US reciprocal tariffs: Fair trade or trade war? Country-by-country breakdown

Imagine you have a friend who trades snacks with you. If your friend gives you one cookie but asks for two in return, that wouldn’t feel fair, right?

A reciprocal tariff is like making the trade equal — if your friend charges you two cookies, you do the same to them. 

In real life, countries trade goods instead of snacks. If another country puts a tax on US products, the US might add the same tax on their goods. This is meant to make trade fair.

​But sometimes it can lead to arguments, just like with snacks.

Starting April 2, 2025, US President Donald Trump announced a series of sweeping tariffs aimed at restructuring the United States' trade relationships. 

These measures include a universal 10 per cent tariff on all imports and higher, targetted "reciprocal tariffs" on specific countries based on their trade practices.

Reciprocal tariffs are designed to “mirror” the tariffs that other countries impose on US goods. 

The aim: encourage trading partners to lower their tariffs.

Example: If a country imposes a 20 per cent tariff on US exports (i.e. food, machinery, medical device, cars), the US would respond with an equivalent tariff on imports from that country.

In theory, it aims to address perceived imbalances and protect domestic industries. ​Let's take a closer look at the ups and downs of such a move:

Adopting a regime of reciprocal tariffs could have the following benefits (at least in theory):

1. Reduction of trade deficits:

By imposing tariffs that match those of trading partners, the U.S. aims to reduce its trade deficits.

The administration argues that this strategy will discourage unfair trade practices and promote fairer competition. ​As of 2024, the United States had a trade deficit of about $918 billion. The US trade deficit has increased since 2009, peaking in 2022, as per Statista

2. Protection of domestic industries:

Higher tariffs on imported goods can shield US industries from foreign competition, potentially fostering domestic manufacturing and preserving jobs. This measure, seen as “protectionist” by some, is intended to bolster sectors that have been adversely affected by international trade dynamics. ​

3. Leverage in trade negotiations:

Implementing reciprocal tariffs may provide the US with bargaining power to negotiate more favourable trade agreements.

By demonstrating a willingness to impose tariffs, the US could compel trading partners to reconsider their own tariff structures and engage in negotiations aimed at mutual reductions. ​

1. Increased consumer prices:

Tariffs often lead to higher prices for imported goods, which can be passed on to consumers. This increase in costs can reduce purchasing power and disproportionately affect lower-income households. ​In the US, the annual inflation rate (based on the Consumer Price Index) saw a significant increase from 2020 to 2022, peaking at 7.0% in 2021 and 6.5% in 2022, before declining to 3.4% in 2023 and 2.9% in 2024.

2. Retaliation from trading partners:

Affected countries may respond with their own tariffs on US exports, leading to a tit-for-tat escalation. Such “trade wars” can harm exporters, particularly those in agriculture and manufacturing sectors, by reducing their competitiveness in international markets. ​

3. Global economic slowdown:

Widespread use of tariffs can disrupt global supply chains and trade flows, potentially leading to a slowdown in economic growth both domestically and internationally. Economists warn that such protectionist measures could increase the risk of a recession. ​

The announcement of these tariffs has elicited varied reactions. Industries reliant on global supply chains, such as fashion and automotive, have expressed concerns about increased costs and operational disruptions. 

For example, the fashion industry anticipates significant challenges due to its dependence on imports from countries facing higher tariffs. ​

Internationally, several countries have voiced dismay and are contemplating countermeasures. The European Union has labelled the tariffs as a "major blow to the world economy" and is considering retaliatory actions if negotiations fail. 

The US historically allowed higher tariffs on its goods without always imposing reciprocal tariffs for several reasons:

Post-WWII trade leadership: After World War II, the US helped create global trade systems like the General Agreement on Tariffs and Trade (GATT) and later the World Trade Organisation (WTO).

As the leading global economy, the US promoted free trade and often accepted higher tariffs from other nations to encourage economic growth worldwide.

Trade agreements and economic strategy: The US pursued bilateral and multilateral trade deals where it accepted some “tariff imbalances” in exchange for greater access to foreign markets. For example, agreements like NAFTA (now USMCA) and trade deals with Asia and Europe provided long-term benefits despite short-term disadvantages.

Preferential treatment developing nations: The Generalised System of Preferences (GSP) allowed developing nations to impose higher tariffs while the US kept its tariffs low, helping those countries grow economically and become better trade partners.

The implementation of reciprocal tariffs by the US represents a major shift in trade policy with far-reaching implications. 

While the intended goals are to protect domestic industries and address trade imbalances, the potential for increased consumer prices, retaliatory measures from trading partners, and a slowdown in global economic growth cannot be overlooked. 

As the situation evolves, it will be crucial to keep tabs of the responses from international partners and the overall impact on the global economy.