Think carefully. My question is not as ridiculous as it sounds. 
Reciprocal Tariffs
We will impose the same tariffs on other countries as they impose on the US: “No more, no less,” said Trump. “What they charge us, we charge them.”
Many people support such foolishness for one of two reasons. The first is they don’t think. The second is they believe any fool thing Trump says.
Think again about my question again. If you support reciprocal tariffs, then your answer is yes.
What Does “Reciprocal” Really Mean?
Curiously, despite Trump’s equality statements, no one really knows what reciprocal means, not even Trump.
Nonetheless, the White House says Trump Still Intends for Reciprocal Tariffs to Kick in on April 2.
“Unless the tariff and non-tariff barriers are equalized, or the U.S. has higher tariffs, the tariffs will go into effect,” the White House official said.
Bessent told Fox Business Network’s “Mornings with Maria” program that Trump on April 2 would give trading partner countries a reciprocal tariff number that reflects their own rates, non-tariff trade barriers, currency practice and other factors, but could negotiate to avoid a “tariff wall.”
“On April 2, each country will receive a number that we believe represents their tariffs,” Bessent said. “For some countries, it could be quite low, for some countries, it could be quite high.”
In short, the answer to what “reciprocal” means is: Who the F knows?
But we know reciprocal will be amazingly complex, difficult to administer, and change on the fly.
Trump Rules Out Simple Plan
The Wall Street Journal reports Trump Team Explored Simplified Plan for Reciprocal Tariffs
Officials have recently weighed whether to simplify the complex task of devising new tariff rates for hundreds of U.S. trading partners by instead sorting nations into one of three tariff tiers, according to people close to the policy discussions, who emphasized that the situation remains fluid and could evolve in the coming weeks. The proposal was later ruled out, said an administration official close to the talks, adding that Trump’s team is still trying to sort how to implement an individualized rate for each nation.
“The president has made it clear he wants to see true reciprocity across the board from every one of our trading partners, and many ideas have been discussed on how to best achieve that outcome,” White House press secretary Karoline Leavitt said. “As promised, President Trump will announce his reciprocal trade plan directly to the American people, and the world, on April 2nd.”
Officials are weighing how to move forward without overwhelming the U.S. Trade Representative’s office, an agency of more than 200 people charged with devising the reciprocal tariff plan. The Wall Street Journal previously reported that imposing reciprocal tariffs unique to each trading partner’s duties and non-tariff barriers could take six months or more.
No matter what the administration settles on, officials expect they will take into account value-added taxes that many other nations charge on consumption within their boundaries.
Thus, Trump will let every nation on the planet set US tariff policy, based of course on Trump’s calculation of what their policy is.
For example, AI says that as of March 19, 2025, New Zealand generally does not have tariffs on U.S. wool under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade agreement that includes New Zealand and the United States.
That’s great.
Q: Can I assume the US will not put a tariff on New Zealand wool?
A: Ha Ha. Reciprocal does not mean reciprocal, silly. It means whatever Trump says it means.
Q: For how long?
A: Good question. Perhaps a day, a week, a month, or hours. No one has any idea.
Q: How many items are we talking about?
A: Great question. The Harmonized Tariff Schedule of the U.S., which details individual rates on particular commodities, has about 13,000 line items. The U.S. trades with roughly 200 countries.
Q: Is Washington ready to impose and manage 2.6 million individual tariff rates?
A: You tell me.
‘Reciprocal’ Tariffs Make No Sense
Wall Street Journal writer Douglas A. Irwin discussed the previous two questions in ‘Reciprocal’ Tariffs Make No Sense
Reciprocal tariff systems lead to nonsensical policies. Consider: China exports rare-earth minerals that are essential for the production of many high-technology goods. The U.S. doesn’t export such goods to China. But if China were nonetheless to impose high tariffs on them, would the U.S. then be required to impose real prohibitive duties on mineral imports from China?
Behind the superficial appeal of reciprocal tariffs are two major fallacies. The first is that other countries are taking advantage of us in trade, and we know this because we have a trade deficit. But macroeconomic factors, such as the balance between domestic savings and investment and the flow of capital between countries, determine the trade balance—not tariffs. The U.S.-Mexico-Canada agreement, the Trump-negotiated successor agreement to Nafta, ensures that U.S. goods have duty-free access to Mexico and Canada, as we also provide them. That’s equal treatment, or pure reciprocity, but it doesn’t guarantee balanced trade. The U.S. runs trade surpluses with Australia, Brazil, the Netherlands, the U.K., Singapore and most of Central and South America. Is the U.S. exploiting those countries? Does our trade surplus justify their putting tariffs on our goods?
