Here are possible risks, rewards

President Donald Trump is preparing to introduce reciprocal tariffs this week — a major change in trade policy that could have far-reaching consequences for domestic inflation rates as well as global commerce.

The idea is straightforward: if another country imposes a tariff on American products, the US will respond by applying the same tariff to that country’s goods.

This strategy is intended to create a fairer trade environment but could also escalate tensions and potentially trigger a new tariff war, experts warn.

The European Union currently places a 10% tariff on cars imported from the United States, whereas the US only charges a 2.5% tariff on European vehicles, according to Stephen Innes of SPI Asset Management.

The goal of Trump’s reciprocal tariff plan is to eliminate these imbalances.

“I’ll be announcing that next week — on reciprocal trade — so that we’re treated evenly with other countries. We don’t want any more or any less,” Trump told reporters in the Oval Office on Friday.

The president added that he planned to hold a press conference on the matter as well as a meeting on the issue either on Monday or Tuesday.

Trump’s reciprocal tariffs

Trump indicated on Friday that reciprocal tariffs might replace the proposed 10% to 20% universal import duty that was a key part of his economic agenda during the campaign.

He stated that he was leaning toward implementing “mostly” reciprocal tariffs rather than broad import duties applied across the board.

Trump announced on Sunday that he is set to implement a unversal 25% tariff on all imports of steel and aluminum, expanding trade restrictions to key trading partners in an effort to protect domestic industries that played a crucial role in his electoral success in battleground states.

Speaking to reporters aboard Air Force One on Sunday, he confirmed that the tariffs would apply to imports from all countries, including major suppliers like Mexico and Canada.

However, he did not specify when the new duties would take effect.

Following the announcement, shares of steel and aluminum producers saw an early boost in trading.

Trump also stated that he would introduce reciprocal tariffs this week on countries that impose taxes on imports. These measures, he said, would take effect “almost immediately” after the announcement, though he did not provide further details.

When reached by The Post, a Trump spokesperson referred to the president’s remarks over the weekend.

Trump has so far held off on imposing tariffs on imports from Canada and Mexico after those two countries agreed to implement border security measures to staunch the flow of migrants and fentanyl.

China’s tariffs on US goods

China is set to implement retaliatory tariffs on a variety of US goods starting Monday, further intensifying trade tensions between the two economic giants with no resolution in sight.

The new tariffs, ranging from 10% to 15%, will target American exports such as crude oil, liquefied natural gas, farm equipment, and several other key products.

These measures were announced last week in direct response to the US imposing a 10% blanket tariff on Chinese imports.

The move by the Trump administration was intended to increase pressure on Beijing to take stronger action against the flow of fentanyl into the US.

China plays a significant role in the supply chain of chemicals that Mexican cartels use to produce the synthetic opioid, which has contributed to the ongoing drug crisis in America.

“If they levy reciprocal tariffs, we will respond in kind,” Dr. Sung Won Sohn, professor of finance and economics at Loyola Marymount University, told The Post. “Reciprocal tariffs is actually a tit for tat.”

Howard Lutnick, Trump’s nominee for Commerce Secretary, reiterated this position, insisting: “How you treat us is how you should expect to be treated.”

Some reports suggest that the EU is already considering lowering its auto tariffs to align with US policies, while other countries like India and Brazil could also face pressure to revise their trade practices.

Adjusting tariffs on a country-by-country basis would require an enormous administrative effort, creating potential inefficiencies and confusion among importers and customs officials.

Industries affected

While general trade data may suggest that the US faces an average foreign tariff of around 2.5% to 3%, this does not reflect the higher tariffs imposed on key industries such as steel, agriculture, semiconductors, and pharmaceuticals.

In many cases, these targeted tariffs function as economic protectionism, shielding domestic industries in a way that broad statistical averages fail to capture.

While many advanced economies, particularly in Europe, maintain tariff rates on US goods that are relatively close to those imposed by the US on their exports, the policy could still create tensions, especially in industries such as agriculture and automobiles.

Countries that will be affected

However, the greatest impact is expected to be felt in emerging and developing economies, particularly in South America, Africa, and southern Asia.

These regions face the most significant risk from the proposed tariffs, according to Bloomberg Economics.

An analysis by senior economist Maeva Cousin compared the average rates levied by each country on imports from the US against those imposed by the US on their goods.

The findings suggest that reciprocal tariffs “would be particularly painful for a number of emerging and less developed economies.”

Cousin further noted that if the US raises duties only in cases where foreign tariffs are higher, while keeping lower tariffs unchanged, virtually all countries would experience some level of economic strain.

Beyond raising tariffs, this policy represents a broader strategy aimed at trade negotiations.

Trump’s approach is not simply about increasing duties on foreign goods; rather, it is about using tariffs as leverage to encourage better trade deals.

If successful, this could lead to a restructuring of international trade relationships, bringing some industries back to the US and shifting global economic dynamics.

A major factor driving this policy is the US trade deficit, which reached $918.4 billion in 2024.

Some of the largest contributors to this imbalance include China with a $295.4 billion deficit, the EU at $235.6 billion, Mexico at $171.8 billion and Vietnam at $123.5 billion.