Trump’s biggest round of tariffs is coming next week. Here is how it could shake up the economy

WASHINGTON ― President Donald Trump's long-promised plan to shake up the economy arrives Wednesday as he prepares to unleash his most significant round of tariffs yet. He already has slapped duties on imports that have roiled markets and ignited a global trade war.

Two months into his White House return, Trump has imposed tariffs on goods from neighboring Canada and Mexico as well as China, all steel and aluminum imports, and foreign cars and auto parts. He's threatened several other countries including traditional allies in the European Union with other steep tariffs ‒ even on European wine.

Yet Trump has circled April 2 as the true culmination of his "American first" trade policy as he seeks to boost domestic manufacturing by making it more expensive for companies to ship products into the U.S.

That's when Trump is set to announce his reciprocal tariffs, which is expected to target all nations with a focus especially on the largest contributors to the $1.2 trillion U.S. trade deficit. Duty collections from the tariffs will begin Thursday.

Here's what to know ahead of what Trump has called "the big one."

What are reciprocal tariffs?

Trump has said his administration's suite of reciprocal tariffs will apply to nations that charge fees on U.S. exports, promising to match those countries' duties with tariffs of the same rate.

On Feb. 13, Trump signed a memorandum that directed U.S. trade officials to go country by country and put together a slate of tailored counter measures.

Why is Trump pushing reciprocal tariffs?

Trump has said the reciprocal tariffs will offset trade practices of other nations that his administration deems unfair, while encouraging companies to make products in the U.S. to avoiding having to pay the new fees.

In 2024, the U.S. imported $1.2 trillion more in goods than than it exported, a record trade deficit that Trump is aiming to shrink with his action.

Trump has complained the U.S. has allowed other nations to levy tariffs on U.S. exports without any consequences.

What is the 'Dirty 15?'

Treasury Secretary Scott Bessent last week said the Trump administration beginning April 2 will apply a reciprocal tariff number to each country based on what they charge on U.S. exports.

He said the countries most impacted will be the 15% of nations that contribute most significantly to the U.S. trade deficit and impose the largest tariffs.

"There's what we would call the 'Dirty 15,'" Bessent said on Fox Business, adding they have substantial tariffs and other unfair trade barriers. "It's 15% of the countries, but it's a huge amount of our trading volume."

The White House has not released a list of the "Dirty 15" countries. But the countries with the largest trade deficits with the U.S. are China, the EU, Mexico, Vietnam, Taiwan, Japan, South Korea, Canada, India, Thailand, Switzerland, Malaysia, Indonesia, Cambodia and South Africa, according to the Wall Street Journal.

Is Trump narrowing the tariffs?

Bessent's remarks suggests the Trump administration could be narrowing the scope of the reciprocal tariffs from what Trump originally proposed.

And although Trump this week imposed tariffs on the auto industry, his administration is likely to exclude other sector-specific tariffs that Trump has previously discussed, according to recent reports from Bloomberg and the Wall Street Journal.

This includes 25% tariffs on all semiconductor, microchips and pharmaceutical imports that Trump has said he intends to impose but has yet to carry out.

Asked on Friday if he expected to put any exemptions in place for life-saving medicines, Trump told reporters aboard Air Force One while flying to South Florida, "Well, we'll be announcing it soon. But we have to bring pharmaceuticals, drugs and pharmaceuticals, back into our country."

The uncertainty continues a whiplash pattern when it comes to Trump’s aggressive use of tariffs, which he’s frequently threatened, only to quickly pull back, in multiple instances.

Why is Trump suddenly changing his tone?

Amid growing economic anxieties at home and abroad, Trump this week downplayed the scale of the tariff rates in store for other nations ‒ a noticeable change in his tone after building the tariffs up for weeks.

"We’re going to make it very lenient," Trump reporters Wednesday in the Oval Office after signing the new auto tariffs. "I think people are going to be very surprised. It’ll be, in many cases, less than the tariff that they’ve been charging us for decades."

White House press secretary Karoline Leavitt echoed that sentiment Thursday, telling reporters, “He thinks that some of these numbers would be more conservative than many people are expecting.”

Could the tariffs push the US into a recession?

Economists worry large-scale reciprocal tariffs could further hurt a weakening economy and lead to higher prices for consumers. Tariffs are taxes on imports that companies typically pass down to customers.

Mark Zandi, Moody's chief economist, told USA TODAY that broad-based reciprocal tariffs left in place for several months would create "the fire for a recession."

He pointed to several consequences of the new levies: higher costs for low- and middle-income earners, a new tariff tax for U.S. businesses, retaliatory tariffs from other nations, and stock market struggles that would wipe out significant wealth of high-income earners critical to consumer spending.

"If I'm right, as that becomes evident, I do think it's likely there will be a pivot and backtrack on the tariffs and a declaration of victory," Zandi said. "So I don't know that we'll ultimately ever get to a recession, but we're going to get awfully darn close."

At the same time, Zandi said it's hard to speculate too much given the uncertainty from Trump's on-and-off again record with tariffs.

How is Wall Street reacting to a tariff plan that Trump calls 'Liberation Day'?

Ahead of what Trump is calling "Liberation Day," the stock market plummeted Friday as investors sold off in response to Trump's trade policy and concerns about inflation.

The Dow Jones Industrial Average dropped more than 700 points, or about 1.7%., its largest drop since March 10. The S&P 500 was down more than 100 points.

Stock market gains that followed Trump's November election victory have been wiped out as Trump executes his trade policy.

Friday's selloffs came after news that inflation in February was 2.5% higher than a year ago, according to the Personal Consumption Expenditures Price Index, The Fed's preferred inflation measure. While that was in line with economists' forecasts, the important so-called core PCE, which excludes the volatile food and energy sectors, rose 2.8%, more than expectations for 2.7%.

How will other countries respond to the tariffs?

Trump's reciprocal tariffs are likely to escalate a global trade war that is already building even before the announcement.

Canada and China hit back at Trump's recently imposed tariffs with retaliatory tariffs on U.S. exports, while the European Union has threatened to do the same next month.

And Canadian Prime Minister Mike Carney responded to Trump's 25% tariffs on automobiles this week by saying the U.S. is "no longer a reliable partner" and vowing his nation will seek to do more business with other countries.

Automobiles that fall under the umbrella of imports protected in the Canada-United States-Mexico Agreement ‒ a trade deal orchestrated by Trump in his first term ‒ won’t be subject to the full tariff rate. Instead, the U.S will only levy tariffs on the foreign parts that make up vehicles imported from Canada and Mexico.

Despite those carve-outs, Carney said Canada will announce new retaliatory tariffs next week, saying, “Nothing is off the table as we defend our workers and our country."

Leaders of Germany and France have also urged the EU to respond with retaliatory tariffs.

What will Trump do if countries retaliate?

Trump said Friday the U.S. will "absolutely" respond to any additional tariffs from Canada with more retaliatory tarrifs.

"Many countries have taken advantage of us ‒ the likes of which nobody even thought was possible, for many, many decades," Trump said. "That has to stop."

Still, Trump said he had a "very good" phone call with Carney Friday.

Trump also told reporters many leaders of other nations agree with his argument on tariffs. "Many of them actually apologize. They said, 'Look, we have taken advantage (of the United States).'"

Trump did not identify the names of these leaders.

Reach Joey Garrison on X @joeygarrison.