What are Trump's reciprocal tariffs and who may be hit?

President Donald Trump’s proposal for “reciprocal tariffs” is expected to trigger intense negotiations that may lead to lower trade barriers. However, analysts caution that the strategy could also provoke severe retaliatory measures from affected countries.

- What Are Reciprocal Tariffs? -

Tariffs are taxes placed on imported goods. Trump’s vision for reciprocal tariffs aligns with his campaign rhetoric: “An eye for an eye, a tariff for a tariff, same exact amount.”

According to a White House official, the policy will apply across the board, whether to geopolitical rivals like China or allied nations such as the European Union, Japan, or South Korea.

The administration argues that many countries impose higher tariffs on U.S. exports than the U.S. does on their goods, creating what Trump calls an “unfair” trade imbalance. The plan aims to equalize these discrepancies by matching foreign tariffs on U.S. products while also considering non-tariff barriers such as value-added taxes (VATs).

- When Will They Take Effect? -

Trump’s executive order directs the Commerce Secretary and U.S. Trade Representative, in consultation with the Treasury Department and other agencies, to conduct a study and propose corrective measures.

Commerce Secretary nominee Howard Lutnick suggested that tariffs could be introduced as early as April 2, following the conclusion of the review.

The administration will prioritize countries with the largest trade deficits or the most lopsided trade arrangements with the U.S. The process could extend over weeks or months, with tariffs possibly justified under national security concerns, unfair trade practices, or emergency economic measures.

Mercatus Center senior research fellow Christine McDaniel noted that, at this stage, the initiative appears more like an effort to bring trading partners to the negotiating table rather than an immediate tariff hike.

- Who Could Be Most Affected? -

Emerging economies with high tariffs on U.S. goods, such as Brazil and India, could be particularly impacted.

For instance, while the U.S. imposes a 2.5% tariff on ethanol imports, Brazil charges an 18% duty on American ethanol. Similarly, the administration has criticized the European Union’s 10% import tariff on automobiles, contrasting it with the U.S.’s 2.5% rate.

However, some analysts have pointed out that the U.S. itself maintains higher tariffs on certain products, such as light trucks.

- Challenges and Risks -

Applying reciprocal tariffs to address non-tariff issues, like VATs, could significantly raise the overall U.S. tariff burden.

The Tax Foundation explains that VATs function by refunding taxes on exports and applying them to imports, making them appear to favor domestic producers. However, VATs are trade-neutral in practice, meaning they don’t necessarily disadvantage foreign exporters. This could complicate negotiations with trading partners.

Maurice Obstfeld, senior fellow at the Peterson Institute for International Economics (PIIE), warned that aggressive U.S. tariff hikes could invite retaliation. “The more major countries push back, the more others will feel compelled to join in,” he cautioned.

Higher tariffs would also increase costs for U.S. importers, potentially impacting consumers and businesses that rely on foreign goods.

- The Bigger Picture -

Obstfeld suggests that Trump’s strategy aims to pressure countries into favoring U.S. exports. For example, if Brazil were to lower tariffs on U.S. cars while maintaining higher duties on other foreign vehicles, it would effectively benefit American manufacturers.

The administration sees tariffs as both a negotiating tool and a way to secure better trade terms. However, this approach injects uncertainty into global markets, creating challenges for both American and international businesses.

While the White House has outlined a country-specific approach for now, officials have not ruled out a broader, uniform tariff policy in the future.

This article was reported by journalist Angelia.