US President Donald Trump announced a “reciprocal” trade policy with US trading partners in a 13 February 2025 memorandum. “Reciprocal tariffs” could be imposed as soon as 2 April 2025.
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The memo follows tariffs announced earlier this month on certain goods like steel and aluminium and trading partners Mexico, Canada and China.
Trump’s “Fair and Reciprocal Plan” aims to reduce US trade deficits and address other aspects of US trade relations that Trump characterised in a memo to senior trade advisors as “unfair and unbalanced.” He said that his administration will “counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner.”
What does that mean?
For starters, non-reciprocal trade arrangements include virtually any measure that “disadvantage[s] the [US] as applied.” The memo makes clear that a trade measure’s impact on the US determines whether the US will consider it a trade barrier; its name and level of formality are irrelevant.
The memo doesn’t define reciprocity, but it provides a non-exhaustive list of non-reciprocal trade arrangements:
- tariffs on US goods;
- unfair, discriminatory or extraterritorial taxes imposed on US persons, eg value-added tax (VAT);
- non-tariff trade barriers and unfair or harmful acts, policies or practices;
- policies and practices that affect currency exchange rates and wage suppression;
- unfair limitations on market access; and
- structural impediments to fair competition with the US economy.
Trump cited several examples in a fact sheet – such as Brazil’s 18% ethanol tariff and the EU’s 10% tariff on imported cars, which are both subject to a 2.5% US tariff – as evidence of the trade imbalances disadvantaging the US economy.
The US president is reportedly concerned with the aggregate effect of EU tariffs and VAT, especially as applied to automotive imports from the US. The memo, which calls for an “approach of comprehensive scope,” would appear to include both the 10% tariff and the approximately 20% VAT to determine whether the US trade relationship with the EU as applied to automobiles has the desired reciprocity.
The fact sheet also identifies Canadian and French digital service taxes as unfair trade practices that would also figure in the comprehensively scoped approach.
Trump also spoke approvingly of the business outcome of India’s tariffs on motorcycle imports as applied to Harley-Davidson. He was referring to the company’s decision to build a manufacturing plant in India to avoid the 100% tariff on US motorcycles. Trump said that he wants US tariffs to inspire similar business decisions in the US.
There will be no exemptions or waivers under his “simple system,” Trump said after signing the memo. He added that the reciprocal tariffs plan “applies to everyone across the board.”
The memo calls for Commerce Secretary Howard Lutnick and USTR Jamieson Greer (pending his confirmation) to investigate non-reciprocal trade arrangements that harm the US. Lutnick said, “Our studies will be all complete by April 1st, so we’ll hand the president the opportunity to start on April 2nd if he wants.”
The world reacts
An EU statement said Trump’s plan is “a step in the wrong direction” and warned of a firm and immediate reaction against “unjustified barriers to free and fair trade.” Taking the reciprocity at face value, German lawmaker Jens Spahn suggested that the EU consider zero-rate tariffs.
After signing the memo, Trump demeaned both Canada and Canadian Prime Minister Justin Trudeau. He referred to the traditional ally and trading partner of the US as a “serious contender to be our 51st first state” and incorrectly referred to the PM as “Governor Trudeau.”
Chrystia Freeland, a member of Canadian parliament, former Canadian foreign minister and current candidate for PM, said earlier this week in a New York Times editorial about the steel and aluminium tariffs, “If exporters feeling the squeeze from tit-for-tat tariffs start calling the White House, the pressure on the [Trump] administration to reverse course will grow.” Freeland said that’s precisely what happened under the first Trump administration and she anticipates a similar outcome this time.
National Retail Federation executive vice president of government relations David French said, “[T]his scale of undertaking is massive and will be extremely disruptive to our supply chains. It will likely result in higher prices for hardworking American families and will erode household spending power. We encourage the president to seek coordination and collaboration with our trading partners and bring stability to our supply chains and family budgets.”
Trump referred to the “art of the international deal” – a nod to his 1987 book, Trump: The Art of the Deal – in the fact sheet before highlighting his record on trade, including his recent use of tariffs in disrupting US trade relations with Canada and Mexico.
“Today’s action is not mere negotiating posture—this is the Trump administration putting nearly every country on notice,” said Josh Lipsky senior director of the Atlantic Council’s GeoEconomics Center.