Key Takeaways
- President Donald Trump on Thursday signed an executive order looking into reciprocal tariffs.
- Reciprocal tariffs would charge a tax on imports that is equal to the taxes charged on U.S. goods.
- Economists said this could potentially add some certainty to the trade landscape.
President Donald Trump signed executive orders Thursday ordering his administration to look into reciprocal tariffs but didn’t go as far as immediately imposing the taxes.
Under Trump’s order, agencies will provide details on how the U.S. could raise tariffs on foreign goods to match those imposed on U.S. exports. For example, if cars from the U.S. were taxed at a 5% rate when they were sent to the U.K., automobiles from the U.K. would be taxed at 5% as they come into the U.S. These tariffs could mirror tariffs on the U.S. by comparing taxes on items or instituting a flat rate for each country.
“I have decided, for purposes of Fairness, that I will charge a RECIPROCAL Tariff meaning, whatever Countries charge the United States of America, we will charge them – No more, no less,” Trump wrote in a post on the Truth Social platform.
Howard Lutnick, Trump’s unconfirmed pick for Commerce Secretary, said he wants the investigation into these tariffs completed by April 1.
What Would the Impact of Reciprocal Tariffs Be?
The latest tariffs would “theoretically make it less likely that U.S. tariffs would rise substantially further,” Goldman Sachs’ Alec Phillips and Elsie Peng wrote Monday before the tariffs, which were broadly expected, were announced.
The Goldman analysts said the policy could also lead to some trading partners reducing tariffs on U.S. goods.
National Retail Federation Executive Vice President of Government Relations David French said in a prepared statement that the scope of reciprocal tariffs would likely disrupt supply chains.
“It will likely result in higher prices for hardworking American families and will erode household spending power,” French said.
Most economists say broad tariffs will cost average Americans money and could endanger certain jobs. Such a dip in the economy could cause the Federal Reserve to keep its influential federal funds rate higher for longer.
How Do Reciprocal Tariffs Fit Into Trump’s Trade Plans?
The tariffs are a key part of Trump’s broader trade strategy. The White House wants to infuse more income into the Federal Budget through tariffs and hopes to reduce the country’s trade deficit. The administration says the measures will generate more money and business activity in the U.S. that way.
Trump has already implemented a slew of other new import taxes. On Monday, Trump levied tariffs against steel and aluminum imports, roughly a week after the White House delayed broad tariffs on Canada and Mexico. The White House also levied a broad 10% tariff on Chinese imports on Feb. 4.
Update, Feb. 14, 2025: This article has been updated to include more context on the timeline and commentary from the National Retail Federation. It was originally published on Feb. 13.
