With Trump's tariff bombshell, world trade heads for the law of the jungle

The trade war just escalated, with consequences that will go far beyond trade.

- Vikram Khanna

April 2 was heralded as "Liberation Day" for the US economy by President Donald Trump. Whether that turns out to be the case remains to be seen. But for the rest of the world, it was "tariff bombshell day"—the biggest salvo so far in the trade war.

By executive order, which is how much of US policy is being made these days, Mr. Trump unleashed a wave of so-called reciprocal tariffs, which left no country unscathed.

From April 5, there will be a universal tariff of at least 10 percent on 185 countries. Many have been singled out for higher duties, which will kick in on April 9. Asian countries will be among the worst hit. Tariffs will range from 24 percent on Japan, to 49 percent on Cambodia. China will be slapped with a tariff of 34 percent. Vietnam, seen as the prime location for the re-routing of Chinese exports, will be walloped with a 46 percent tariff. Asia's smaller economies, Laos, Myanmar, and Sri Lanka will be hit by tariffs ranging from 44 to 48 percent. Only Singapore, among all Asian countries, gets away with the 10 percent baseline tariff.

This protectionist barrage could devastate many of Asia's export sectors and trigger a massive disruption of supply chains in the region.

DUBIOUS RECIPROCITY

The Trump administration's claim that the tariffs are reciprocal is suspect. The calculations that determined the tariff levels are opaque. They are said to take into account not only tariffs levied against the US, but also other trade restrictions, indirect taxes, and alleged currency manipulation. For example, when unveiling his tariff regime at the White House on April 2, Mr. Trump claimed that China's trade barriers and currency malpractices were equivalent to a tariff rate of 67 percent, so he suggested the 34 percent tariff imposed on China represented a discount. The same dubious methodology was applied to other countries.