Reciprocal Trade and Tariffs

Memorandums

TLDR

This executive order establishes aggressive trade reciprocity measures to counter perceived unfair practices through matching tariffs, VAT countermeasures, and currency/wage provisions. It targets 14 specific practices including digital trade restrictions and IP theft, shifting U.S. policy toward managed trade rather than rules-based liberalization.

This executive order aims to address perceived imbalances in U.S. trade relationships through aggressive reciprocity measures.

The order establishes a “Fair and Reciprocal Plan” to eliminate non-reciprocal trade practices by:

  1. Matching foreign tariffs through equivalent reciprocal duties
  2. Countering value-added taxes (VAT) and nontariff barriers
  3. Addressing currency manipulation and wage suppression
  4. Targeting 14 specific unfair practices including digital trade restrictions and intellectual property theft

Key mechanisms will include:

  • Comprehensive trade audits of all partner nations
  • Mandatory 180-day impact assessment by OMB
  • Authority for USTR to define “structural impediments” flexibly

The order asserts that trade deficits:

  • Threaten national security
  • Hollow out industrial capacity
  • Result from foreign market closures

While the U.S. does run persistent goods deficits ($1.04 trillion in 2024), most economists dispute direct links to national security. Trade balances reflect complex factors including:

  • Relative savings/investment rates
  • Dollar’s reserve currency status
  • Global supply chain integration

The reciprocal tariff approach risks violating WTO most-favored-nation principles, potentially triggering trade wars. Previous 2018 Section 232 tariffs reduced GDP by 0.2% annually according to Federal Reserve studies.

Implementation challenges:

  • VAT countermeasures: The WTO prohibits border adjustments for indirect taxes like VAT.
  • Currency provisions: The U.S. Treasury already monitors currency manipulation under the 2015 Act.
  • Wage comparisons: There is no clear metric for determining “fair” wage parity.

The expanded nontariff barriers definition (Section 4b) creates enforcement complexities - 78% of U.S. trade partners use some form of technical barriers per ITC.

Legal considerations include:

  • Section 5© explicitly bars judicial review
  • Relies on existing trade statutes (Section 301, Trade Expansion Act 1962)
  • Potential conflicts with WTO dispute resolution timelines (avg. 19 months)

The order shifts U.S. trade policy toward managed trade rather than rules-based liberalization. While targeting legitimate issues like forced technology transfers, its unilateral approach risks:

  • Retaliatory measures from EU ($3.4B in 2018) and Asia
  • Supply chain disruptions in critical sectors (semiconductors, pharmaceuticals)
  • Reduced leverage for multilateral reforms

Implementation success would require unprecedented interagency coordination and likely face legal challenges under both domestic and international law.

