US President Donald Trump has instructed his economic team to create plans for reciprocal tariffs on countries that tax American imports, increasing the potential for a global trade war with both allies and adversaries.
Trump stated, "On trade, I have decided for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them. No more, no less," during a discussion with reporters in the Oval Office on Thursday. "This is every country, and essentially, when they treat us fairly, we treat them fairly,” he said.
Trump signed a memorandum directing his team to begin calculating duties that match those imposed by other countries, and to address non-tariff barriers such as vehicle safety regulations that exclude US automobiles and value-added taxes that raise their cost. The directive stopped short of implementing additional tariffs and instead initiated what could be a lengthy investigation into the tariffs imposed on US goods by other trading partners, followed by the development of a response.
What are reciprocal tariffs?
Tariffs are taxes imposed on goods imported from another country. Trump’s reciprocal tariffs indicate that he would impose taxes similar to what other countries are levying. In his words, reciprocal tariffs are: "An eye for an eye, a tariff for a tariff, same exact amount."
To make it clearer, a White House official mentioned to news agency AFP that when it comes to imposing reciprocal tariffs, it does not matter whether the countries are strategic competitors like China or allies such as the European Union, Japan, or Korea.
Officials indicated that these levies will be applied on a country-by-country basis. Besides considering the tariff rates other countries impose on US goods, Trump's plan will also examine non-tariff factors like value-added taxes (VATs).
How will Trump’s reciprocal tariffs impact India?
Trump has reiterated that India’s tariffs are rather high, on occasions also referring to the country as the tariff king. “India has more tariffs than nearly any other country,” said Trump after signing the order on Thursday.
The US President said that in his first term he had brought up the issue of high tariffs with India but was unable to get a concession.
"And so we are being reciprocal with India. Whatever India charges, we charge them. So, frankly, it no longer matters to us that much, what they charge. I had discussions with India in the first term about the fact that their tariffs were very high, and I was unable to get a concession," he said.
Foreign Secretary Vikram Misri addressed the ongoing reciprocal tariff controversy, stating that the issue has been a topic of discussion for some time. In recent talks between the two sides, this matter naturally arose during the discussions between the leaders. Misri noted that while both leaders had their perspectives on the matter, the significant development is the agreement to initiate discussions on a bilateral trading agreement. He expressed optimism that this could be a valuable opportunity to advance and possibly conclude an agreement, which was initially anticipated during the first Trump administration.
When will Trump’s reciprocal tariffs come into effect?
The memo from former President Donald Trump calls for the commerce secretary and the US trade representative, in consultation with the treasury chief and others, to study trade issues and propose solutions. Trump's commerce secretary nominee, Howard Lutnick, stated on Thursday that tariffs could be implemented as early as April 2, following the completion of studies on the matter.
What are the experts saying on Trump’s tariffs?
Wall Street is concerned that further tariffs may increase U.S. inflation, hinder the Federal Reserve's ability to cut interest rates, and slow economic growth. The lack of immediate new trade measures led to a rise in global markets.
Barclays analysts noted that while global financial markets might find some relief in the delay of immediate reciprocal tariffs, it is unclear whether this delay indicates a reduced likelihood of their eventual implementation.