Liberation day tariffs set to reshape global trade flows

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• US President Donald Trump announced a range of tariffs on most trading partners on self-proclaimed ‘liberation day’. We’ll model the impacts on bilateral trade flows in greater detail using our TradePrism model in the coming weeks. But it’s clear these tariffs are set to cause significant disruptions to supply chains and the global trading system.

• Within the US, imports of machinery & electrical equipment and textiles are set to face the greatest disruption in the near term. These goods have the highest rate of import penetration and face the sharpest increase in effective tariff rates, respectively.

• Asian exporters appear to be the most vulnerable to the new tariffs. Exporters may find it difficult to reroute trade given the breadth of tariff increases. Admittedly with such drastically different tariffs across economies, some exporters in low tariff economies may have an opportunity to increase their share of US imports. However, the decline in US imports overall is likely to more than offset any gain in market share.

Chart 1: Asian exports appear most at risk from reciprocal tariffs