Another fallacy is that other countries’ value-added taxes constitute discrimination against the U.S. Most European countries tax imported goods because they also levy taxes on domestic producers. In the end, VATs are taxes on consumption and don’t discriminate against imports.
Reciprocal tariffs don’t make sense even using the mercantilist logic that pervades the Trump administration. A prolonged bout of inflation has made the American public sensitive about prices. The U.S. shouldn’t be imposing tariffs that will raise the cost of living for American consumers on all manner of goods and justify it on the illusory basis of fairness and reciprocity. If we truly want reciprocity—meaning zero tariffs on both sides—then the answer is to conclude free-trade agreements with willing partners. The U.S. could and should be negotiating such trade agreements with the European Union, Japan and other trading partners and allies. But the Trump administration is obsessed with mercantilism and trade balances.
Even worse, by threatening Canada, Mexico and Colombia (with which we have free-trade agreements) with stiff tariffs over nontrade issues, the Trump administration has undermined the value of such agreements. If they no longer constrain U.S. policy, they’re no longer credible.
The Trump administration thinks it’s using tariffs to beat up other countries. In reality, U.S. businesses and consumers will take the hit. Even Mr. Trump’s hero William McKinley said, “Commercial wars are unprofitable.” Sadly, it’s advice that the administration seems likely to ignore.
Mr. Irwin is an economics professor at Dartmouth College and author of “Clashing Over Commerce: A History of U.S. Trade Policy.”
Bonus Question
Q: Why should any country believe Trump will honor any agreement he signs?
A: There is no reason and there is no trust. Trump tore up his own “best trade deal ever” USMCA.
What Can Go Wrong?
Don’t worry. As noted, the trade department has more than 200 people charged with devising the reciprocal tariff plan on 200 nations and 13,000 items.
Here’s the beauty of it all. Whatever the team decides, Trump can rectify at a moment’s notice, based on exchange rates, VATs, non-trade barriers, drugs, and what side of the bed Trump gets up on.
Reciprocal means whatever Trump says it means whenever he says it.
So nothing can possibly go wrong.
Related Posts
March 4, 2025: A Global Trade War Has Started – Global Recession Will Follow
The most significant global trade war since Smoot-Hawley and the Great Depression is underway.
March 9, 2025: Cheese Was a “Key Achievement” of Trump’s USMCA Trade Agreement
Trump is complaining about Canada’s cheese tariffs. In 2018, he was bragging about cheese.
That post is a real hoot. Please give it a look.
March 16, 2025: Trump Wants a Weak Dollar But Needs a Strong One
Trump wants the Fed to cut interest rates to weaken the dollar and boost exports. But that’s not what helped him get elected.
For discussion of the small business hit, please see How One Small Business Owner Is Coping With Trump’s Tariffs
Fifty-four percent of small businesses polled said that tariffs would negatively affect their companies, while just 11 percent said they would benefit.
Please read the above post and multiply it by tens of thousands of small businesses.
Welcome to the global recession.
I find this apparent trade imbalance between Europe and US strange. I live in Europe and other than food, I buy almost everything through Amazon (which skims ~10% of all transactions), I spend $30 a month with Netflix; I pay Amazon another $30 a month in digital services; all my advertising comes via Google and Meta; almost all electronics I buy is laden with US-designed chips. In other words pretty much all my discretionary spend is with US companies. I guess it is pretty much the same with most people in Europe. The way that big corporations avoid paying taxes must have a big impact on the apparent trade surplus. In reality almost all my money goes towards paying for jobs in the US. Not complaining – you do it better than anybody else, but I wonder if the real “value added” trade deficit really exists.
In addition of this, he consider vat as a tariff whereas local producers pays it to. Therefere europe has only 10% tariffs and not 25%
Germany?
Zero Hedge appliance post – go right to the comments.
If Trump were smart he would have forced some debt forgiveness by all countries to the US. If they have been ripping us off they would agree. The dollar is effectively the currency of trade and if America has been suffering because of the currency devaluation of countries trying to game the system for more exports then the importers like the US should be allowed to forgo some debt. This would have made the markets stronger and provided relief in the bond market. If other countries have benefitted because of globalization then they should be more than happy to wipe US debt off their books. The US appears be the first middle and last resort for everything. Why not leverage that into debt reduction.
The loonie theories continue.
If I was a foreign nation, I would say, go ahead and default.
Momentous pearl-clutching in this comment section.
