President Donald Trump on Thursday disrupted the global trade system further by announcing reciprocal tariffs for other countries, a move that will align US import tariffs with the tax rates imposed by other countries.
"I will charge a reciprocal tariff. Any country that charges the US a tariff will receive tariffs of the same amount. No more or less. In other words, if they charge us tax or tariffs, we will charge them the exact same tax or tariffs. Very simple," he told reporters.
The announcement was made just hours before Trump was scheduled to meet Prime Minister Narendra Modi in the White House. Later, Trump doubled down on India as a "high tariff" country and ruled out making any concessions.
The tariffs, which Trump put into motion via an executive action Thursday, won’t take immediate effect, an intentional move to give nations time to potentially negotiate new trade terms with the US, a White House official said Thursday.
What are reciprocal tariffs?
Tariffs refer to taxes applied to goods imported from other nations.
During his Presidential campaign, Trump often mentioned about reciprocal tariffs and said, "If India, China, or any other country hits us with a 100 or 200 per cent tariff on American-made goods, we will hit them with the same exact tariff. In other words, 100 per cent is 100 per cent. If they charge us we charge them -- an eye for an eye, a tariff for a tariff, same exact amount."
Recently, he suggested that the detailed order on the same would come by Wednesday or Thursday, adding that “every country will be reciprocal”.
The announcement came just ahead of Prime Minister Narendra Modi’s visit to the United States. The Trump administration has raised concerns over India’s tariff policies, claiming they limit US imports.
The term “reciprocal tariffs” lacks an official definition in international trade, experts say. Instead, Trump employs it to describe US customs changes designed to align with his campaign’s vision of reciprocal and fair trade.
Who will be impacted by the move?
Economists at global banks from Morgan Stanley to Nomura Holdings Inc have identified India and Thailand as among the nations most exposed to risks from President Trump’s vow to impose reciprocal tariffs on trading partners, according to a Bloomberg report.
Trump previously slammed India as a “very big abuser” in terms of import tariffs.
As per analysts, tariffs imposed by these two Asian nations on US imports are, on average, significantly higher than those the US applies to them.
Goldman Sachs estimates that "there should be no effect on countries with free trade agreements like Mexico, Canada, and Korea, limiting the overall impact" if Washington took a country-based approach to reciprocal tariffs, AFP reported.
The average rate that India charges US imports is more than 10 percentage points higher than US levies on Indian goods, according to Cousin’s analysis.
The reciprocal tariffs order could also mean a major tax hike, largely impacting American consumers and businesses, given last year’s $4.1 trillion in US imports. The move could trigger retaliation from trade partners, shaking global markets and altering America’s standing with allies and competitors alike.
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