US President Donald Trump is all set to introduce a sweeping import tax initiative, dubbed "Liberation Day," as part of his push for what he calls reciprocal tariffs.
The move is expected to be a key component of his economic strategy, aiming to impose equivalent duties on nations that levy tariffs on American goods.
"I have decided for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them. No more, no less," Trump said.
But the question rises what are exactly reciprocal tariffs?
US will impose tariffs on imports equivalent to those levied on American exports by other countries. Applied on a product-by-product basis, this policy aims to promote fair trade and protect domestic industries of the US. Let's say if a country puts 10% tax on American made automobile parts, US will impose same amount of tax on that country's automobile parts.
Currently, the United States and its trading partners apply different tariff rates on the same products. The proposed system aims to support domestic industries while addressing trade imbalances.
"Reciprocal means that if a country has higher tariffs than we do on certain products, we will raise it to that level," Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a left-leaning public policy think tank, told CBS MoneyWatch.
While reciprocal tariffs match foreign levies on U.S. exports, the White House may opt for country-specific tariff rates based on trade imbalances rather than imposing identical duties.
"They will likely implement a blended rate that isn’t product-specific but balances out overall disparities. For example, if their tariffs average 10% higher than ours, the U.S. may apply a uniform 10% tariff on all imports," said Jacquez, a former economic policy analyst in the Biden administration.
This could lead to the US imposing higher tariffs on certain nations compared to the rates they apply.
Now the question rises how the countries would be impacted with Trump's reciprocal tariffs.
Impact of reciprocal tariffs
Economists caution that President Trump’s proposed tariffs could drive up consumer prices and fuel inflation, particularly on imports from China, Canada, and Mexico. S&P Global Ratings estimates a potential one-time rise of up to 0.7% in U.S. consumer prices if the tariffs take full effect.
After a period of high inflation following the COVID-19 pandemic, U.S. inflation had declined but climbed back to 3% in January 2025, the highest in six months. Experts warn that new tariffs may further strain global supply chains, with nations like India, South Korea, and Thailand among the most vulnerable.
A maximal approach would add up to 28 percentage points to average US tariff rates — creating a hit of 4% to US GDP and lifting prices by close to 2.5%, over a two-to-three-year period says Bloomberg Economics.
As the world's top importer and a leading exporter, any shift in U.S. trade policy is expected to have far-reaching consequences. However, the full impact remains uncertain until the tariffs are officially implemented.
Trump has also signaled another set of tariffs called secondary tariff that may have an impact on India.
What are secondary tariffs?
President Donald Trump has warned of imposing “secondary tariffs” on imports from nations purchasing Russian oil if Moscow fails to reach a ceasefire agreement. These tariffs would target countries like China, India, Turkey, and certain EU nations, pressuring them to choose between Russian energy and access to the U.S. market.
Secondary tariffs extend economic pressure by penalizing foreign entities that trade with a sanctioned nation. Trump recently took a similar approach with Venezuela, imposing a 25% tariff on U.S. imports from nations buying its oil.
With affected countries being WTO members, the move could spark challenges under global trade rules.
WTO’s role in US tariff disputes
WTO is 166-member Geneva-based multilateral body which formulates rules for global trade and adjudicates disputes between the countries. It is tariff binding.
Bound tariffs are the highest tariff rates a WTO member agrees to in its Schedule of Concessions.
Under Article II of the General Agreement on Tariffs and Trade (GATT) 1994, WTO member countries cannot impose tariffs exceeding their bound commitments. Any duties or charges beyond those listed in their schedules would constitute a violation of WTO regulations.
While America has refused to comply with the WTO ruling, arguing that it has the sovereign right to determine its national security policies. It has also blocked the WTO Appellate Body, preventing an appeal resolution. This leaves WTO totally powerless.
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