Q: Why should any country believe Trump will honor any agreement he signs?
A ceasefire between Israel (USA proxy, 100%, as we saw after Mr Witkof paid a visit) and Gaza was just broken. The ceasefire & withdrawal from Lebanon was broken. The JCPOA was broken. The INF & ABM were abolished. The US routinely transgresses the UN Charter, and routinely and continuously murders more babies than any identifiable actor.
The US will abide by any agreement only as long as it is deemed to benefit the US (often narrowed to the current administration [domestic politics | corporate political sponsors])
The US has been breaking treaties since it declared independence. White man speak with forked tongue….the 100% correct evaluation of US keeping trade, peace or other treaties.
We will impose the same tariffs on other countries as they impose on the US: “No more, no less,” said Trump. “What they charge us, we charge them.”
More tariff is collected over Canadian exports than vice versa.
What is he even talking talking about?
And they are irrelevant tiny amounts
This article reminds me of Danny Devito’s role in movie other peoples money.
Giving his speech about a sunset industrial base in America.
A Prayer that globalism as it has been formulated is irrevocable.
Reciprocity and reciprocal tariff is probably closer to a retaliatory tariff, a sort of angry counterproductive measure that will reduce trade.
Punative tariff as we are seeing today is in the economic war family that includes embargos and sanctions.
Protectionist tariff is the norm and tuned individually to protect existing industries at home.
External revenue tariff is unproven technology, never heard of the concept before.
Build, re-build or re-locate industry tariff involves unsustainable time delay and the patient might be dead before.
This is all the variations of tariff I’ve come across lately. Never had to think about it before this year being a retired engineer.
Consider how ignorant Trump’s tariffs are to date. He put big tariffs on steel and aluminum. Just about every high-value product, from machine tools to autos to aircraft to rockets use steel and/or aluminum. So Trump just allowed domestic producers of steel and aluminum to raise their prices, decreasing the profitability of the high-value product manufacturers. With lower profits, there will be less desire to invest in manufacturing high-value products, meaning fewer jobs and lower income for skilled employees in those industries.
You want tariffs to promote high-value manufacturing. So you never put tariffs on low-value products or raw materials. You want that to be as cheap as possible. You don’t get Mercedes to build more plants in the US by making input costs exorbitantly high in the US. That’s completely counterproductive. I am confident Trump is too dumb to understand this, but I’m certain someone in the administration gets it. So either they don’t have access to Trump, don’t have the guts to contradict him, or are actively helping the destroy the US manufacturing base for fun, profit and to own the libs.
Trump acts like a drunken sailor at the tiller steering the global economy into the rocks of a global recession.
Am somewhat puzzled by where there is a problem here.
The US at face value was and can be once again totally self sufficient.
The US does not need one product from New Zealand, France, Germany, Japan, Hungary, Ethiopia, China or any place else on this globe.
These named countries are allowed to sell into US market because the United States lets them.
So start the economic analysis with why the US should allow other Nations to sell into its market. There is only one answer to this and that is because the US rebuilt a very Broken World after WW2
It is now 80 plus years since WW2 ended and the world has been rebuilt to where it is now.
Time to mend the Home garden fences and take care of Domestic problems first and foremost. Time to stop being the village drunk down at Humpies Bar proclaiming we are the World, Globalism forever and a day..
Trade deals can be worked out and reciprocity as in balance of Trade issues are going to get a level playing field.
Uh….
How am I going to get my coffee?
And where are manufacturers going to get their graphite, etc. components?
Possibly you have heard of a place called Hawaii.
They are quite progressive and liberal but even they have to turn a Buck to pay bills.
Kona coffee is what it is called. Made in America.
Who’s going to produce your high value added products and services when the labor and capital are diverted for light assembly and apparel production? How well will the new jobs pay?
Possibly you may have noticed there is some action in the AI Game.
The reason the World will be paralyzed without the US consumer is those same countries need to provide work for their own people so as not to have revolt of locals to deal with..
Dartmouth – really?
Future Capital Expenditures; Diffusion Index for New York (CEFDISA066MSFRBNY) | FRED | St. Louis Fed
This is another call for supply-side economics. The basic idea of supply side economics is to create an economic milieu that will foster increased production of higher quality goods and services which can be marketed at competitive prices. To achieve these objectives we need to reduce monopolistic elements in the price structure (monopolistic prices of goods or services tends to increase prices and restrict output); increase labor productivity; reduce unit labor costs; reduce transfer payments to the non-productive sectors; eliminate excess regulatory burdens, excessive rates of taxation on producers and savers, etc.
