On Thursday, U.S. President Donald Trump signed a memorandum aiming to reshape the country’s trade relationships. The plan, known as the “Fair and Reciprocal Tariff Act,” seeks to impose tariffs on foreign trading partners that match the tariffs they place on American goods.
“I have decided, for purposes of fairness, that we will charge a reciprocal tariff—meaning whatever countries charge the United States, we will charge them the exact same,” Trump announced at the White House. “In other words, they charge us a tax or tariff, and we charge them the exact same tax or tariff. Very simple.”
The memorandum states that the United States is looking to reduce its significant trade deficits and address what it considers unfair trade practices. Under this new approach, the administration will evaluate trade relationships with all its partners to determine appropriate reciprocal tariffs.
Traditionally, under World Trade Organization (WTO) agreements, “reciprocity” referred to an overall balance of concessions between a country and its trading partners. However, Trump’s plan redefines reciprocity on a product-by-product basis, focusing on individual countries rather than the collective balance.
Gary Clyde Hufbauer, a senior fellow at the Peterson Institute for International Economics, expressed concerns about this shift. “With reciprocity as defined by Trump, U.S. tariffs would probably average 10 to 15 percentage points higher,” he said. “In my opinion, tariffs actually hurt the U.S. economy; while they might raise revenue, they would reduce GDP growth.”
Critics worry that this new stance could undermine established WTO principles, potentially sparking trade tensions and deadlocks in negotiations. There are also fears that other countries may retaliate with their own tariff increases, leading to a cycle of trade barriers that could affect the global economy.
