In teasing the culmination of “tariff week,” President Trump took to Truth Social to declare: “Three Great Weeks, Perhaps the Best Ever, But Today is the Big One: Reciprocal Tariffs!!!”
On Thursday, February 13, the President built off his Day One “America First Trade Policy” Memorandum (summarized here) in a Memorandum on Reciprocal Tariffs and Trade by tasking Commerce Secretary nominee Howard Lutnick and United States Trade Representative (“USTR”) nominee Jamieson Greer to propose new tariffs on a country-by-country basis to facilitate “reciprocal trade.”
The memorandum declares that it “is the policy of the United States to reduce our large and persistent annual trade deficit in goods and to address other unfair and unbalanced aspects of our trade with foreign trading partners.” This policy will be pursued via the “Fair and Reciprocal Plan.”
Importantly, the memorandum does not result in any immediate imposition of new tariffs, which appear to be months away.
In assessing any lack of reciprocity and any potential reciprocal tariff amount, the President’s memorandum asks Commerce and USTR to consider the tariff rates applied to U.S. exports by each country, any internal taxes imposed on U.S. exports, non-tariff barriers imposed, any domestic and export subsidies provided, exchange rate imbalances including the extent to which the foreign country intervenes in its currency, and any other policies that USTR determines to constitute a burden on U.S. commerce. The broad language allows for consideration of value-added tax regimes and the regulatory environment for engaging in trade in that country to determine the extent of any reciprocal tariff to be imposed.
Specific examples of such non-reciprocal foreign trade measures cited by the White House include:
- Brazil’s 18 percent tariff on U.S. ethanol imports;
- India’s average applied Most Favored Nation Tariff of 39 percent;
- The EU ban on shellfish imports from 48 U.S. states;
- The EU 10 percent tariff on imported cars; and
- Canada and France’s digital service taxes.
This broad range of foreign trade measures will be evaluated as part of a multi-stage process described in today’s Memorandum — a process likely to take weeks to complete. After the President receives the agency reports required under the January 20th “America First Trade Policy” memorandum, Commerce and USTR are now instructed to initiate “all necessary actions to investigate the harm to the United States from any non-reciprocal trade arrangements adopted by any trading partners,” and recommend proposed remedies to the President. This potentially lengthy and open-ended period of reporting, investigating, and recommending action provides opportunities to negotiate country-specific resolutions to any perceived asymmetry in trade.
Questions remain regarding how such tariffs may be imposed in the future. For example, it remains unclear whether reciprocal tariffs would be limited to balancing trade on a product- or sector-specific basis or whether the Administration would take a broader, country-wide approach in addressing trade imbalances with U.S. trading partners. If expedience is part of the objective, we expect the latter to be more likely, given the complexity of a product-specific approach (especially given the number of potential trading partners covered by such action) and the breadth of tariff and non-tariff barriers perceived by the Administration to create an uneven playing field for the United States. Also uncertain is the extent to which the Administration will engage with the trade.
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Cassidy Levy Kent’s attorneys, compliance professionals, economists, and licensed customs brokers have experience assisting clients navigating tariff changes, supply chain challenges, and supply chain tracing. We expect further developments in this space and will continue to provide updates. Please contact us with any questions about these developments.