” This will require reallocation of financial, human, and technical resources as well as the development or acquisition of new expertise.

Firms that have built “geopolitical muscle” should be much better prepared to confront the headwinds. Companies have set up teams to work through basic short-term mitigation plans, especially the possibilities for pricing pass-through and working with suppliers to share the cost burden. This is partly a competitive exercise, so developing a full understanding of peer companies’ tariff-affected cost structures is critical. Now, management teams also need to game out what permanent high tariffs would do to their supply chains and manufacturing networks. Relevant factors include:


Global trade is entering a brave new world. Companies need to adapt quickly to the new realities of complexity and cost. The ability to do so will be a basis of competitive advantage for the foreseeable future.

About BCG’s Center for Geopolitics

BCG’s Center for Geopolitics brings clarity to the shifting complexities of global power dynamics, unlocking opportunities for growth and collaboration worldwide. By integrating deep geopolitical expertise with BCG’s renowned analytical capabilities, we deliver business-focused and actionable insights that foster open dialogue and equip the world’s top organizations and their leaders with tools to navigate uncertainty with resilience and confidence. Partnering with industry and functional experts across BCG, we cut through the noise with data-driven analysis, offering business leaders strategic and timely responses to emerging challenges, today’s realities, and tomorrow’s scenarios. For more information, please visit the  Center for Geopolitics.

 

Authors

Director, Geopolitics & Trade Impact

Dominic DeSapio

Director, Geopolitics & Trade Impact
New York

Managing Director & Senior Partner; Global Lead, Center for Geopolitics

Marc Gilbert

Managing Director & Senior Partner; Global Lead, Center for Geopolitics
Toronto

Partner & Associate Director, Global Trade & Investment

Keith Halliday

Partner & Associate Director, Global Trade & Investment
Toronto

Partner

Sarah Lichtblau

Partner
San Francisco - Bay Area

Partner & Director, Global Trade & Investment

Michael McAdoo

Partner & Director, Global Trade & Investment
Montreal

Partner & Director, Trade, Investment & Geopolitics

Cristián Rodríguez-Chiffelle

Partner & Director, Trade, Investment & Geopolitics
Geneva

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