President Donald Trump has introduced a sweeping trade measure, signing a memorandum to implement "reciprocal tariffs" aimed at aligning U.S. import duties with those imposed by trading partners. The administration plans to finalise the strategy by 1 April, with Commerce Secretary Howard Lutnick stating the measures will be developed "quickly."
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Trump stated, 'I've decided, for purposes of fairness, that I will charge a reciprocal tariff,' arguing that many nations impose higher duties on U.S. exports. The tariffs will also address non-tariff costs such as value-added taxes (VATs), particularly those in the European Union.
Goldman Sachs economists outlined three possible approaches: country-level tariffs, product-based tariffs, and a broader system incorporating non-tariff barriers. Deutsche Bank estimated that a country-level approach would raise the U.S. weighted average tariff rate to 4.8%, up from 1.5% in 2022.
Economists warn that the policy could contribute to inflation, with Deutsche Bank predicting a potential 0.5 percentage-point rise in core personal consumption expenditures. The impact could complicate Federal Reserve interest rate decisions.
Trump suggested the new tariffs might replace the universal 10% import duty he previously proposed. However, Goldman Sachs analysts cautioned that policy shifts remain unpredictable. The measures are expected to particularly impact Indian exports, including diamonds, rubber, and textiles, as well as European car imports.
The administration has already implemented a 25% tariff on steel and aluminium imports and additional levies on goods from China, Canada, and Mexico. Trump has also called for lower interest rates, claiming they should 'go hand in hand with upcoming tariffs.'
Analysts suggest that the policy's success will depend on how trading partners respond, with the European Union warning of potential countermeasures.
Source: www.forbes.com