President Donald Trump has announced plans to implement a reciprocal tariff system that would target countries imposing taxes on U.S. imports by matching those tariffs.
In a post on Truth Social, Trump stated, “On trade, I have decided for purposes of fairness that I will charge a reciprocal tariff. This means whatever countries charge the United States, we will charge them—no more, no less.” His administration aims to begin calculating these duties by early April, raising fears of a potential global trade war that could further accelerate inflation in the U.S.
This tariff strategy is anticipated to ignite negotiations with numerous countries to reduce their tariffs and trade barriers. The U.S. government is particularly focused on reducing its goods trade deficit, which reached over $1.2 trillion (£954 billion) last year. Officials suggest that countries with significant trade surpluses with the U.S. may face initial scrutiny. The top five such countries include China, Mexico, Vietnam, Ireland, and Germany, according to data from the U.S. Census Bureau.
UK government minister Pat McFadden indicated a “wait and see” stance regarding the tariffs but did not confirm whether the UK would retaliate. If Trump follows through on his threats to classify VAT as a tariff, the UK could face tariffs as high as 24%, according to Paul Ashworth, Chief North America Economist at Capital Economics. He estimates that the UK would be the fourth hardest hit after India (29%), Brazil (28%), and the EU (25%).
The projections are based on existing VAT rates combined with current tariffs. The Trump administration also plans to consider factors such as regulations, government subsidies, digital services taxation, and exchange rate policies. Ashworth noted that while VAT is generally seen as non-discriminatory since it applies to both imported and domestically-produced goods, the U.S. contends that it functions as a discriminatory tariff due to its lower average state-level sales tax.
On Thursday, Trump also met with Indian Prime Minister Narendra Modi, discussing collaboration on artificial intelligence, semiconductors, and strategic minerals. Following their meeting, Trump remarked on India’s significant tariff rates, stating, “They’re going to be purchasing a lot of our oil and gas,” emphasizing the challenges of selling into India due to its high tariffs. According to the World Trade Organization, India maintains the highest tariff rates, averaging 17% for all products compared to just 3.3% for the U.S.
Credit: Sky News
