Trump Signs Plan for Reciprocal Tariffs on US Trading Partners

By Associated Press

Published 1 month ago on

February 13, 2025

President Trump's new tariff plan could trigger global trade tensions and economic uncertainty as he seeks to level the playing field. (AP/Ben Curtis)

Trump's reciprocal tariff plan aims to match import taxes of other countries, risking economic confrontation.
White House argues tariffs will improve trade fairness, but analysts warn of potential stagflationary effects.
EU, Canada, Mexico, and China prepare countermeasures in response to Trump's aggressive trade policies.

WASHINGTON — President Donald Trump on Thursday rolled out his plan to increase U.S. tariffs to match the tax rates that other countries charge on imports, possibly triggering a broader economic confrontation with allies and rivals alike as Trump hopes to eliminate any trade imbalances.

“I’ve decided for purposes of fairness that I will charge a reciprocal tariff,” Trump said in the Oval Office at the proclamation signing. “It’s fair to all. No other country can complain.”

Trump’s Republican administration has insisted that its new tariffs would level the playing field between U.S. manufacturers and foreign competitors, though these new taxes would likely be paid by American consumers and businesses either directly or in the form of higher prices.

Political Risks of Tariff Strategy

The politics of tariffs could easily backfire on Trump if his agenda pushes up inflation and grinds down growth, making this a high stakes wager for a president eager to declare his authority over the U.S. economy.

The tariff increases would be customized for each country with the partial goal of starting trade new negotiations. But other nations might also feel the need to respond with their own tariff increases on American goods. As a result, Trump may need to find ways of assuring consumers and businesses that growth to counteract any uncertainty from the possible fallouts from his tariffs.

Trump’s proclamation identifies value added taxes — which are similar to sales taxes and common in the European Union — as a trade barrier to be included in any reciprocal tariff calculations, according to a senior White House official who insisted on anonymity to preview the details on a call with reporters.

Other nation’s tariff rates, subsidies to industries, regulations and possible undervaluing of currencies would be among the factors the Trump administration would use to assess tariffs.

Economic Implications of New Tariffs

The official said that the expected tariff revenues would help to balance the expected $1.9 trillion budget deficit. The official also said the reviews needed for the tariffs could be completed within a matter of weeks or a few months.

The possible tax increases on imports and exports could be large compared to the comparatively modest tariffs that Trump imposed during his first term. Trade in goods between Europe and the United States nearly totaled $1.3 trillion last year, with the United States exporting $267 billion less than it imports, according to the Census Bureau.

The president has openly antagonized multiple U.S. trading partners over the past several weeks, levying tariff threats and inviting them to retaliate with import taxes of their own that could send the economy hurtling into a trade war.

Global Trade Tensions Escalate

Trump has put an additional 10% tariff on Chinese imports due that country’s role in the production of the opioid fentanyl. He also has readied tariffs on Canada and Mexico, America’s two largest trading partners, that could take effect in March after being suspended for 30 days. On top of that, on Monday, he removed the exemptions from his 2018 steel and aluminum tariffs. And he’s mused about new tariffs on computer chips and pharmaceutical drugs.

The EU, Canada and Mexico have countermeasures ready to inflict economic pain on the United States in response to Trump’s actions, while China has already taken retaliatory steps with its own tariffs on U.S. energy, agricultural machinery and large-engine autos as well as an antitrust investigation of Google.

The White House has argued that charging the same import taxes as other countries do would improve the fairness of trade, potentially raising revenues for the U.S. government while also enabling negotiations that could eventually improve trade.

But Trump is also making a political wager that voters can tolerate higher inflation levels. Price spikes in 2021 and 2022 severely weakened the popularity of then-President Joe Biden, with voters so frustrated by inflation eroding their buying power that they chose last year to put Trump back in the White House to address the problem. Inflation has risen since November’s election, with the government reporting on Wednesday that the consumer price index is running at an annual rate of 3%.

The Trump team has decried criticism of its tariffs even as it has acknowledged the likelihood of some financial pain. It says that the tariffs have to be weighed against the possible extension and expansion of Trump’s 2017 tax cuts as well as efforts to curb regulations and force savings through the spending freezes and staff reductions in billionaire adviser Elon Musk’s Department of Government Efficiency initiative.

But an obstacle for this approach might be the sequencing of the various policies and the possibilities of a wider trade conflict stifling investment and hiring amid the greater inflationary pressures.

Analysts at the bank Wells Fargo said in a Thursday report that the tariffs would likely hurt growth this year, just as the extended tax cuts could help growth recover in 2026.

“Tariffs impart a modest stagflationary shock to an economy,” the report said. “The U.S. economy entered 2025 with a fair amount of momentum, but we look for real GDP growth to downshift a bit over the next few quarters as the price-boosting effects of tariffs erode growth in real income, thereby weighing on growth in real consumer spending.”