Trump Announces Reciprocal Tariffs, Opening New Front in Trade War
Trump’s Latest Move in Trade War
U.S. President Donald Trump announced on Thursday that he would impose "reciprocal tariffs" on trading partners, opening new fronts in his trade war. In a post on his Truth Social platform, Trump wrote, "Three great weeks, perhaps the best ever, but today is the big one: reciprocal tariffs!!! Make America great again!!!"
Background on Reciprocal Tariffs
The move would match the United States’ tariff rates on imports to the levels that other countries impose on US goods. This is not a new strategy for Trump, who has announced a broad range of tariffs targeting some of the United States’ biggest trading partners since taking office. He argues that this would help balance trade, and in some cases, use the threats as a way to influence policy.
Economic Concerns
Economists, however, warn that his broad-ranging tariffs on US imports would likely boost inflation, not reduce it. This is a key issue that was a major concern in the November election that saw Trump sweep to power, and the Republican has promised to swiftly reduce prices.
Impact on Emerging Markets
Analysts have also warned that reciprocal duties could bring a broad tariff hike to emerging market economies such as India and Thailand, which tend to have higher effective tariff rates on US goods. Countries such as South Korea that have trade deals with Washington are less at risk from this move, analysts believe.
Trump’s Promise
During election campaigning, Trump promised, "An eye for an eye, a tariff for a tariff, same exact amount." For example, if India imposes a 25-percent tariff on US autos, Washington will have a 25-percent tariff as well on imports of autos from India, explained a Nomura report this week.
Trade Talks with India
Indian Prime Minister Narendra Modi will hold talks with Trump at the White House on Thursday, and New Delhi has offered some quick tariff concessions ahead of his visit, including on high-end motorcycles.
Objective of Reciprocal Tariffs
"Trump’s objective of implementing reciprocal tariffs is to ensure fair treatment for US exports, which could indirectly also address US trade imbalances with partner countries," analysts at Nomura said.
Effective Tariff Rates
Among Asian economies, India has a 9.5-percent weighted average effective tariff on US exports, while there is a three-percent rate on India’s exports to the United States. Thailand has a 6.2-percent rate and China a 7.1-percent rate on US products.
Conclusion
The introduction of reciprocal tariffs by the US is likely to have significant implications for international trade, particularly for emerging market economies. While the move may be seen as a way to address trade imbalances, it is important to consider the potential economic consequences, including higher inflation and reduced trade.
FAQs
- What are reciprocal tariffs?
Reciprocal tariffs are tariffs that match the tariff rates of other countries on US goods. - Which countries are most affected by this move?
India and Thailand are likely to be among the most affected, as they tend to have higher effective tariff rates on US goods. - What is the objective of reciprocal tariffs?
The objective is to ensure fair treatment for US exports and address US trade imbalances with partner countries. - What are the potential economic consequences of reciprocal tariffs?
Higher inflation and reduced trade are potential consequences of the introduction of reciprocal tariffs.