US President Donald Trump announced plans for customised reciprocal tariffs on all imports on Thursday, citing unfair duties imposed by other countries on American goods and marking a further move towards a global trade war.
The new levies would take effect after a six-month assessment by the director of the Office of Management and Budget – with input from the Office of the US Trade Representative, Commerce Department and other agencies – after which time the OMB would give Trump its assessment.
The US Trade Representative and the Commerce Department would be responsible for proposing new tariffs on a country-by-country basis.
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Howard Lutnick, Trump’s nominee for Commerce Secretary, told reporters that all assessments would be completed by April 1, allowing tariffs to potentially take effect the following day if the US president decides to move forward.
“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,” Trump told reporters in the Oval Office before signing a presidential order.
“In other words, they charge us a tax or tariff and we charge them the exact same tax or tariff. Very simple,” he added, noting that the exact number would not be clear “unless you go by the individual country”.
“If you go to the individual country and you look at what they’re charging us, in almost all cases, they’re charging us vastly more than we charge them,” Trump said. “Those days are over.”
The calculation for new tariffs would also take into consideration quotas, value-added taxes and regulations as well as non-tariff barriers imposed by other countries.
The announcement came just hours before Trump met with Indian Prime Minister Narendra Modi at the White House.
“India is a very hard place to do business in because of the tariffs,” Trump told reporters on Thursday. “They have the highest tariffs just about in the world and it’s a hard place to do business.”
Widely anticipated owing to Trump’s threats to hit most or all of America’s trading partners with reciprocal tariffs, the president’s decision follows his move against steel and aluminium imports, which face levies of 25 per cent starting in March.
The new tariffs will be applied on top of those levies.
New tariffs on cars, pharmaceuticals and semiconductors were expected to be announced in the coming days. Trump on Thursday said those duties would likewise be imposed in addition to the reciprocal taxes.
Trump imposed an additional 10 per cent tariff on Chinese goods, effective February 4, on top of those that have been in place since he started a trade war with Beijing in 2018. Chinese countermeasures will take effect this week.
On Thursday, even traditional American allies drew criticism from the president.
“We all love Europe, love the countries in Europe, but the European Union has been absolutely brutal on trade,” Trump said. “Canada has been very bad to us on trade, but now Canada is going to have to start paying up.”
He told reporters there would be no waivers for companies like US tech giant Apple who manufacture their products in China.
“Apple makes a lot of their product in China, so I did that because it wouldn’t have been fair,” he said. “But now this applies to everybody across the board.”
Trump asserted his tariff policy would result in “tremendous amounts of jobs, and ultimately, prices will stay the same, go down”, saying “we’re going to have a very dynamic country”.
The White House’s flurry of tariff orders is central to Trump’s broader effort to protect American manufacturers, force allies and adversaries alike to help the US on issues like undocumented immigration and raise revenue to offset tax cuts.
Amid the executive orders reversing his predecessor Joe Biden’s efforts to close ranks on economic and security fronts with Washington’s allies to blunt China’s expanding geopolitical sway, a number of analysts have described some Trump objectives as dangerously contradictory and putting American jobs at risk.
Clark Packard of the Cato Institute, a Washington-based think tank, called Trump’s plan “an administrative nightmare” considering the thousands of products that will need to be analysed for dozens of countries.
Whether USTR will be examining trade-weighted tariff levels – those that weigh the foreign-import levies on actual trade as opposed to an average of a country’s full tariff schedule – also clouded the picture, he said.
Canada, for instance, had an average trade-weighted tariff rate of 1.83 per cent, compared with 2.72 per cent for the US, in 2022, according to World Bank data. Its rate would be higher if it were to include products imported at much lower volumes and often insignificant for the US.
Trump delayed an across-the-board 25 per cent tariff on goods from Mexico and Canada, with a lower 10 per cent carve-out for imports of Canadian energy products until March 4 to allow talks over steps meant to stem the flow of fentanyl into the US.
More broadly, Packard said, the layering of tariff threats undermined the rationale for investment in America.
“Investment in the United States and around the world thrives on certainty, and when we have an erratic trade policy, that’s causing all kinds of uncertainty,” he added. “I think you will see over time, investments start to pull back and sort of shrivel up.”
Trump is betting that the damage the tariffs inflict on trading partners will be greater than what the US will face, a correct assessment because the country is less trade-dependent than most other large economies, said Philip Luck of the Centre for Strategic and International Studies, a Washington-based think tank.
However, Luck warned that Trump’s “fortress America strategy” could undermine many of his goals in the longer term, particularly with respect to China.
“Antagonising our partners distracts from the key problem, which is the subsidies of the PRC,” Luck explained in a panel discussion ahead of Thursday’s announcement.
He said the US was focused on “what types of bourbon the EU is going to put tariffs on, rather than focusing on the non-market policies of the PRC”.
“We need tariffs or some sort of barriers to these market behaviours, not only in the United States, but in Canada, in the EU, Japan, South Korea [and] other places,” Luck added.
More expensive steel in the US means less competitive exports and less competitive production for things that use steel, he continued.
“For every job in steel and aluminium, there are 80 jobs in the United States in industries that intensively use steel and aluminium. This is immensely costly.”
Attention now turns to whether Trump will strike deals with trading partners that would waive some or all of the pending US tariffs.
His resolve will be tested by rising domestic inflation, an issue that helped doom the presidential campaign of Trump’s opponent, then US vice-president Kamala Harris, in last year’s election.
America’s monthly consumer price index rose 3 per cent in January – the most since August 2023 – a warning sign that progress in the effort to tame inflation has stalled if not reversed.
Analysing Trump’s threat to slap 25 per cent tariffs on Canada and Mexico alone, S&P Global in a report last week said those levies could cause a one-time 0.5 per cent to 0.7 per cent rise in US consumer prices, assuming the tariffs remain in place through 2025.
More from South China Morning Post:
- Trump blames Biden for surprise rise in US inflation
- Transatlantic trade war nears as Trump and EU clash over metals tariffs and digital laws
- US tariffs targeting China face a legal challenge, but not the taxes you might think
- EU signals pragmatic tone as it walks ‘fine line’ between China and the US
- Donald Trump downplays China’s retaliatory tariffs and ‘in no rush’ to talk to Xi Jinping
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