REFERENCES

  • 2025-03-26: Trump will announce auto tariffs at a White House news conference | AP News — President Trump announced new tariffs on auto imports, aiming to boost U.S. manufacturing but risking price hikes and disruptions due to automakers’ reliance on global supply chains. The tariffs are part of a broader strategy that includes levies on steel, aluminum, and Chinese imports, and could escalate into a global trade war. Despite warnings from the industry, Trump argues these measures will create jobs and reduce the deficit, citing Hyundai’s planned steel plant in Louisiana as proof.
  • 2025-03-24: Trump’s Aggression Sours Europe on US Cloud Giants | WIRED — The article discusses how European companies are increasingly looking to move away from US cloud services provided by Amazon, Google, and Microsoft due to concerns about data security and privacy risks under the Trump administration. This shift is part of a broader European desire to reduce dependence on US technology companies, with some organizations already beginning to transition to European alternatives despite the significant challenges involved in migrating from established cloud ecosystems.
  • 2025-03-22: IRS close to finalizing data-sharing agreement with ICE, sources say | ABC News — The IRS is nearing a data-sharing agreement with U.S. Immigration and Customs Enforcement that would allow immigration officials to use tax data to support deportation efforts. The agreement would enable ICE to submit names and addresses of suspected undocumented immigrants for the IRS to check against its confidential databases.
  • 2025-03-13: Trump Turns His Back on the Markets; It Could Break MAGA — Trump’s imposition of tariffs has created economic uncertainty, leading to a market correction with the S&P 500 falling 10.1% from its peak and the Nasdaq Composite dropping 14.2% from its record. Despite Trump and his advisers acknowledging the falling stock market, they remain committed to their policies, framing it as a necessary “transition” period for rebuilding the country. Economic indicators show troubling signs, including the NFIB Uncertainty Index reaching its second-highest level ever in February and a significant drop in CEO confidence about revenue growth. The administration’s budget challenges persist, with Republicans abandoning efforts to negotiate a new budget and the February deficit reaching $308 billion, $11 billion higher than the same period last year. Markdown version of heavily paywalled story in summpementary-files.
  • 2025-03-12: Trump tariffs prompt “Boycott USA” backlash against US goods — President Trump’s tariffs targeting Canada, Mexico, and China have sparked a global “Boycott USA” consumer backlash, with significant pushback coming from EU countries and Canada where social media groups dedicated to boycotting American products have gained thousands of members.
  • 2025-03-11: Trump Tariffs | House Republicans Move to Block Potential Challenges | Bloomberg — House Republicans are moving to block Democrats from forcing a politically difficult vote on Donald Trump’s tariffs as the president escalates the US trade war with Canada by increasing steel and aluminum tariffs to 50%. The legislative provision, included in a rule governing floor debate on a government funding bill, would prevent a vote terminating the national emergency Trump used to impose tariffs without congressional approval.
  • 2025-03-05: China says it is ready for ‘any type of war’ with US — China has warned the US it is ready to fight “any type” of war after hitting back against President Donald Trump’s mounting trade tariffs, with tensions escalating as Trump slapped more tariffs on all Chinese goods and China retaliated with 10-15% tariffs on US farm products. The Chinese embassy’s statement on X represents some of the strongest rhetoric from China since Trump became president, coinciding with China’s announcement of a 7.2% increase in defense spending during the annual National People’s Congress in Beijing.
  • 2025-02-27: Trump and GOP leaders discuss using tariffs to pay for agenda | POLITICO — President Donald Trump and Republican leaders are discussing how to use revenue from new tariffs to fund their domestic policy bill, aiming to argue it won’t increase the national debt. The strategy involves keeping tariffs outside the reconciliation package while counting the revenue to claim deficit neutrality, with Trump announcing tariffs against Canada, Mexico, and China to take effect next month.
  • 2025-02-25: Consumer confidence plunged in February amid rising economic concerns | CBS News — U.S. consumer confidence plummeted in February 2025, with the Conference Board’s index dropping to 98.3 from 105.3 in January, marking the biggest monthly decline in over four years amid concerns about inflation, trade wars, and President Trump’s proposed tariffs. The seven-point drop reflected growing pessimism about future business conditions, income prospects, and employment, with the measure of Americans’ short-term expectations falling to 72.9, below the 80-point threshold that can signal a potential recession.
  • 2025-02-21: US economic growth falters and goods prices spike higher, according to flash PMI surveys | S&P Global — US economic growth has faltered to a near-stalled pace in February 2025, with the Composite Flash PMI Output Index falling to 50.4, a 17-month low, while goods prices have spiked higher due to tariffs. Companies attribute the weaker expansion to uncertainty and disruption caused by recent US government policy initiatives, though reduced pricing power in the services sector has offset manufacturing price increases, which bodes well for inflation but poorly for profits.

Section 1.

Background.

The United States has one of the most open economies and has among the lowest average weighted tariff rates in the world.  The United States imposes fewer barriers to imports than other major world economies, including those with similar political and economic systems.  For many years, the United States has been treated unfairly by trading partners, both friend and foe.  This lack of reciprocity is one source of our country’s large and persistent annual trade deficit in goods — closed markets abroad reduce United States exports and open markets at home result in significant imports.

