President Trump proposed a new “reciprocal tax” on imports from high-tariff countries, reviving a proposal previously considered by the administration. On Feb. 12, at a White House infrastructure event, the president said that the U.S. cannot continue to let other countries “rob us blind” and charge the U.S. tariffs and taxes, while the U.S. charges nothing.
What is a reciprocal tax? It’s a tax imposed on imports from countries that slap higher tariffs on U.S. exports. The average U.S. tariff is about 3.5 percent and the average trade-weighted tariff is about 2.4 percent, according to the WTO. In comparison, other countries have much higher tariffs. For example, China’s average tariff is 9.9 percent and its trade-weighted tariff is 4.4 percent; Mexico’s average tariff is 7 percent and its trade-weighted tariff is 4.5 percent.
The White House offered no specifics on the mechanics of a reciprocal tax on imports, instead noting that nothing formal is currently in the works.
Implementing a reciprocal tax would be no small feat – raising U.S. tariffs to equal that of other nations would require the administration to renege or renegotiate on most of the nation’s trade agreements that have been place for over 70 years. Additionally, economists have long cautioned against such retaliatory tax measures, noting that tariffs generally hit consumers the hardest and make American companies less competitive.