President Donald Trump’s proposal for “reciprocal tariffs” on U.S. trading partners is expected to lead to intense negotiations that may result in lower trade barriers. However, analysts caution that the plan also carries the risk of retaliatory measures from affected nations.
“This applies to every country. When they treat us fairly, we treat them fairly,” Trump told reporters.
What Are Reciprocal Tariffs?
Tariffs are taxes imposed on imported goods. Under Trump’s plan, reciprocal tariffs would involve matching the tariffs that other countries impose on U.S. exports.
During his election campaign, Trump pledged, “A tariff for a tariff, the exact same amount,” emphasizing that the approach would apply to all nations, including economic competitors like China and allies such as the European Union, Japan, and South Korea.
A White House official, speaking anonymously, stated, “Each of these countries benefits from trade imbalances with the U.S. The president sees this as a lack of fair trade.”
The administration's plan would assess both tariff rates and non-tariff factors like value-added taxes (VATs) before determining new levies, which will be imposed on a country-by-country basis.
When Will They Be Implemented?
For now, Trump’s directive instructs the Commerce Secretary and U.S. Trade Representative, along with other officials, to study the issue and propose solutions.
Commerce Secretary nominee Howard Lutnick indicated that tariffs could be imposed as early as April 2, following the completion of necessary evaluations.
The White House has signaled that the initial focus will be on countries with the largest trade imbalances with the United States. The timeline for implementing tariffs could span weeks or months, with potential legal justifications including national security concerns, unfair trade practices, or emergency economic measures.
“This seems more like an invitation to negotiate,” said Christine McDaniel, a senior research fellow at the Mercatus Center.
Which Countries Could Be Most Affected?
Emerging economies with high tariffs on U.S. goods may be particularly vulnerable if reciprocal tariffs are introduced.
The White House singled out Brazil and India when unveiling the proposal, noting disparities such as the U.S. ethanol tariff of 2.5% compared to Brazil’s 18% duty on American ethanol exports.
Officials also pointed to the European Union’s 10% tariff on imported cars, significantly higher than the U.S. rate of 2.5%. Trump has criticized the EU’s trade policies as “brutal.”
However, analysts highlight that the U.S. itself has higher tariffs on specific products, such as light trucks.
What Challenges Could Arise?
Addressing non-tariff factors like VATs through reciprocal tariffs could significantly increase overall trade duties, according to Goldman Sachs analysts.
Experts from the Tax Foundation pointed out that VATs are border-adjusted, meaning they tax imports while exempting exports. Despite appearances, this system is trade-neutral, which could complicate negotiations.
Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics (PIIE), warned that if Trump aggressively pursues these tariffs, other nations may retaliate.
“The more major countries respond with countermeasures, the greater the likelihood that additional countries will follow suit,” he told AFP.
Higher U.S. tariffs would also raise costs for domestic importers.
What Is the Objective?
According to Obstfeld, Trump’s strategy seems aimed at pressuring countries to adopt trade policies that favor U.S. exports.
“For example, if Brazil lowers tariffs on U.S. automobiles but maintains higher tariffs on other foreign cars, it effectively benefits American manufacturers,” he explained.
Some analysts believe that the threat of tariffs serves as a negotiating tactic, creating uncertainty that affects both U.S. and global businesses.
The White House has not ruled out the possibility of a future universal tariff policy that could apply broadly across all trading partners.
BDST: 1011 HRS, FEB 14, 2025
MSK