Our workers and industries bear the brunt of unfair practices and limited access to foreign markets.  As noted in the Presidential Memorandum of January 20, 2025 (America First Trade Policy Memorandum), this situation is untenable.  The trade deficit of the United States threatens our economic and national security, has hollowed out our industrial base, has reduced our overall national competitiveness, and has made our Nation dependent on other countries to meet our key security needs.  By making trade more reciprocal and balanced, we can reduce the trade deficit; grow the United States economy; and improve our trade relationships with trading partners to the benefit of American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.

Sec. 2.

Policy.

It is the policy of the United States to reduce our large and persistent annual trade deficit in goods and to address other unfair and unbalanced aspects of our trade with foreign trading partners.  In pursuit of this policy, I will introduce the “Fair and Reciprocal Plan”(Plan).  Under the Plan, my Administration will work strenuously to counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner.  This approach will be of comprehensive scope, examining non-reciprocal trade relationships with all United States trading partners, including any:

(a) tariffs imposed on United States products;

(b) unfair, discriminatory, or extraterritorial taxes imposed by our trading partners on United States businesses, workers, and consumers, including a value-added tax;

© costs to United States businesses, workers, and consumers arising from nontariff barriers or measures and unfair or harmful acts, policies, or practices, including subsidies, and burdensome regulatory requirements on United States businesses operating in other countries;

(d) policies and practices that cause exchange rates to deviate from their market value, to the detriment of Americans; wage suppression; and other mercantilist policies that make United States businesses and workers less competitive; and

(e) any other practice that, in the judgment of the United States Trade Representative, in consultation with the Secretary of the Treasury, the Secretary of Commerce, and the Senior Counselor to the President for Trade and Manufacturing, imposes any unfair limitation on market access or any structural impediment to fair competition with the market economy of the United States.

The Plan shall ensure comprehensive fairness and balance across the international trading system by factoring in losses as a result of measures that disadvantage the United States as applied, regardless of what they are called or whether they are written or unwritten.

Sec. 3.

Taking Action.

After the submission of the specified agency reports due under the America First Trade Policy Memorandum, the Secretary of Commerce and the United States Trade Representative, in consultation with the Secretary of the Treasury, the Secretary of Homeland Security, the Assistant to the President for Economic Policy, the Senior Counselor to the President for Trade and Manufacturing, and the heads of such other executive departments and agencies as the Secretary of Commerce and the United States Trade Representative deem relevant, shall initiate, pursuant to their respective legal authorities, all necessary actions to investigate the harm to the United States from any non-reciprocal trade arrangements adopted by any trading partners.  Upon completion of such necessary actions, they shall submit to me a report detailing proposed remedies in pursuit of reciprocal trade relations with each trading partner.

(b) Within 180 days of the date of this memorandum, the Director of the Office of Management and Budget shall assess all fiscal impacts on the Federal Government and the impacts of any information collection requests on the public, and shall deliver an assessment in writing to the President.

Sec. 4.

Definitions.

For the purposes of this memorandum:

(a) “Value-added tax” means a type of consumption tax that is levied on the incremental increase in value of a good or service at each stage of the supply chain.

(b) “Nontariff barrier” or “measure” means any government-imposed measure or policy or nonmonetary barrier that restricts, prevents, or impedes international trade in goods, including import policies, sanitary and phytosanitary measures, technical barriers to trade, government procurement, export subsidies, lack of intellectual property protection, digital trade barriers, and government-tolerated anticompetitive conduct of state-owned or private firms.

Sec. 5.

General Provisions.

(a) Nothing in this memorandum shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department or agency, or the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b) This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.

© This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

(d) The United States Trade Representative is authorized and directed to publish this memorandum in the Federal Register.