In a significant escalation of trade disputes, US President Donald Trump on Thursday signed off on plans to introduce sweeping reciprocal tariffs, a move that could affect both allies and competitors alike.
The White House contends that the measures are aimed at addressing unfair trading practices, but economists caution that they may fuel inflation and dampen economic growth, reports AFP.
Speaking from the Oval Office, Trump justified the decision by claiming that US allies were often “worse than our enemies” in trade relations.
“Whatever countries charge the United States of America, we will charge them,” he asserted, singling out the European Union as “absolutely brutal” in its trade dealings with Washington.
Under the directive signed on Thursday, US trade officials, including the trade representative and commerce secretary, will assess and propose tariffs tailored to individual trading partners.
These duties will take into account both existing levies on American goods and taxes viewed as discriminatory, such as value-added taxes (VATs), according to a White House official speaking on condition of anonymity.
Targeted approach and potential timelines
Commerce secretary nominee Howard Lutnick indicated that studies should be completed by 1 April, with the first tariffs potentially being introduced by 2 April.
Initial reviews will prioritise economies with which the US maintains the largest trade deficits or those deemed to have the most egregious trade barriers.
“This should be a matter of weeks, in a few months at most,” a senior White House official remarked.
Ahead of Trump’s announcement, trade advisor Peter Navarro accused major exporting nations of exploiting the US market through punitive tariffs and restrictive non-tariff barriers.
Alongside the EU, Washington highlighted trade imbalances with India and Brazil while criticising Japan’s structural barriers.
Inflation concerns and economic implications
The imposition of widespread tariffs could have significant repercussions for the US economy.
Inflationary pressures have been a focal point in Trump’s renewed presidency, with the Republican leader pledging to lower costs swiftly.
However, economists warn that broad tariffs on imports could drive up prices rather than reduce them, potentially slowing economic growth in the long run.
Acknowledging these concerns, Trump conceded that prices “could go up” as a result of tariffs but expressed confidence that they would stabilise over time.
Trade deficit and 'unfair' treatment claims
The White House has repeatedly argued that the US has been treated unfairly in global trade, citing the country’s persistent annual trade deficit in goods, which exceeded $1 trillion last year.
One frequently cited example is the EU’s 10% tariff on American automobiles, compared to the 2.5% duty imposed by the US.
However, analysts have pointed out that Washington maintains higher levies on certain products, including a 25% tariff on light truck imports.
Trump also criticised European VAT rates, which average around 20%, though experts note that VATs are domestic consumption taxes rather than direct trade barriers.
Global ramifications and India’s position
Trump’s announcement came just ahead of his meeting with Indian Prime Minister Narendra Modi in Washington.
The US president later suggested that “wonderful trade deals” with India were on the horizon, though analysts caution that reciprocal tariffs could disproportionately impact emerging economies such as India and Thailand, where effective tariff rates on American products remain high.
Nations with established trade agreements with the US, such as South Korea, may face lesser risks.
Meanwhile, in a preemptive move ahead of Modi’s visit, New Delhi offered limited tariff concessions, including reductions on high-end motorcycle imports.
WTO implications and the road ahead
Christine McDaniel, a senior research fellow at the Mercatus Center, observed that Trump’s strategy appears largely unconstrained by World Trade Organization (WTO) norms.
His directive effectively compels trading partners to renegotiate tariff schedules with Washington.
“If countries engage in negotiations, this could yield beneficial agreements,” McDaniel noted.
“However, if they refuse and the US raises its tariffs unilaterally, it could backfire, raising costs for American importers and consumers.”
As Washington moves towards implementing these new trade measures, the global economic landscape faces heightened uncertainty, with the potential for escalating trade disputes and inflationary pressures looming on the horizon.
