Trump administration wants to bring manufacturing back to the US and thinks higher tariffs could achieve that
President Donald Trump announced plans for sweeping reciprocal tariffs yesterday that would hit both allies and competitors and ramp up an international trade war that experts warn could fuel domestic inflation.
Before implementing the tariffs in April, he said that the federal agencies would first calculate duties to match the rates other countries impose on the US.
Trump argues that foreign nations, especially India and the EU, impose higher tariffs on American goods, making current trade deals unfair to the US.
He claims that the US has lower average tariffs (3%) than other nations, leaving American businesses at a disadvantage. Trump specifically criticized the European Union’s 15% VAT and Japan’s consumption tax.
Usually, low-income countries, like South Africa, have higher tariff rates.
How do reciprocal tariffs work?
The new system would impose tariffs based on each country’s trade policies, including subsidies, regulations, and Value Added Tax (VAT). The Office of the US Trade Representative and the Commerce Department will design tariffs on a country-by-country basis.
Who will be affected?
Emerging markets like India, Argentina and parts of Southeast Asia could face the biggest impact, as they tend to impose higher tariffs on US goods.
Potential trade violations
Trade experts warn that this move could violate World Trade Organization (WTO) rules, triggering disputes and retaliatory tariffs. The WTO requires members to treat trading partners equally and uphold negotiated tariff limits.
Business groups, while supporting fair trade, caution against raising tariffs.
The new administration wants to bring manufacturing back to the US and thinks higher tariffs could achieve that. However, economists warn that the move could backfire, and other countries may impose retaliatory tariffs.
Broader trade policy
Trump’s administration has already imposed tariffs on China, nearly targeted Canada and Mexico, and added levies on steel and aluminum. His tariff strategy could reshape global trade and test international alliances.