Trump signs a plan for reciprocal tariffs on US trading partners

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WASHINGTON (AP) — 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, as he 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 equalize the ability of U.S. and foreign manufacturers to compete. 

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 new trade negotiations. 

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

A senior White House official, who insisted on anonymity to preview the details on a call with reporters, said that the expected tariff revenues would separately 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. 

Trump has put an additional 10% tariff on Chinese imports due to 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 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 short-term higher inflation levels. 

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. 

Trump believes his policies would not trigger anything more than a brief bump in inflation. But when asked if he would ask agencies to analyze the possible impact on prices, the president declined. 

“There’s nothing to study,” Trump said. “It’s going to go well.”