Update: April 9, 2025: President Trump announced lowering nearly all of the tariffs in the original announcement down to a 10 percent level for 90 days. He also announced an increase in the tariffs on products imported from China from 104 percent to 145 percent, including the 20 percent tariff announced in February. The announcement came after several days of alarm and plunging performance in the stock market and instability in the typically more-stable bond market. The original tariff announcement has also severely disrupted U.S. economic and diplomatic relations with other countries, many of which struggled to get responses from the White House on negotiations.
Timeline:
April 2, 2025: Trump issued an executive order declaring a national economic emergency and levying tariffs on goods imports from virtually all U.S. trading partners, at a minimum of 10% but significantly higher for major trading partners.
April 5, 2025: Tariffs take effect.
April 9, 2025: Trump lowers lowers most of the announced tariffs to 10 percent for 90 days; increases tariffs on goods from China.
On April 2, 2025, President Trump issued an executive order titled, “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits.” The order declares a national economic emergency over large and sustained U.S. trade deficits—the difference between how much the United States sells in exports to the rest of the world and how much it buys in imports. Invoking a variety of emergency legal authorities, the order invokes significant taxes on goods that Americans purchase from abroad, also called tariffs.
While the word “reciprocal” might imply these tariffs are meant to match in some way trade barriers to U.S. exports, the actual calculation of each country-specific tariff has no relation at all to genuine trade barriers. For each country, the “reciprocal tariff rate” is calculated as one-half multiplied by the bilateral trade deficit the United States runs with the country divided by the value of U.S. imports from that country. There is no information at all about legal or regulatory barriers or tariffs on U.S. exports that is reflected in this formula – it is functionally arbitrary in setting the reciprocal tariff levels.
Impact:
In 2024 the average effective tariff rate on goods entering the United States was less than 3%. The “reciprocal” tariffs will raise it to just under 19%. Tariffs will now cover functionally all goods imports into the United States – over $3 trillion. This level of tariffs will raise taxes on U.S. households by roughly $450 billion and will see a sharp reduction in both imports and exports.
Tariffs can be a useful tool in industrial policy for well-defined strategic goals, but broad-based tariffs that significantly raise the average effective tariff rate in the United States are unwise. Without a strategic plan, and applied broadly across all sectors, these tariffs will not provide a meaningful boost to U.S. manufacturing.