The US has some of the lowest tariffs in the world. Trump is now threatening to reverse that with reciprocal tariffs, due to take effect on April 2.
United States reciprocal tariffs take effect on Wednesday, April 2, with President Donald Trump warning on Sunday that “all countries” will be affected.
At the same time, Trump on Monday said that compared with tariffs imposed by other countries on US imports, what he would announce would be relatively “kind“.
- What is the Fair and Reciprocal Plan?
On February 13, Trump announced plans to review the tariffs and trade policies imposed by other countries on US exports.
Under what he calls the Fair and Reciprocal Plan, the US will impose the same amount of tariffs on other countries that those countries impose on US goods.
Trump has argued that many US trading partners have taken advantage of low US tariff rates while maintaining higher duties on US goods.
Emerging market economies in Africa, Latin America, South Asia and Southeast Asia are likely to be among the worst hit, either through product-specific levies or an average tariff on goods from specific countries.
Emerging economies have long charged higher tariffs as a means to protect their developing domestic industries and help these sectors thrive against established foreign competition.
Trump’s stated goal is to shrink the US’s trade deficit as well as bolster domestic industry and the competitiveness of US manufacturers. He also wants to use tariffs to finance future tax cuts.
However, critics argue that tariffs risk triggering trade wars and raising consumer prices – including for Americans.
- What countries have the highest trade deficit?
The US has the largest trade deficit in the world. According to data from 2023, the US imported $1.1 trillion more than it exported in that year.
The US trade deficit has been rising continuously since 2019, and has now been at more than $1 trillion for four years in a row.
According to 2023 data, the country with the second largest trade deficit is the United Kingdom, at $271bn, followed by India at $241bn, France at $137bn and Turkiye at $106bn.
The US dollar’s role as the world’s reserve currency is, in part, sustained by open trade and capital flows.
Some economists argue that the trade imbalance benefits the US because it maintains the global demand for the dollar.
- Which countries does the US have the largest trade deficit with?
In 2024, the US had a trade deficit with 92 countries and a trade surplus with 111 countries.
The US’s large trade deficit is highest with three major economic partners – China, Mexico and Vietnam.
In 2024, the US-China deficit was $295bn, the US-Mexico deficit at $172bn and the US-Vietnam deficit at $123bn.
Despite tariffs imposed on China seven years ago, the US continues to run its largest bilateral trade deficit with the country — driven by strong consumer demand for Chinese goods and US companies’ reliance on China in global supply chains.
Trump first introduced tariffs on China in March 2018, citing alleged intellectual property theft and a desire to reduce the trade imbalance.
These levies continued under former President Joe Biden, with tariffs being expanded in some cases.
In February, Washington introduced further 10 percent levies on China, which Beijing responded to with retaliatory tariffs on imports from the US of crude oil, agricultural machinery, large-displacement vehicles and pick-up trucks.
In March, Trump doubled the additional tariff rate on Chinese imports to 20 percent.
- The US has some of the lowest tariffs in the world
US tariffs were historically much higher, particularly throughout the 19th and early 20th centuries. In response to the stock market crash of 1929, which saw the onset of the Great Depression, US President Herbert Hoover signed the Smoot-Hawley Tariff Act in 1930.
Its aim was to protect US farmers with wide-ranging tariffs on agricultural and industrial imports. However, several countries imposed retaliatory tariffs which led to the weakening of the US economy.
The 1934 Reciprocal Trade Agreements Act marked a shift away from US protectionism, allowing the president to negotiate lower tariffs with foreign governments and opening the door for more liberalised global trade.
- What about other countries — and free trade agreements?
The World Trade Organization (WTO) governs global trade by the most-favoured-nation (MFN) principle, which requires countries to extend the same trade terms to all WTO members, regardless of economic or political clout.
However, the rule allows for exceptions such as free trade agreements (FTAs) or providing certain countries, such as developing ones, with more favourable terms.
The US trades with more than 160 countries under these WTO rules. It also has free trade agreements with 20 countries. These agreements include:
- United States-Mexico-Canada Agreement with Mexico and Canada
- KORUS FTA with South Korea
- AUSFTA with Australia
- US-Bahrain FTA
- US-Chile FTA
- US-Colombia FTA
- CAFTA-DR (Dominican Republic-Central-America-US FTA, which includes Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic and the US)
- US-Israel FTA
- US-Jordan FTA
- US-Morocco FTA
- US-Oman FTA
- US-Panama FTA
- US-Peru FTA
- US-Singapore FTA
Countries and territories with the lowest tariffs include the likes of Hong Kong and Singapore where there are 0 percent tariffs on goods, with some exceptions.
Countries that maintain low tariffs are often focused on attracting investment or because they may not have a large manufacturing industry, so instead rely on imports.
However, the US, which is the world’s second-largest manufacturing country, has relatively low tariffs – the result of trade liberalisation policies it pursued after World War II.
Countries with the highest tariffs on nations that have MFN status include Tunisia with 19.5 percent tariffs, Algeria (18.9 percent) and Gabon (18.1 percent).
The table below captures which countries have the lowest and highest such tariffs using the MFN total simple average measure.
This “simple average tariff” is calculated by adding up all individual tariff rates and dividing by the number of tariffed products. For example, if two products are subject to tariffs, Product A at 10 percent and Product B at 20 percent, the simple average tariff would be 15 percent.
- What industries will be affected by Trump’s plan?
Key sectors that will be impacted include industrial products, consumer products, auto, aerospace, pharmaceuticals, technology, media, telecommunications, energy, utilities and resources and private equity.
Trump has already announced tariffs on automobiles taking effect from April 2.
In a White House press release, the US singled out some countries to highlight the difference in tariffs.
In one example, it stated that the US average tariff on agricultural goods from India is 5 percent. But India’s average tariff on US agricultural goods is 39 percent.
India has historically also charged a 100 percent tariff on US motorcycles, which it reduced to 30-40 percent in 2018, while the US charges a 2.4 percent tariff on Indian motorcycles.
In February, India lowered its duties on imported bourbon whisky from 150 percent to 100 percent following criticism from Trump on the “unfair” levies in the South Asian market.
- Which tariffs have already taken effect?
Since Trump re-entered office, he has used tariffs as his principal weapon to advance his international trade goals — which he says include combating the trade deficit as well as bringing revenue into the US.
However, tariffs have historically had the consequence of making international goods more expensive. The prices of domestic goods usually also rise in tandem.
So, what has Trump done since he came into office?
February 1: Trump signs executive orders imposing 25 percent tariffs on all goods from Mexico and Canada, in addition to 10 percent tariffs on Canadian energy and an additional 10 percent on Chinese goods. He cites illegal drug trafficking and immigration as the reasons.
February 3: A one-month delay on Canadian and Mexican tariffs is announced after agreements for tighter border security.
February 13: Trump announces the Fair and Reciprocal plan to deal with “unfair” trade practices against the US, set to come into effect April 2.
March 4: Tariffs on goods from Canada and Mexico — with some exemptions — come into effect after a one-month pause, along with an additional 10 percent tariff on Chinese imports.
March 12: Trump imposes 25 percent tariffs on steel and aluminium imports aimed at bolstering domestic industries.
March 26: Trump announces 25 percent tariffs on all imported foreign-made cars and auto parts.
April 2: Reciprocal tariffs are set to come into effect. Tariffs on autos are set to come into effect. (Al Jazeera)
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