President Trump has repeatedly said his decision to impose sweeping new tariffs stems from a simple idea: reciprocity. The US, he argues, should impose the same import conditions on foreign goods that other countries place on American products. But critics and economists are now questioning whether that’s what the tariffs actually do, the Wall Street Journal reported.
Instead of mirroring foreign tariffs, Trump’s new policy appears to be pegged to trade deficits — a different economic metric that may not reflect real trade barriers. This distinction could be one reason global financial markets have reacted with such alarm.
Some analysts believe the result is an uneven tariff structure. In many cases, countries are now being charged far more to export to the US than the US pays to sell to them. Take Vietnam, for instance: while its average tariff on imports is just over 5%, the US has slapped a 46% tariff on its goods. Taiwan, with a modest 2% average tariff, is now facing a 32% rate under the new rules.
One reason for this imbalance, economists suggest, is that the Trump administration based the new tariffs not on actual barriers — like tariffs or red tape — but on the size of bilateral trade gaps. “While billed as ‘reciprocal tariffs,’ no attempt was made to measure foreign trade barriers,” JPMorgan economist Abiel Reinhart noted in a client memo. “The increases were based solely on bilateral trade deficits.”
By shifting the focus from trade barriers to trade deficits, the administration may be adopting a more aggressive — and some say riskier — stance. Trying to eliminate trade deficits entirely is a far more disruptive economic goal than simply levelling the playing field on tariffs, according to many experts.
Critics on Wall Street have voiced concern. “We are in the process of destroying confidence in our country as a trading partner,” investor and Trump supporter Bill Ackman wrote on X, pointing to what he sees as disproportionate levies that target both allies and rivals alike.
Vietnam's swift reaction to the tariffs suggests that some countries are trying to de-escalate. Trump claimed in a recent social media post that Vietnam offered to cut its tariffs on US imports to zero — though it’s unclear whether Washington will reciprocate.
Trump has said the new tariff rates were based on what other countries charge the US He cited India, claiming it imposed a 52% tariff on American goods. But according to WTO data, India’s average weighted tariff is closer to 7.7%.
The US Trade Representative’s office has suggested that trade deficits reflect more than just tariffs — including regulations and VAT systems that they argue put American exporters at a disadvantage. Yet many economists dispute that VATs discriminate, since they apply equally to imported and domestic goods.
Several US trading partners with free trade agreements — including South Korea, Chile, and countries in Central America — have also been hit with new tariffs. Brazil, known for its complex import restrictions, was given one of the lowest rates. Analysts suggest this inconsistency could indicate a policy shaped more by politics than economics.
Trump has long criticized the global trading system, arguing that if a country sells more to the US than it buys, it must be taking advantage. But experts say trade imbalances don’t always reflect unfair practices. Some countries have fewer resources, others are aging and invest heavily in the US, and some — like Argentina — have high tariffs but still run trade deficits with the US.
Before the latest tariff round, the US typically imposed lower average tariffs than most of its trading partners. But that’s changing. The new tariffs now place the US above the European Union average and far ahead of previous rates with countries like China.
Can tariffs solve trade deficits? Most economists are sceptical. While higher tariffs might reduce US demand for imports, they also tend to hurt American exporters through retaliation and dampen global economic activity.
As the dust settles, some are left wondering: Are these tariffs a strategy for fairer trade — or are they fuelling a new kind of global economic standoff?
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
