US announces plans for reciprocal tariffs
Date of publication: February 14th, 2025
On February 13, 2025, President Trump signed a Presidential Memorandum laying the groundwork for the implementation of reciprocal tariffs on imports from individual countries based on the tariffs, and other potential trade remedies they are imposing on US goods. The “Fair and Reciprocal Plan” on trade “will seek to correct longstanding imbalances in international trade and ensure fairness across the board.” The memorandum is yet one more action taken in support of the President’s “America First Trade Policy” announced on January 20, 2025.
The President could use a mix of trade authorities to implement the new tariff regime, including Section 301 of the Trade Act of 1974; Section 232 of the Trade Expansion Act of 1962; and the International Emergency Economic Powers Act (IEEPA).
This announcement follows prior proclamations on tariffs that were specifically targeted at increases tariffs on all goods imported from China, Canada and Mexico (Canada and Mexico tariffs are on “pause” until March 4th) and the latest tariffs on steel and aluminum from all countries, scheduled to become effective March 12th.
A Fact Sheet has also been put out by the White House outlining its justification for moving forward on this latest tariff plan.
Timelines
President Trump has instructed the Secretaries of Commerce, DHS, UTSR and others to develop a plan to "counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner."
After the agencies prepare reports for the White House, they are to initiate "pursuant to their respective legal authorities" all necessary actions to investigate the harm to the United States from any non-reciprocal trade arrangements adopted by any trading partners" and provide the President with a report detailing proposed tariff remedies.
Within 180 days from February 13th, the Office of Management and Budget (OMB) must also assess the fiscal impacts on the government and on the public for any information collection requests and deliver a written assessment to the President.
During the press conference announcing this action, Commerce Secretary Lutnick stated the reports would be provided to the President by April 1st and actions could take place as early as April 2, 2025. Actual effective date(s) of reciprocal tariffs are questionable at best, as it is expected that this latest action will trigger numerous negotiations with other countries wishing to avoid increased tariffs, which could extend the timelines.
Factors in determining reciprocal tariffs
Per the memorandum, the investigations conducted are designed to be comprehensive and take into account numerous factors, including:
- tariffs imposed on United States products;
- unfair, discriminatory, or extraterritorial taxes imposed by our trading partners on United States businesses, workers, and consumers, including a value-added tax;
- costs to United States businesses, workers, and consumers arising from nontariff barriers or measures and unfair or harmful acts, policies, or practices, including subsidies, and burdensome regulatory requirements on United States businesses operating in other countries;
- policies and practices that cause exchange rates to deviate from their market value, to the detriment of Americans; wage suppression; and other mercantilist policies that make United States businesses and workers less competitive; and
- any other practice that, in the judgment of the United States Trade Representative, in consultation with the Secretary of the Treasury, the Secretary of Commerce, and the Senior Counselor to the President for Trade and Manufacturing, imposes any unfair limitation on market access or any structural impediment to fair competition with the market economy of the United States.
The Plan shall ensure comprehensive fairness and balance across the international trading system by factoring in losses as a result of measures that disadvantage the United States as applied, regardless of what they are called or whether they are written or unwritten.
It is unclear from the wording of the memorandum whether the tariffs would be applied on a product-by-product basis, or some other method, which could be extremely challenging to implement.
Other considerations
It is uncertain how this possible change would impact the current longstanding Most Favored Nation (MFN) principle at the World Trade Organization (WTO), formerly under GATT. This principle was agreed to by 165 member countries. In general, the MFN principle says that if the US gives special trade terms to a country, it must also give the same terms to all other countries it trades with, unless there's a specific exception, like a free trade agreement. The concept is simply that whatever the level of tariff a country decides to impose, it must apply that tariff equally to all WTO member countries and not discriminate in rates applied to each country. It is designed to ensure that countries treat all their trading partners equally, offering the same terms and conditions to everyone, unless there's a specific exception. This should prevent discrimination and lead to increased trade and economic cooperation.
Countries do, of course, have the ability to charge other taxes (e.g., VAT, GST) on top of the tariffs. This can contribute to how “open” the market is to the rest of the world and is a choice each country will make based on many factors.
It should also be noted that there are going to be numerous instances where US tariffs are higher than those of its trading partners on specific goods. For example, United States charges a 20% tariff on plastic luggage, while Canada charges 11%, and India charges 15%. The US traditionally has higher tariff rates on numerous goods such as footwear, textiles, agricultural, vehicles, dairy and sugar, to name a few. This could result in other countries raising their tariffs on US exports in retaliation, leading to overall increased cost of goods.
Reciprocal tariffs would end the MFN principle and move the United States toward having more bilateral tariff relationships with each country.
How this will all be applied and implemented is one of the many unanswered questions at this time. What is relatively clear is that there will be more tariffs to come – at a minimum, an increase on some products and some countries – and no more MFN treatment.
Conclusion
Companies should continue to provide sufficient resources to determining their tariff risk strategy and consider options for mitigating the impact, including a robust import compliance program.
The ONESOURCE Global Trade Management team will continue to monitor the progress on this important announcement and provide further updates as they become available.
Based on these latest updates, it will be imperative for companies to conduct thorough due diligence on their products to ensure proper classification. A classification database that is complete and accurate as the single source of truth, will position companies to conduct quick analysis to identify products and suppliers that are exposed to higher risk in this area.
To learn more about how the ONESOURCE Global Trade suite of tools and services can help businesses analyze potential impacts, explore alternative sourcing options, and optimize their trade operations to mitigate risks and capitalize on potential advantages, contact your Account Manager or Customer Success Manager.