Key Takeaways From The Reciprocal Tariff Announcement
Reciprocal Tariffs have just been announced. But what does that mean for you?
What Are Reciprocal Tariffs?
Trump declared a national emergency under IEEPA (International Emergency Economic Powers Act) which grants the President the power to invoke tariffs to protect the economic interest of the United States.
Following is what we know so far.
The entire world will have a 10% tariff that goes into effect April 5.
The nations that have higher “trade barriers” will have higher tariffs which are going to go into effect April 9th.
Countries and their tariffs are listed in this PDF released from the White House. Click to access it via this link: https://www.whitehouse.gov/wp-
What Are Trade Barriers?
How did the white house get to these numbers? 46% for Vietnam, 32% for Taiwan, 29% for Pakistan and so on? it is based on what the president calls “trade barriers”
What the President considers trade barriers are among other things tariffs, sales tax and currency manipulation.
What analysts say the President’s cabinet did was divide the trade deficit by the amount of trade we do with that nation, giving a percentage of the “trade barrier”. Half of that amount is what the US reciprocal tariff will be.
Here is an example:
U.S. Imports from China (2024): $439 billion
U.S. Exports to China (2024): $144 billion
Trade Deficit: $439B – $144B = $295 billion
Deficit-to-Import Ratio: $295B ÷ $439B ≈ 67.2%
Reciprocal Tariff Rate: 67.2% ÷ 2 ≈ 33.6%
There is no proof that this was indeed the formula used and it’s not my place to find out.
However, I will try to answer the most common questions people have, so keep reading.
Do These Tariffs Stack?
Yes and no.
Treasury Secretary Scott Bessent said this extends to 54% when combined with Trump’s 20% February duties imposed over the U.S. fentanyl overdose crisis.
Based on what the president said was his formula (50% of the opposing nations trade barrier) this would be 34% for China instead of 54%, we shall find out in due time I guess)
Section 301
In regard to Section 301, which are the 2019 tariffs that Trump imposed in his first term, it will still be applicable, which makes some products have the staggering 79%!
Section 232
It will however not stack to Section 232 steel and aluminum tariffs, so if you have a
product subject to Section 232, you will not be subject to the 54%.
Furthermore, copper and lumber (that are currently under investigation for Section 232
tariffs) will also be excluded from the reciprocal tariffs should the Section 232 apply to
them.
When Do Reciprocal Tariffs Go Into Effect?
The worldwide 10% tariff goes into effect April 5 12:01 am EST.
Excluded are goods that are loaded on the final vessel destined to the US on or before May 5.
The higher reciprocal tariffs will go into effect April 9 12:01am EST.
Excluded are goods that are loaded on the final vessel destined to the US on or before April 9.
What About Canada And Mexico?
For goods made in Canada and Mexico and subject to USMCA there will be zero tariffs whatsoever.
For goods coming from Canada and Mexico that are not subject to USMCA there will be 25% IEEPA from earlier this year.
Should the IEEPA be deemed to be no longer necessary, the reciprocal tariffs on
Canada and Mexico will be 12% ad valorem.
Further Exclusions
Further excluded are minerals and some pharmaceuticals, the full list can be found here
Also excluded are products that 20% of their content is made in the USA, in which case the tariff will only apply to the content not made in the USA. (to determine what is considered made in the USA follow the country of origin rules)
Also excluded are the Autos that will now be subject to a 25% tariff under section 232, and they will not be subject to the reciprocal tariffs.
Speaking of which, the auto tariff went into effect last night already.
De Minimis - Section 321
The worldwide De Minimis is still under investigation.
However, the de minimis for goods coming from China will change: There will be full duties and tariffs applied to any shipment, even the low value shipments that were previously exempt from duties and tariffs for less than $800.
If the goods are coming via the postal service, there will be a minimum fee of $25, (which will see an increase to $50 after June 1, 2025), or 30% of the commercial value regardless of the HTS code.
Will These Tariffs Be Renegotiated?
The way Trump calculated the trade barriers includes currency manipulation and VAT/GST which makes it more complicated to remove these trade barriers.
Simply by dropping tariffs on US goods will not do the trick, as we have seen from Israel, it not help them and they are still subject to 17% reciprocal tariff.
You will have to drop the ““trade barriers” which among other things are currency manipulation. The reason why I mention this is because as you may have read, currency manipulation was a strategy applied by China for many years as a way to keep their exports high, by manipulating their currency, a US dollar can buy more Chinese goods not just because it is cheaper but also because the US dollar is worth more.
In other words: The reason you can buy goods for cheap is most definitely due to cheap labor. But how much of it is also because the US is stronger in value and therefore buys more goods for less money – and it is only made possible because of the “currency manipulation”? which means that if China were to stop manipulating their currency, who can promise that you will not see a significant increase in cost of goods of the likes of the tariffs are numbers close to it?
As more information becomes available I will make sure to share them with you all.
If you have questions that I have not addressed here, please respond directly and I will try to include your questions in my future email on this matter.
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