Trump's reciprocal tariffs may mean 7-8% higher US import duties, says S&P Global economist

Trump's tariffs are also being seen as an inflation risk, with latest US consumer prices rising in January by the most in nearly 1-1/2 years.

S&P Global Ratings is of the view that reciprocal tariffs by US President Trump would not have as much of a hit on the global economy and trade, as compared to universal import tariffs.

In conversation with CNBC-TV18, Satyam Panday, Chief US and Canada Economist at S&P Global said on February 13 that the US President 'seems serious' about his reciprocal tariff threat, which has come ahead of Prime Minister Modi White House visit. The Trump administration has in the past raised the issue of India levying high tariffs on US imports.

White House has indicated that President Trump could authorize reciprocal duties by Thursday morning. "Trump seems serious about the reciprocal tariffs, but it seems to have not as much of a hit on global economy as a universal 10-20% tariff would have been," said Satyam Pandey.

"This (reciprocal tariff) may mean 7-8% higher import tariffs from the US side," he added, given that the average US import tariffs are at 2.3%.

The S&P Global economist added that the world could stare at a higher trade tariff era under President Trump, and countries that have higher trade deficit with the US could mean they would be in the firing line. " All countries have higher tariff differential with US... It is not just the tariff difference, but also the trade deficit. A higher deficit and higher tariff differential will mean that Trump will target you," Pandey said.

Trump's tariffs are also being seen as an inflation risk, with latest US consumer prices rising in January by the most in nearly 1-1/2 years. S&P Global's Pandey said the reciprocal tariff could mean a one-time inflation hit on America, with the assumption that trading partners do not retaliate, however, "..that is a strong assumption", the economist added.

Trump has already announced tariffs on all steel and aluminum imports beginning March 12, a move that is expected to impact Mexico, Canada and the the European Union. Japan and Australia are likely to seek exemptions from the duties.

The new US tariff rates would take effect 'almost immediately', and Section 338 of the Trade Act of 1930 would give Trump a quick path to impose them.