Next Wednesday (2 April) is being billed by US president Donald Trump as ‘Liberation Day’, when he has pledged to announce a wide-ranging new package of tariffs aimed at – according to him – levelling the playing field between the US and countries with restrictions on imports.
The countries in the crosshairs include everyone from India to EU nations and beyond. Trump has offered some hints at the shape the new tariffs could take, and suggested that some partners could get off more lightly, but what will the programme mean in practice?
The rationale
In February, the Trump administration published its plan for “reciprocal trade and tariffs”, which argued that, though the US has “fewer barriers to imports than other major world economies”, it has for many years “ been treated unfairly by trading partners, both friend and foe”. It is US “workers and industries [that] bear the brunt of unfair practices and limited access to foreign markets”, it added.
As recently noted by the BBC, the US did report a lower average tariff rate on all imports (3.3%) than almost all of its major trading partners in its 2023 report to the WTO. The UK’s average rate was slightly higher, at 3.8%, while the EU levied 5% and others went much higher – notably India, at 17%.
Trade agreements with countries including Mexico, Canada and South Korea mean that those countries’ overall higher average tariff rates do not apply to most US goods, however, perhaps weakening Trump’s case for reciprocal tariffs on these countries. Some economists also argue that it is not US producers and workers that eat the cost of higher tariffs in foreign markets, but those own markets’ consumers.
The policy
The president said last month that if other countries “charge us, we charge them”.
“If they're at 25, we're at 25. If they're at 10, we're at 10. And if they're much higher than 25, that's what we are too.”
He also emphasised that this will apply to “everything”, not just materials like steel and aluminium. The industries namechecked by Trump included both automobile – where he announced a new 25% tariff rate this week – and pharmaceutical imports.
But what appeared to be an ironclad date of 2 April now appears to be just a starting point. CNN reported Trump’s remarks on Monday that, while the car tariffs announced this week will be implemented “very shortly”, pharmaceutical measures will only be introduced “at some point” and those on semiconductors and lumber will come into force “down the road”.
‘Flexibility’
Speaking to journalists in the White House last week, Trump hinted at greater leniency. He said that “the word flexibility is an important word”, with US technology stocks subsequently increasing in value this week.
“I may give a lot of countries breaks,” he added.
The gains reflect market sentiment predicting a “regularisation and rationalisation of tariff policy”, according to foreign exchange strategist Thierry Wizman of banking firm Macquarie, speaking to the FT.
Other reporting by the same publication suggests there could be a shift to a ‘two-step’ tariff regime in a bid to build reciprocal tariffs on a stronger legal foundation. That could include the use of obscure items of US law, including the Section 122 of the Trade Act of 1974 and Section 338 of the Tariff Act of 1930, which could see additional tariffs of as much as 50% being levied on partners. It could, however, mean a more phased approach, as hinted at by Trump himself.
Any hopes of a lighter-touch approach are likely to be dampened by White House spokesman Kush Desai, however, who said:
“Although the final reciprocal tariff plan for April 2 has yet to be unveiled by President Trump, every member of the Trump administration is aligned on finally levelling the playing field for American industries and workers.”
You can learn more about the ongoing story of Trump tariffs with the write-up from this week’s free Chartered Institute of Export & International Trade webinar on the subject here. Those looking for more news on tariffs, meanwhile, can keep up with our reporting on the subject at this page.
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