On Thursday, President Trump signed a memorandum instructing his administration to consider reciprocal tariffs, warning that he may impose levies on imports from countries that enforce higher duties on American goods.
The initiative aims to “address long-standing discrepancies in international trade and promote fairness overall,” according to a fact sheet released by the White House regarding the tariffs.
“The era of America being exploited is over: this strategy will prioritize the American worker, enhance our competitiveness across all industry sectors, reduce our trade deficit, and strengthen both our economic and national security.”
Details regarding the implementation of the tariffs were not provided by the Trump administration.
This move signifies a worsening of an emerging trade conflict as Mr. Trump seeks to obtain concessions from international economic partners and aims to use trade policy to achieve broader foreign policy objectives.
The announcement was made just prior to a discussion between Mr. Trump and India’s Prime Minister Narendra Modi, a nation that may be affected by the reciprocal tariffs. Modi has recently attempted to alleviate the Trump administration’s trade-related concerns by reducing import tariffs on certain motorcycles and bourbon whiskey, and has also agreed to accept planes carrying undocumented migrants.
Previously, President Trump has already established tariffs on Canada, China, and Mexico. While he temporarily suspended tariffs on Canada and Mexico for a month following commitments from both countries to enhance border security, he also announced 25% tariffs on steel and aluminum that are scheduled to be enforced in March.
Imposing a matching tariff on specific U.S. trading partners may be seen as a less drastic alternative than a broad levy, as per economists. Trade data indicates that Argentina, Brazil, India, and Turkey have the largest tariff disparities with the U.S.
“While most developed markets would likely remain relatively unaffected, emerging markets could experience a more significant loss of competitiveness, with India, Brazil, and Turkey being among the most vulnerable,” stated Shilan Shah, deputy chief emerging markets economist at Capital Economics, in a report to investors. “It is likely that these governments (and others) would offer concessions to President Trump to avert the imposition of reciprocal tariffs.”
Officials from the Trump administration assert that tariffs can support domestic manufacturers and also incentivize both American and foreign companies to generate more jobs within the U.S.
However, economists caution that tariffs, which function as taxes on imported goods, may lead to increased prices for consumers. This latest series of U.S. tariffs comes at a time when inflation appears to be rising, with the Consumer Price Index in January climbing to 3% year-over-year, surpassing analyst expectations.
