GuShiio.com ① “Equivalent tariffs” are not just benchmarking import tariffs, but a complex policy tax rate that considers multiple factors;
② Overall, emerging economies with higher tariffs and more market access restrictions will be more affected;
③ In the face of inevitable trade retaliatory measures, global trade and the U.S. economy will be under tremendous pressure.
Cailian News, February 14 (Editor Shi Zhengcheng)In the early morning of Friday morning Beijing time, U.S. President Trump signed a memorandum, outlining the outline of the so-called “reciprocal trade and tariff” system for the first time. Under the pretext of matching tax rates on imported goods between the United States and trading partners, a bold “playing with fire” attempt to subvert the status quo of global trade was ignited in the White House.
According to official White House briefings and interpretations from various agencies, the following is currently known information about Trump’s “reciprocal trade and tariffs” system.
Q1: What are “reciprocal trade and tariffs”?
White House documents show that Trump’s presidential memorandum ordered “the development of a comprehensive plan” to reduce the United States ‘huge trade deficit.
In accordance with Trump’s instructions, the U.S. Department of Treasury, Department of Commerce, Office of Trade Representative and other departments will intensify research in the next few weeks to formulate special “reciprocal tariff rates” for each U.S. trading partner.
It should be noted that “reciprocal tariffs” are not just import tariffs, but a policy tax rate that considers multiple factors.
The system does not just equalize the tariff rates between the United States and its trading rivals. Tariff rates in other countries, other taxes (including value-added tax) imposed on U.S. goods, industry subsidies, entry thresholds and policy restrictions, exchange rate devaluations, and labor wage levels are all factors used by the Trump administration to evaluate “reciprocal tariff rates.”
Q2: When will it be implemented?
It is not clear at this time. Given that each trading partner has a series of “equivalent tariff rates” to be calculated, this process may take weeks or even months.
The next important node will be April 1st.U.S. Commerce Secretary Lutnik has said that the study on tariffs will be completed by April 1. This was also the deadline set by Trump on his first day in office, requiring Lutnik and other economic advisers to report to him on plans to resolve trade imbalances.
According to the memorandum, the director of the Office of Management and Budget is required to submit to the President in writing an assessment of the fiscal impact of “reciprocal tariffs” on the U.S. federal government within 180 days.
Q3: Which economies will be most affected?
In general, emerging economies that have not suffered the impact of “Trump tariffs” before will be hit more severely.
According to WTO tariff data,Among the major trading partners of the United States, India and Brazil will be the economies potentially hardest hit by “reciprocal tariffs”。Due to Modi’s visit to the United States, Trump also specifically named India as “having always had high tariffs” after signing the memorandum.
(Note: The United States has signed free trade agreements with Canada, Mexico and South Korea, and in theory there are no commodity tariffs; at the same time, the Sino-US trade war provoked by Trump has been going on for nearly seven years)
Q4: What other questions did Trump not explain clearly?
As a policy that affects global trade, there are still two main uncertainties in the “Trump Equivalent Tariffs”:Whether the United States really sets separate tax rates for thousands of goods in each country, and how to quantify non-tariff factors such as legal policies in tariffs.
In the White House announcement, the tariff differential treatment of specific goods was clearly mentioned. For example, the United States has an import tariff rate of 2.5% on ethanol, but Brazil imposes an 18% tariff on U.S. ethanol exports; the United States has an average MFN tariff on agricultural products of 5%, but India has a tax rate of 39%. At the same time, India imposes a 100% tariff on U.S. motorcycles, while the United States taxes 2.4%.
At the same time, Trump’s demand for equal value-added tax is also a hegemonic act of stealing concepts. Although there is no value-added tax at the federal level in the United States, sales taxes are levied at the state level. The actual tax burden is similar to the value-added tax in the European Union and other regions, except that the target of the tax is not the federal government.
What deserves vigilance among US trading partners is thatMarket access, policies and regulations, etc. will also become the collection targets of “reciprocal tariffs”。
According to reports, White House officials specifically named Japan when explaining the policy, saying it has “high structural barriers.” Japanese media interpreted this as saying that Trump may have to intervene in the country’s “specifications and standards” of industrial products and the country’s import controls of agricultural products.
Q5: What is Trump’s purpose?
