On Thursday, President Donald Trump enacted measures to adjust U.S. tariff rates to align with those of other countries in a bid to address barriers to American goods and reduce the U.S. goods trade deficit, which exceeded $1.2 trillion last year.
The initiative may result in increased tariffs for key trading partners by early April, prompting negotiations with numerous countries to lower tariffs and trade barriers.
Key aspects of Trump's order "Reciprocal Trade and Tariffs" include directing the Commerce Department, the U.S. Trade Representative's office, and other agencies to reassess U.S. tariff rates per country and product.
This ambitious undertaking involves reviewing over 17,000 import tariff codes for each of the 186 nations with Most-Favored Nation trading status. For instance, adjustments could be made to match tariffs like Brazil's 18% levy on U.S. ethanol or the EU's 10% import duty on vehicles compared to the U.S.'s 2.5% rate for passenger cars.
Notably, economies like China, Mexico, Vietnam, Ireland, and Germany are among those with substantial U.S. trade surpluses or facing severe cases that might be targeted first.
The order also mandates evaluating non-tariff barriers, such as regulatory hurdles, unfair taxes like the EU's Value Added Tax, and subsidies supporting state-owned firms in China, to be factored into the new tariff rates.
Furthermore, foreign exchange rates will be considered in tariff calculations, as undervalued currencies against the U.S. dollar can impact the trade deficit.
Once the Commerce Department, USTR, and the U.S. Treasury submit reports on modifying U.S. trade policies to Trump by April 1, he can proceed with implementing the new tariffs. Additionally, within 180 days, the Office of Management and Budget will report on the fiscal implications of the tariff actions on the federal government finances.
The White House anticipates swift tariff implementation based on available data, with a focus on a country-specific evaluation to expedite the process.