Trump Unveils Reciprocal Tariff Strategy in New Effort to Reform Trade

On Thursday, U.S. President Donald Trump directed his economic team to develop plans for imposing reciprocal tariffs on countries that impose tariffs on U.S. imports, heightening the risk of a global trade war with both allies and adversaries. Trump announced in the Oval Office that, for fairness, the U.S. would match the tariffs imposed on American products by other countries, neither more nor less.
Trump signed a memo instructing his team to begin assessing duties based on the tariffs other nations impose, as well as addressing non-tariff barriers like vehicle safety regulations and value-added taxes that raise the cost of U.S. products. However, the directive did not immediately impose new tariffs but launched an investigation into the levies by other countries, which could take weeks or months to complete. The focus will include countries such as China, Japan, South Korea, and the European Union.
This latest move escalated concerns about a broader trade conflict, with potential impacts on inflation in the U.S. Wall Street responded cautiously, relieved that immediate tariffs weren’t enacted, and stocks rose. The global stock market reached a record high, and U.S. Treasury yields fell.
Trump’s choice for commerce secretary, Howard Lutnick, stated that the administration would assess each affected country individually, with studies expected to conclude by April 1. This deadline aligns with the president’s initial instruction for his economic team to develop plans to address trade imbalances.
While Trump has previously campaigned on reducing consumer prices, he acknowledged that prices could rise temporarily due to these tariff actions. The White House official emphasized that the focus would initially be on countries with the largest trade surpluses and the highest tariffs.
Trump explained that the tariffs would aim to match other countries’ higher duties and counteract non-monetary barriers such as regulations, subsidies, and currency policies that obstruct U.S. businesses. He emphasized the need to create fair tariffs that accurately reflect these barriers.
The announcement seems partly aimed at initiating negotiations with other countries. The White House official noted that Trump would be open to lowering tariffs if other nations did the same. Though no specific global tariff plan was confirmed, the official stressed that the administration would seek more tailored, country-specific tariffs.
Tiffany Smith from the National Foreign Trade Council expressed relief that the administration was taking a more careful, methodical approach, hoping it would lead to lower tariffs and fewer barriers through dialogue with trading partners.
Since taking office, Trump has already announced tariffs on steel and aluminum imports, implemented 10% tariffs on Chinese goods, and delayed tariffs on goods from Canada and Mexico. He also mentioned the possibility of separate tariffs on cars, semiconductors, and pharmaceuticals.
Trade experts warned that implementing reciprocal tariffs could be complex for the administration, given the legal challenges. Potential statutes that could be used include Section 122 of the Trade Act of 1974 and Section 338 of the Tariff Act of 1930, though the latter has never been applied. Trump could also rely on the International Emergency Economic Powers Act, which was used to justify tariffs on China and is pending for Canada and Mexico.
Meanwhile, Indian Prime Minister Narendra Modi, who met with Trump on Thursday, offered to discuss reducing tariffs and increasing U.S. imports of oil, gas, and military equipment. Trump confirmed that the U.S. would reciprocate India’s tariffs. There was optimism that a trade deal with India could be reached within months.