The caveat is that supply side economics requires structural and attitudinal changes which will be zealously resisted by powerful special interest groups. Even more intractable are constraints imposed by resource and technological factors. Gains will be limited and a long time in coming even with our best efforts. Up until now we have ameliorated these unnecessary self-imposed economic hardships largely through massive transfer payments to non-productive recipients. Deficit financing by the Federal Government provided the principal source of funds. Al we all should know, there is a finite limit to this “remedy”.
Supply-side economics, as applied to the deficit, assumes that if enough tangible financial encouragement is given to the business community and investors, then plant expansion, production, employment and taxable incomes will increase sufficiently to enable the economy to “grow out of the deficit”. All of this, the supply-siders contend, it possible without burdening ourselves with higher taxes or endangering our national security through “real” reductions in the federal budget.
Methods already adopted to achieve these supply-side objectives include: 1) sharply lower corporate income taxes; 2) more generous treatment of capital gains; 3) tax credits for capital outlays; 4) tax deductions for certain types of investments: 5) accelerated depreciation on plant and equipment and rental housing; 6) removal of costly (and presumably unnecessary) government regulations, etc.
However, further tax incentives, especially to corporations, are likely to be counterproductive. That is, the adverse effects on the deficit and interest rates will more than offset the simulative effects on the economy. Many corporations, including some of the largest, pay little or no income taxes.
There is one all-important ingredient that the supply-siders ignore; namely that the demand for capital goods is a derived demand, derived from primary consumer demands. That even in a capitalistic system the end and objective of all production is human consumption. The demand for inventory or plant and equipment, however far removed from the ultimate consumer, is derived from final consumer outlays in the marketplace.
Demand is always paramount in successful business planning and commitment decisions. If sufficient demand is not expected to exist, it matters not what the expected costs will be. “Sufficient” demand, of course, covers all costs plus and expected after tax profit margin.
Supply-siders approach the demand side of the equation on a “trickle down” basis; build the plants and produce the goods, and demand will take care of itself. Supply creates its own demand.
Unfortunately, we do not live in that kind of world. The proposition is simple. An economy such as ours which is geared to mass production requires concomitant mass consumption. Payrolls must be sufficient to buy the goods and services produced – at the asked prices.
Only in the frictionless world created by the mathematical model builders are the asked prices in equilibrium with consumer spendable income. In the real world, there is always a purchasing power deficiency gap of varying proportions. This is just another way of saying that to have high levels of production and employment, we need not only a vastly more competitive price structure, we also need a steady but slightly inflationary monetary policy (prices increase c. 2-3 percent annually), and a tax policy that contains some elements of compulsory income redistribution – downward.
A couple of ‘end games’: one difficult but needed and the other leading to a total breakdown of the country.
The good option (which will never happen): greatly decrease the payments to social security, Medicare, and Medicaid (by the fairest means possible – if there are any). (Oh, and cut the military budget by 40 percent). This will only fly, however, if the income and the estate taxes were increased at the same time – as this could be used to ‘sell the reductions’ to the populace that will suffer directly. But this will never happen (the population that depends on SS cannot and will not live on less income – and any increase in taxes on the wealthier strata will never fly either. (Lets face it: the idea of shared sacrifice went out the window at WW2)
A second end game – which may not occur – is the plan to close a good percentage of the social security offices (Note: this is happening or proposed). (You can bet this will occur more in the ‘blue’ states than the ‘red’ (in line with Trump’s thinking). Then, require that all recipients of SS (and Medicaid/Medicare?) show up to register at distant and already overwhelmed SS offices in order to get their next month’s check. (Obviously this will not work – as it was never designed to). The Trump administration will try to implement a private option in its place (I mean, really, what good is it to have this money going out if you can’t make money off it!) – but this will lead to chaos and break down of our system and possible martial law (this is something Trump and will welcome and the brain dead Trumpers will justify as “necessary”.
Why not accelerate the depreciation expense for targeted products instead of a targeted tariff.
Accelerated depreciation is a tax gimmick that quickly gets out of hand, as people who remember the 1980’s can attest.
Looking forward to restoring some balance to a sustainable global economy on Apr 2nd.
If the ROW wants to punish their people for restoring balance and promoting sustainability, that just shows how much these leaders have a common with a certain German leader at the end of WWII.
A little bit of history (as an aside). I remember when in Carter’s last years in office, the national deficit was around 40 billion; I remember a lot of ‘hand wringing” over this. At that time we were the world’s largest creditor nation.
