Trump Moves to Impose Reciprocal Tariffs as Soon as April

2025-02-14 @ 13:41

Rates will consider non-tariff barriers, including EU’s VAT
President reiterated plan to tax auto, chip and drug imports

https://imasdk.googleapis.com/js/core/bridge3.686.0_en.html#fid=goog_2000697569Unmute WATCH: President Trump says tariffs would cause the US to be “flooded with jobs” and prices will ultimately go down for most things. Source: Bloomberg

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The president on Thursday signed a measure directing the US Trade Representative and Commerce secretary to propose new levies on a country-by-country basis in an effort to rebalance trade relations — a sweeping process that could take weeks or months to complete. Howard Lutnick, Trump’s nominee to lead the Commerce Department, told reporters all studies should be complete by April 1 and that Trump could act immediately afterward.

Bloomberg Daybreak Asia

US Tariff Delay Boosts Mood

20:08

Fresh import taxes would be customized for each country, meant to offset not just their own levies on US goods but also non-tariff barriers the nations impose in the form of unfair subsidies, regulations, value-added taxes, exchange rates, lax intellectual property protections, and other factors that act to limit US trade, according to a copy of the memo distributed by the White House. Markets reacted positively to signs the tariffs aren’t expected to start immediately.

“I’ve decided, for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America,” Trump said in the Oval Office. “In almost all cases, they’re charging us vastly more than we charge them but those days are over.”

Trump told reporters that he would enact import taxes on cars, semiconductors and pharmaceuticals “over and above” the reciprocal tariffs at a later date.

Trump cited barriers in the European Union, including a VAT, as an example of what the US is looking to respond to. Trump has also singled out Japan and South Korea as nations that he believes are taking advantage of the US, and thus could be targeted in his latest push, according to a White House official who briefed reporters before the announcement.

Reciprocal tariffs would amount to Trump’s broadest action to address US trade deficits and what he characterizes as unfair treatment of American exports around the globe. Trump has already imposed 10% tariffs on Chinese goods and plans to slap 25% duties on all US steel and aluminum imports next month.

Yet the president’s decision not to implement tariffs right away could be seen as an opening bid for negotiation — following the same strategy he’s already used to extract concessions from Mexico, Canada and Colombia — rather than a sign he’s committed to following through.

Traders saw the moves as a boost for risk assets, with the dollar retreating and stocks rising around the world. Speculation that negotiations will soften the tariffs, for now, eased fears of a full-blown trade war that would hurt growth and spur inflation.

“The goal is to have fair and reciprocal trade, and if we have that we will have jobs, high wages and high productivity,” Trump trade adviser Peter Navarro said Thursday on Bloomberg Television.

The president is hoping to have a discussion with other nations about how existing policies have created an imbalanced trade environment, an official said, and he’s more than happy to lower tariffs if countries want to pare their levies or remove other trade barriers.

“It’s a two-way street,” Lutnick told reporters Thursday after Trump signed the directive.

But Trump said he did not expect to issue exemptions or waivers. He said that despite giving Apple Inc. a pass on tariffs he imposed on China during his first term in order to compete with Samsung Electronics Co. Ltd., this tariff package “applies to everybody across the board.”

Whatever happens, Trump’s brinkmanship has injected uncertainty into the global economy, with businesses and consumers waiting to see how Trump proceeds on a decision that could disrupt the US’s trade relationships with the rest of the world. The tariffs, if enacted, also risk driving up prices for US consumers on imported goods and exacerbating worries over inflation.

Navarro downplayed those worries on Thursday, saying the revenue raised from tariffs would be a “beautiful thing” and arguing that China-specific levies on certain key goods imposed during the first Trump administration hadn’t meaningfully driven up prices.

“I would suggest to you that the tariffs we imposed on China were historic and large, and we had no problem at all with that,” Navarro said.

A study from the United States International Trade Commission found that the costs of those tariffs were split between less-favorable margins for sellers and higher prices for downstream buyers.

Earlier: Trump, Modi to Discuss Trade Pact as Reciprocal Tariffs Loom

Reciprocal tariffs are expected to hit hard in less-developed economies where average duties on US products are higher, according to Bloomberg Economics. It differs from a universal levy on all imports, as Trump proposed during the 2024 presidential campaign. The official said Trump could divert back to a global tariff strategy later on.

Trump announced his move just hours before he was set to host Indian Prime Minister Narendra Modi, whose country stands to be affected by reciprocal tariffs more than many other major trading partners. Trump has repeatedly criticized India’s high tariff barriers. Trump has taken repeated aim at the EU’s 15% VAT. Japan also has a VAT, known as a consumption tax.

Sea Change

The breadth of Trump’s envisioned tariff plan is breathtaking, setting off a massive logistical undertaking for Commerce and USTR. Trump’s action opens the door to develop analyses and calculations for nearly 200 other nations, each with their own tariff schedules containing thousands of tariff codes. That’s not to mention the challenge of determining the value of other nations’ regulations, fiscal policies and subsidies.

“The complexity of devising a fully reciprocal tariff system with all other countries and covering all products would be enormous,” said Tim Brightbill, a trade lawyer at Wiley Rein LLP.

A reciprocal tariff system would mark a sea change in how the US approaches trade, and would erode one of the fundamental tenets of the global trading system that the US shaped after the Second World War.

As the world’s largest economy, the US has long dangled access to its market as an incentive and seen openness as an economic advantage. It also advocated for what is known as the “most favored nation” approach to tariffs that had guided global trading rules since the 1940s. It holds that all countries should treat trading partners equally and give them the same access as their most-favored ones other than in cases where special free-trade agreements have been signed.

Trump blames US bilateral trade deficits on unfair trade practices, bad deals negotiated by his predecessors or a combination of both. He’s been especially critical of the EU and what he sees as the unfair treatment of American-made products, especially automobiles and agricultural commodities.

Most economists argue that trade deficits are the product of forces far stronger than mismatched tariffs — they also reflect broader macroeconomic factors such as the consumption of American households relative to those elsewhere, the US dollar’s reserve currency status and the appetite globally for US assets.