The United States has announced sweeping reciprocal tariffs on goods entering the country, U.S. President Donald Trump said on Thursday in the Oval Office.
“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 said as he signed the executive order Thursday.
Trump said the tariff would differ depending on the tariffs individual countries imposed on U.S. goods.
“In almost all cases, they are charging us vastly more than what we charge then, But those days are over,” he said.
The tariffs were not going into effect on Thursday but could begin to be imposed within weeks as Trump’s trade and economic team study bilateral tariff and trade relationships, a White House official told reporters on a conference call, according to Reuters.
The executive order said the newest tariff approach “will be of comprehensive scope, examining non-reciprocal trade relationships with all United States trading partners.”
The order described “non-reciprocal trade relationships” in very broad terms, including any tariffs on U.S. products, taxes and non-tariff barriers on U.S. businesses, workers, and consumers and “policies and practices that cause exchange rates to deviate from their market value.”
A non-reciprocal trade relationship, the executive order said, would be one which “in the judgment of the United States Trade Representative… imposes any unfair limitation on market access.”
It added that a “nontariff barrier” would be described as “any government-imposed measure or policy or nonmonetary barrier that restricts, prevents, or impedes international trade in goods.”
Economists, including a recent report by the Bank of Canada, have warned that a “global trade conflict” will lead to lower economic growth across the world.
The Canadian Chamber of Commerce, in a statement, said Trump’s move would be a “step towards dismantling a rules-based international trade order that has made much of the western world, especially the United States, more prosperous and productive.”
“Disrupting long-standing, mutually beneficial trade patterns with self-defeating tariffs makes no sense for American or Canadian economic success. Tariffs are taxes. They raise the cost of goods and services. They are not — as the President claims — a source of endless revenue. The pursuit of an American industrial model from the past will result in rising costs of goods, long-term economic decline, and job losses,” Candace Laing, the president and CEO of the chamber, said in a statement.
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Laing called on the Canadian government to improve internal trade between Canadian provinces and ensure that regulations in Canada attract investment.
What are reciprocal tariffs?
After weeks of focus on retaliatory tariffs, many may wonder what the term “reciprocal” means.
Trump has not specified in detail how he defines the term.
There remains uncertainty about whether his order would apply only to matching tariffs or to including other foreign taxes that he views as a barrier to exporting American goods.
Broadly speaking, a reciprocal tariff would appear to be aimed at matching either the value or the spirit of any tariffs in place by other countries on American products.
This is different from what has become known in the Canadian context as a retaliatory tariff, which has been used when discussing a response to hit back at new tariffs imposed by the U.S. on Canada.
For example, Canada does not have across-the-board tariffs on American goods. If Trump follows through on his threat to impose those sweeping 25 per cent tariffs next month, those sweeping U.S. tariffs would not be reciprocal, since Canada does not have any matching ones already in place.
Canada has a list ready of retaliatory tariffs that the government will impose in direct response if that happens, which Trudeau has said are crafted to inflict pain on American consumers while minimizing pain on Canadians.
How will tariffs be applied?
Howard Lutnick, Trump’s pick for Commerce secretary, said the administration would address each affected country one by one. He said the administration’s studies on the issue would be completed by April 1.
Trump, who campaigned on a pledge to bring down consumer prices, said prices could go up in the short term as a result of the moves. “Tariffs are great,” he said.
The White House official, who spoke to reporters before Trump’s event in the Oval Office, said the administration would examine what it called the most “egregious” issues first, including countries with the biggest trade surpluses and highest tariff rates.
Trump’s reciprocal tariffs would match the higher duty rates charged by other countries, he said. They also would aim to counteract non-tariff trade barriers such as burdensome regulations, value-added taxes, government subsidies and exchange rate policies that can erect barriers to the flow of U.S. products to foreign markets.
The effort also aims to launch negotiations with some countries to reduce these barriers.
The announcement appeared designed at least in part to trigger talks with other countries. The official said Trump would gladly lower tariffs if other nations lowered theirs.
“So the president is more than happy to lower tariffs if countries want to lower tariffs. But let’s also recognize that tariffs, higher tariffs, are not the biggest part of the problem in many, if not most cases,” the official said.
Targets include China, Japan, South Korea and the European Union. The tariffs would avoid a “one size fits all” approach for more customized levies, he said, though he did not rule out a flat global tariff.
–with files from The Associated Press and Reuters