Trump Threatens 'Reciprocal' Tariffs
President Donald Trump said during a Feb. 12 infrastructure event that a "reciprocal tax" may be coming because our allies are not allies on trade. "We cannot continue to be taken advantage of by other countries. We cannot continue to let people come into our country and rob us blind and charge us tremendous tariffs and taxes, and we charge them nothing. We cannot allow that to happen," he said, repeating for emphasis: "We cannot allow it to happen."
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"We’re going to be doing very much a reciprocal tax, and you’ll be hearing about that during the week and during the coming months," Trump said. "Not fair when we’re taken advantage of. That’s why we have these big trade deficits. That’s why we have tremendous problems with trade."
He pointed to a $71 billion annual trade deficit with Mexico as an example of trade problems, and added, "We lose a lot amount of money with Canada. Canada does not treat us right in terms of the farming and the crossing the borders. They’ll either have to treat us right, or else we’ll just do business a little bit differently, really differently." U.S. Trade Representative Robert Lighthizer is doing a fantastic job renegotiating NAFTA, Trump said. "Hopefully the renegotiation will be successful. And if it’s not, we’ll be more successful."
Trump said he has talked with China, Japan and South Korea about his intentions to change the United States' approach on trade. "They understand where I’m coming from," he said. "It’s a little tough for them because they’ve gotten away with murder for 25 years. But we’re going to be changing policy." This is not the first time administration officials brought up the idea that the U.S. should raise tariffs on products to match what other countries levy on U.S. imports of those products. Chad Bown, a scholar with the Peterson Institute of International Economics, co-authored an op-ed piece last year critical of the reciprocal tax concept.
WTO rules limit the amount members, including the U.S., can raise tariff rates, with maximum rates for each country varying based on agreed-upon schedules. Countries that raise tariffs above a bound rate would either have to negotiate that increase with the affected countries or compensate them for their loss of trade, else they would face tariff retaliation in return.