The US president has ordered his officials to develop reciprocal tariffs on imports to the US, keeping to an “eye for an eye” campaign promise on matters of world trade.
Trump has a longstanding belief that the US is being treated unfairly in global trade. He argues that many countries impose higher tariffs on US goods than the US does on theirs, creating an imbalance.
For example, India levies tariffs that are typically between 5 and 20% higher than the US on 87% of imported goods, according to data from Global Trade Alert, an organization which assesses commerce policies.
Trump has said he wants to match the levy on US imports that other countries apply to US products.
As well as forcing major powers like China and the European Union to lower their duties, the president believes reciprocal tariffs will boost his “America First” economic policy by narrowing the country’s trade deficit while improving the competitiveness of US manufacturers.
However, economists have pointed out that the US benefits from having large trade imbalances with the rest of the world, as the dollar — the global reserve currency — is used in most trade, which offers major tailwinds to the US economy.
Countries use those dollars earned in trade to invest back into the US, often in government bonds, stocks and real estate. This keeps US interest rates lower, and allows US businesses and consumers to borrow and spend more.