Based on Trump’s application of tariff policies in the three weeks since he took office,Force trading opponents to proactively negotiate and meet his policy demands, will be one of the purposes of this policy.
Another attempt on the table isPromote manufacturing and employment in the United States。In an interview on Thursday, Trump specifically singled out the chip industry, saying: “We used to have Intel and those great companies that performed well, and we want the (chip) business back, we want it back to the United States.”
Another quite dangerous sign is thatTrump seems ready to impose additional tariffs to make up for the United States ‘fiscal deficit。According to U.S. media reports, senior White House officials revealed at a prior “briefing” that the expected tariff revenue will “help balance a trillion-dollar budget deficit.”
Q6: Will U.S. consumers face higher inflation?
Yes, and Trump thinks so, too.
When meeting with reporters, he said: “Prices may rise in the short term… So Americans should be prepared for some short-term pain.”
According to trade rules, U.S. importers who pay tariffs will pass on the costs to retailers, who will pass on the costs to consumers by raising prices.
Deutsche Bank calculates that imported goods account for 16% of core spending of U.S. consumers in 2024. Consumers will face additional price inflation of up to 0.5% by simply increasing the effective tariff rate by 3.3%.
More importantly, the calculations here do not include retaliatory measures from U.S. trading partners or the impact of other “Trump tariffs.”
According to calculations by the Peterson Institute, imposing a 25% tariff on Canadian and Mexican goods and a 10% tariff on China goods alone is equivalent to an additional $1200 per year on each typical American family. Obviously,”reciprocal tariffs” will further increase the pressure on American consumers.
Q7: Will the United States encounter retaliation?
This is almost certain. Because Trump had already fought a “global trade war” during his first term. Therefore, major economies including China, the European Union, Canada, and Mexico all have ready-made countermeasures at hand, and the action to crack down on Trump will be more natural and smoother.
Faced with Trump’s threat of “steel and aluminum” tariffs, European Commission President Von der Leyen issued a statement on Tuesday saying that unreasonable tariffs on the EU will not be ignored-they will trigger firm and proportionate countermeasures.
Inspired by the last trade war between Europe and the United States, the EU subsequently adopted the “Anti-Coercion Instrument” specifically used to deal with Trump’s tariff policies. In addition to imposing retaliatory tariffs, the EU can further cancel intellectual property protection for U.S. technology giants and adopt a series of measures such as market bans on U.S. financial giants.
As for the United States ‘neighbors, Canada and Mexico, which were also among the first countries to be hit by Trump’s tariffs this year, they have already tightened their grip on countermeasures against the United States, such as imposing tariffs on U.S. exports.
Q8: So U.S. economic growth will also be damaged?
Yes. Wells Fargo pointed out in a report on Thursday that Trump tariffs would hurt U.S. economic growth this year.
In fact,Trump is making an expensive political gamble–Betting that voters who support him can tolerate higher inflation levels allows him to complete a series of domestic and foreign political, diplomatic and trade agendas in a limited time.
In last year’s U.S. election, American voters sent Trump back to the White House because they could not bear the ultra-high inflation during the Biden administration. Since the election in November last year, U.S. inflation has risen again, with the latest CPI annual rate on Wednesday of 3%. Unable to be reelected,Trump can only stay in the White House for up to four yearsAt the same time, we will face midterm elections in 2026.
Trump will rely on extended tax cuts and Musk’s government efficiency plan to hedge against the impact of tariff policies. But the question lies in the sequencing of the impact of this series of policies, and the possibility that a broader trade conflict could stifle investment and hiring amid greater inflationary pressure.
Q9: Has Trump finished playing his “tariff card”?
Unfortunately, not.
Although Trump said that the intention of “reciprocal tariffs” was to create a level playing field, he also made it clear that additional tariffs would be imposed to satisfy his “America First” hegemonic policy.
Trump said in an interview that the 25% steel and aluminum tariff will not be counted as “reciprocal tariffs.”At the same time, the next tariffs on cars, computer chips and drugs will also be higher than the “equivalent tariffs.”
According to the current “tariff schedule”, the United States ‘schedule of imposing a 25% tariff on all goods in Canada and Mexico has been temporarily shelved until early March, while the “steel and aluminum tariffs” will be implemented on March 12.
