The US mutual tariffs will come into effect on Wednesday, April 2nd, with President Donald Trump warning on Sunday that “all countries” will be affected.
At the same time, Trump said Monday that what he announces will be relatively “kind” compared to tariffs imposed by other countries on US imports.
Trump has described April 2 as the “liberation day” for US trade. However, details of his fair and mutual plans remain vague.
What is a fair and mutual plan?
On February 13, Trump announced plans to consider tariffs and trade policies imposed by other countries on US exports.
Under what he calls fair and mutual planning, the United States imposes the same amount of tariffs on other countries that those countries place on the United States.
Trump argues that many U.S. trading partners maintain a higher obligation on U.S. goods while lowering US tariff rates.
Emerging market economies in Africa, Latin America, South Asia and Southeast Asia can be the worst hit, either through product-specific taxation or average tariffs on goods from a particular country.
Emerging economies have long charged higher tariffs as a way to protect domestic industries in developing countries and to help these sectors thrive from established foreign competition.
Trump’s goal is not only to reduce the US trade deficit, but also to strengthen the competitiveness of domestic industries and US manufacturers. He also wants to use tariffs to fund future tax cuts.
However, critics argue that tariffs risk causing trade wars and raising consumer prices, including Americans.
Which country has the highest trade deficit?
The United States has the largest trade deficit in the world. Data from 2023 shows that the US imported $1.1 trillion more than it exported that year. The US trade deficit has been steadily increasing since 2019, and is now at over $1 trillion for the fourth consecutive year.
According to data from 2023, the UK is the second largest country with the trade deficit, with $271 billion, $241 billion, France at $137 billion and Torquier at $106 billion.
The role of the US dollar as a global reserve currency is maintained in part by public trade and capital flows. Some economists argue that trade imbalances will benefit the US as it maintains global demand for the dollar.
Which country does the US have the largest trade deficit?
In 2024, the US had a trade deficit with 92 countries and a trade surplus with 111 countries.
The US’s massive trade deficit is the highest among three major economic partners: China, Mexico and Vietnam. In 2024, the US and China deficits were $295 million, the US Mexico deficit was $1.720 billion, and the US and Vietnam deficits were $123 billion.
Despite tariffs imposed on China seven years ago, the US continues to carry out its largest bilateral trade deficit with the country. This is driven by strong consumer demand for Chinese products and the dependence of US companies on China in their global supply chains.
Trump cited his desire to introduce tariffs to China for the first time in March 2018, reducing intellectual property theft and trade imbalances. These taxes continue under former President Joe Biden, and in some cases tariffs are expanded.
In February, Washington introduced an additional 10% tax on China. This was handled by Beijing with retaliatory tariffs on imports from the US, agricultural machinery, large-scale spread vehicles and pickup trucks. In March, Trump doubled the additional tariff rate on Chinese imports to 20%.
The US has the lowest tariffs in the world
US tariffs have been much higher historically, especially from the 19th and early 20th centuries. In response to the stock market crash in 1929, when the onset of Great Fear Pression, US President Herbert Hoover signed the Smootholy Customs Act in 1930. Its aim was to protect US farmers with broad tariffs on agricultural and industrial imports. However, some countries have imposed retaliatory tariffs that have led to weakening the US economy.
The 1934 Mutual Trade Agreement Act marked a shift from US protectionism, allowing the president to negotiate lower tariffs with foreign governments and open the door for more liberalised world trade.
Not only is the relatively low tariff rate in the US, but the large, wealthy markets it represents are attractive destinations for foreign exporters. While US consumers may benefit from cheaper imports, the influx of foreign goods has increased competition among domestic producers and contributed to the trade imbalance Trump has promised to reduce.
What about free trade agreements with other countries?
The World Trade Organization (WTO) controls world trade by the principles of the most well-known countries (MFN) that require countries to extend the same terms of trade to all WTO members, regardless of their economic or political influence.
However, the regulations allow exceptions such as free trade agreements (FTAs) or provide more favorable terms for certain countries in development.
The United States trades with more than 160 countries under these WTO rules. There are also free trade agreements with 20 countries. These agreements include:
US, Mexico, Canada, Mexico and Canada agreements and South Korea Ausfta and Australia US and Burrain Fta us-chile fta us-colombia fta cafta-dr (Dominican Republic – American American Fta, Costa Rica, El Salvador, Domatemala, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, Hunduraga, and the United States) US Israel Fta us-jordan fta us-morocco fta us-moman fta us-panama fta us-singapore fta fta
Countries and regions with lowest tariffs include Hong Kong and Singapore, with a few exceptions, there is a 0% tariff on goods.
Countries that maintain low tariffs often rely on imports as they may focus on attracting investments or may not have large manufacturing industries.
However, the United States, the world’s second largest manufacturing country, has relatively low tariffs. This is the result of the trade liberalization policy pursued after World War II.
Countries with the highest tariffs for countries with MFN status include 19.5% tariffs, Algeria (18.9%) and Gabon (18.1%) Tunisia.
The table below uses a simple average total scale of MFNs to see which countries have the lowest and highest tariffs. This “simple average tariff” is calculated by adding all individual tariff rates and dividing them by the number of tariff products. For example, if two products are subject to tariffs, then if Product A is 10% and Product B is 20%, the simple average tariff is 15%.
What industries will be affected by Trump’s plan?
The major sectors affected include industrial products, consumer products, automotive, aerospace, pharmaceuticals, technology, media, communications, energy, utilities, resources and private equity.
Trump has already announced tariffs on cars, which have come into effect from April 2nd.
In a White House press release, the US has picked out several countries to highlight differences in tariffs. In one example, he said that the average US tariff on agricultural products from India is 5%. However, India’s average tariff on US agricultural products is 39%.
India has historically charged 100% tariffs on US motorcycles, which fell to 30-40% in 2018, while the US has charged 2.4% tariffs on Indian motorcycles.
In February, India reduced its imported bourbon whisky obligation from 150% to 100% following criticism from Trump for “unfair” taxation in South Asian markets.
Which customs duties have already been enforced?
Since Trump took office, he has used tariffs as a major weapon to advance international trade targets. This includes fighting the trade deficit and bringing revenue to the US.
However, tariffs have historically resulted in making international goods even more expensive. Prices for domestic products usually rise in parallel.
So, what has Trump done since he took office?
February 1st
Trump is signing an executive order that imposes a 25% tariff on all goods from Mexico and Canada, plus a 10% tariff on Canadian energy and an additional 10% on Chinese goods. He cites illegal drug trafficking and immigration as reasons.
February 3rd
A one-month delay in Canada-Mexico tariffs is announced after a more stringent border security agreement.
February 13th
Trump announces a fair and mutual plan to address “unfair” trade practices for the United States, which are due to take effect on April 2.
March 4th
The tariffs on goods from Canada and Mexico – there are several exemptions – will come into effect with a 10% tariff on Chinese imports after a month’s suspension.
March 12th
Trump imposes a 25% tariff on steel and aluminum imports aimed at strengthening domestic industry.
March 26th
Trump announces 25% tariffs on all imported foreign-made cars and auto parts.
April 2nd
Mutual duties are set to be in effect. Automobile duties are set to be effective.
Source link
