Trump’s reciprocal tariff drive is throwing international firms for a loop

US President Donald Trump’s push for reciprocal tariffs has sent businesses scrambling to assess the fallout on supply chains and costs, The New York Times writes. While Trump argues the policy is about fairness — matching tariffs imposed on US exports with equivalent duties on imports — it is also a harbinger of significant uncertainty for businesses and policymakers alike.

Where Trump’s tariffs stand so far: Trump has already imposed a 10% tariff on USD 450bn worth of Chinese goods and 25% tariffs on steel and aluminum imports and vowed to impose reciprocal tariffs matching those imposed by other US trade partners. He has also threatened to impose 25% tariffs on US imports from Mexico and Canada, with the measures on hold until 1 March as the neighboring countries continue to negotiate over border security.

Sidelining the WTO: Trump’s reciprocal tariff policy is not just a shift in trade policy — it’s a fundamental challenge to the World Trade Organization’s (WTO) role in global trade governance. For decades, the WTO has facilitated trade through multilateral agreements, ensuring that all member nations receive equal tariff treatment. Trump’s approach upends this system, pushing for country-to-country negotiations instead. The shift could have far-reaching consequences, as it erodes the global rules-based trading order and replaces it with a fragmented system of one-on-one trade deals based on direct negotiations.

It also introduces more uncertainty for multinational companies, which must now navigate a patchwork of differing tariff agreements instead of a standardized global framework. “For every widget, every tariff classification, you can have 150 different duty rates,” said law firm Sidley Austin’s Ted Murphy. It is bound to expose businesses to increased compliance costs and introduce uncertainty into global supply chains.

Businesses brace for the fallout: Trump’s latest tariff frenzy has forced international companies to rethink supply chains and investment strategies. Retailers like Walmart have already shifted sourcing from China to India and Mexico, while Columbia Sportswear and MedSource Labs have been exploring factory sites in Central America. However, Trump has now put those regions on notice as well.

The automotive sector is particularly vulnerable, as more than a quarter of US imports are components and raw materials essential for manufacturing. This means that higher tariffs could make American production more expensive, undermining domestic job creation rather than supporting it in direct contradiction to Trump’s stated rationale for the tariffs. “A 25% tariff across the Mexico and Canadian border will blow a hole in the US industry that we have never seen,” Ford CEO Jim Farley warned last week.

A strategy or a high-stakes gamble? While many see Trump’s tariff threats as a blunt protectionist measure, some analysts believe they could serve as a negotiation tactic. “There are a lot of ways this can go very badly for us… But if he can get other countries to open up their markets, there is a narrow path where this could end up promoting trade,” said former US Treasury official Christine McDaniel.

The unpredictability of Trump’s trade moves is leaving businesses and investors in limbo. “We take Trump seriously, but not necessarily literally,” said trade lawyer Ted Murphy. “He talks in broad strokes, but we have to watch what actually emerges.”

MARKETS THIS MORNING-

Asian markets are mostly in the green in early trading this morning, with Japan’s Nikkei looking at gains of 0.1%, the Hang Seng up 0.2%, and the Kospi up 0.8%.

THE CLOSING BELL-

The DFM rose 0.8% on Friday on turnover of AED 680.3 mn. The index is up 3.9% YTD.

In the green: Air Arabia (+4.4%), Shuaa Capital (+3.8%) and Emaar Development (+3.7%).

In the red: International Financial Advisors (-8.8%), National Cement Company (-6.8%) and Emirates Investment Bank (-6.3%).

Over on the ADX, the index closed down 0.3% on turnover of AED 893.7 mn. Meanwhile Nasdaq Dubai closed down 0.4%.