Reciprocal Tariffs: Trump Shifts Focus, But Universal Tariffs Remain on the Table
Last year's emphasis on universal tariffs has waned in favor of a reciprocal-first approach under the Trump administration. Signed on Thursday, the presidential memorandum initiates studies on unfair trade practices and launches negotiations with affected nations, culminating in April.
This move raises questions regarding the future of universal tariffs, previously proposed at 10-20%. While the administration maintains that these tariffs are still under consideration, the focus has shifted towards reciprocity and establishing trade fairness.
The reciprocal approach aims to limit impacts on American consumers but carries the risk of political polarization and uncertainty. The memorandum also includes non-tariff measures, such as scrutiny of Europe's value-added tax and other practices deemed to hinder market access.
Recent actions include 25% tariffs on steel and aluminum, 10% tariffs on China over drug and migration issues, and concessions announced by India in reciprocal tariff talks. The reciprocal focus may represent a shift in strategy, but Trump himself has indicated an inclination towards this approach.
Analysts suggest that a reciprocal-only approach could result in a lower effective tariff rate than a universal 10% tariff, albeit with more unpredictable consumer price effects. The impact on manufacturing on-shoring remains uncertain, as varied duties on different nations and their goods could hinder long-term planning.
The unanswered question remains the extent of the administration's commitment to reciprocal tariffs. This shift has left investors puzzled and uncertain about the future of tariff policy.