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What is Trump's new reciprocal tariff regime?

U.S. president Donald Trump has shattered a global trading system that dates back more than 75 years with a new 10% U.S. baseline tariff on all goods and higher reciprocal rates of tariffs for countries that, according to his administration, have high barriers against U.S. imported goods.

Here are some of the key features of Trump's new tariff regime, as detailed by his executive order.

High Tariffs on Major Trade Partners

The reciprocal rate is meant to capture policies like currency manipulation, lax laws on pollution and labor, and burdensome regulations which keep U.S. goods out of foreign market.

The European Union is hit with a tariff of 20% by the United States. This will increase to 45% in Vietnam, 24% in Japan, 25% in South Korea, and 26% in India.

China, with a $295 billion trade surplus in 2024, will receive a reciprocal tariff of 34%. Treasury Secretary Scott Bessent stated that this rate would increase to 54% if combined with Trump's February 20% duties imposed due to the U.S. overdose crisis. Trump promised to impose a 60% tariff on Chinese goods as part of his election campaign in 2024.

Britain, Brazil, and Singapore, who had trade deficits last year with the U.S., were still given the 10% baseline rate. White House officials claimed that many countries would have higher deficits with the U.S., if they had fairer policies.

The U.S. Office of the Trade Representative reported that Russia would not be on Trump's list despite a $2.5 Billion goods trade surplus in 2024 with the U.S.

REPRIEVE MEXICO AND CANADA

The tariffs on goods from Canada and Mexico have not been reciprocated because Trump has maintained his 25% fentanyl duty, as well as 10% for Canadian potash and energy.

The tariff exemption will be in effect for all goods that comply with the U.S., Mexico and Canada Agreement on Trade. This is a welcome relief to U.S. automobile manufacturers. Trump previously stated that the USMCA exclusion granted a month earlier would expire on Tuesday.

Officials said that the fentanyl tariffs would remain in place until conditions regarding drug trafficking and migration at borders improve. If they are removed, a 12% import duty will replace them for products not complying with USMCA origin rules.

METALS, AUTOS TARIFFS A DIFFERENT THING

Certain tariffs will not stack on top the reciprocal duty. Imports subject to a separate 25% tariff under Section 232 of Trade Act of 1962, such as autos, auto parts, and steel and aluminum, will be excluded.

This exemption also applies to other sectors that are subject to Section 232 investigations or could be investigated in the future, such as copper, lumber and semiconductors. In a future annex, other products will be listed as exempt, such as certain minerals, energy, and energy products.

IMPLEMENTATION AND AUTHORITY

The baseline 10% tariff will go into effect on April 5 at 12:01 am EDT (0401 GMT), while the higher reciprocal tariffs will be in effect the following day, at the same time.

Trump has invoked the International Emergency Economic Powers Act, the 1977 law he used in February to justify his tariffs against Chinese, Mexican and Canadian products over fentanyl. IEEPA was not used for tariffs prior to Trump's current administration, but only to impose economic sanctions.

Trump declared a state of national emergency in accordance with IEEPA due to the "large, persistent and growing" U.S. goods trade deficit which grew more than 40% by 2024, reaching $1.2 trillion.

The executive order stated that "This trade imbalance reflects asymmetries of trade relationships which have contributed to atrophying domestic production capacity in the United States, particularly that of its manufacturing and defense-industrial bases."

CHINA'S EXEMPTION FOR SMALL PACKAGES IS ENDED

Trump signed a separate executive order ending the duty-free exemption "de minimis", which was granted to packages coming from China or Hong Kong that were valued under $800. This loophole had been exploited for years by Chinese ecommerce giants, including Shein Holdings and PDD Holdings Temu, to avoid tariffs in the U.S. by shipping directly to consumers.

Trump's administration attempted to close the de minimis exception earlier this year. It blamed it for allowing unscreened fentanyl-precursor chemicals to enter the U.S., an assertion that was verified by a last year investigation.

The administration decided to delay the exemption in order for the Commerce Department and Customs and Border Protection to implement adequate measures. The decision to close the loophole was first reported earlier Wednesday. Reporting by David Lawder, Editing by Lincoln Feast.

(source: Reuters)