Reciprocal Tariffs Announced
On February 13, President Donald Trump signed the “Fair and Reciprocal Plan”, a Presidential Memorandum directing his advisers to develop new reciprocal tariff levels for countries worldwide. This initiative aims to address various trade barriers and economic practices that the administration considers unfair, including higher tariffs imposed on U.S. goods, foreign taxes like value-added taxes (VAT) and digital service taxes (DST), industrial subsidies, exchange rate policies, and other behaviors deemed detrimental to U.S. interests. For example, the administration references that the EU imposes a 10% tariff on imported cars while the U.S. tariff on cars is only 2.5%. By implication, the 2.5% tariff on cars to the E.U. can be expected to increase to 10%. Additionally, the President emphasized that this measure is essential to reduce trade deficits and incentivize companies to relocate their manufacturing operations back to the United States.
What Countries are Affected and When?
The directive mandates that the U.S. Trade Representative (USTR) and the Commerce Secretary-designate formulate recommendations, with a comprehensive fiscal impact report due within 180 days. Key targets include China, Japan, South Korea, and the European Union. The USTR, in coordination with other agencies, will investigate non-reciprocal trade practices that disadvantage the U.S. and propose remedies to establish fair and balanced trade. The USTR has broad scope, covering tariffs, taxes, nontariff barriers, exchange rate policies, and other structural impediments to market access, ensuring comprehensive enforcement of reciprocal trade policies. During his nomination hearing, USTR Jamieson Greer emphasized the need to review all trade agreements to ensure they are truly reciprocal, aligning with the administration’s commitment to fair trade. This focus on evaluating unfair trade practices and existing agreements was also outlined as a key directive in the first Executive Order issued on January 20. While the tariffs are not immediate, they could be enforced in the coming weeks after examining bilateral trade relationships. The structured approach outlined in the memorandum suggests the administration intends to wait for the full review before major enforcement actions. Similar to recent trade initiatives with Canada and Mexico, the administration is open to negotiations if other nations reciprocate, with President Trump posting to Truth Social that “... if a Country feels that the United States would be getting too high a Tariff, all they have to do is reduce or terminate their Tariff against us.”
Background
This action on reciprocal tariffs follows the announcement of updated Section 232 tariffs on steel and aluminum imports, the imposition of an additional 10% tariff on Chinese imports, and a one-month pause on the planned 25% tariff on imports from Mexico and Canada. These measures reflect the administration's broader strategy to address trade imbalances, protect domestic industries, and create leverage in ongoing trade negotiations with key international partners. * * * * Are you impacted by reciprocal tariffs? Please contact Sarah Helton, Michael Best Strategies’ Trade Practice Lead at sarah.helton@michaelbest.com for assistance. |