Then we had Reagan and the start of 200+ million deficits. But remember: Cheney said: “deficits don’t matter”). They didn’t – as long as we had so much to give. But the rich were getting richer – so who cared.
Then we had George HW Bush who was fiscally unremarkable followed by Bill Clinton and Newt Gingrich who eliminated the deficit over about 5 years with a mix of tax hikes and spending cuts.
If this administration was serious about the deficit and debt (which they’re not,) the first thing they’d do is to let the Trump 2017 tax cuts expire. Cuts alone are not going to get the deficit / debt situation under control.
“…followed by Bill Clinton and Newt Gingrich who eliminated the deficit over about 5 years with a mix of tax hikes and spending cuts.”
Stop this nonsense!
Clinton/Gingrich didn’t eliminate the deficit, they coincidentally happened to be in power when there was a giant stock bubble that coincided with the peak earning years of the boomer generation relative to Social Security outlays. Deficits weren’t structurally eliminated, unrealistic projections just made it appear that way.
https://www.cbo.gov/sites/default/files/105th-congress-1997-1998/reports/eb01-98.pdf
The fiscal deficit was only eliminated on a cash flow basis.
The national debt continued to rise during those years.
Debt ≠ Fiscal Deficit ≠ Trade Deficit
Hah! That ship sailed a long time ago. Now, it’s a train that cannot be stopped. Have fun while we’re rolling.
If New Zealand imposes a 20% tariff on US goods and the US responds with a 20% tariff on New Zealand’s goods, it’s a stretch to call that New Zealand setting US trade policy, especially because trade with New Zealand (with its 5 million people) is insignificant. NZ is only important because they’re part of Five Eyes which lets the Anglophone countries’ Intel services circumvent their laws against spying on their own citizens.
It shouldn’t be about nominal tariffs to begin with.
It should be based on actual import tariffs collected.
How about VAT? New Zealand has a 15% VAT, the US has none, and each state can impose a sales tax on retail. EU has a minimum VAT of 15%, but in Hungary, for example, the typical VAT is 27%. This means, that regardless of import duties, imported goods cost that much more. Unfair?
Consumption taxes, of which VAT is inarguably one, are the most regressive taxes there are, i.e. they hurt poor people the most and help rich people the most. Why are you in favor of helping the rich more than they are already helped by so many facets of everything?
This is true if you look at VAT standalone, but most countries have social payments to lower income families that remove the injustice.
Because the rich spend a lot of money brainwashing poor idiots.
Good idea. We need revenue from wherever we can get it.
Nope – VAT is charged on both domestic and imported goods.
VATs are a tool of socialist, excessively taxed and regulated countries. It is an economic signal. That is why a VAT is relevant in reciprocal tarriffs (but not dollar for dollar).
Here are the problems Mish. How would you deal with them?
https://www.zerohedge.com/personal-finance/here-are-7-astonishing-economic-charts-will-absolutely-blow-your-mind
low effort post
The most amusing thing about this tariff and trade war is the assumption that Americans will put up with it. These same Americans that were outraged and balked at doing something as simple as wear a mask during COVID will suddenly endure loss of jobs, higher prices, supply chain disruptions, investment portfolios crashing, etc.
Lol, the pitchforks and torches will be out soon; heck the torches are already out at Tesla dealership and Tesla cars and it’s only a matter of time before it spreads beyond that in short order.
April 2 is right around the corner, we’ll see how fast Trump caves.
You’re assuming these people are able to identify, locate, pick up, and utilize pitchforks. You’re an optimist!
Most would be doing well to waddle 100 yards with it, let alone put it to any use
That is the plan: provoke “illegal” protests, declare martial law…
and minimize the checks and balances of the other 2 branches.
Leaving us with only an unchecked, and unbalanced, sTump.
And then what? No one wants to rule over burned cities, shattered economy and endless block by block gun violence. This isn’t North Korea or Iran, everyone here is armed to the teeth. I doubt dictatorship works out the way Trump thinks it will.
Americans were outraged that they were mandated to wear a product over their face, which science long ago determined did not prevent transmission of airborne viruses.
So you’re gonna lose your social security and medicare, take losses on your portfolio, pay sky high prices for goods and services, and be waiting in long lines at the local food bank to “own” the libs. Lol. go right ahead. Sweet poetic justice for the trumpers, you reap what you sow.
Total bullshit
What would be your plan, Mish, for dealing with the government deficit, government debt, trade deficit, and high debt/GDP?
You know, Warren Buffet is a pretty bright guy and had solutions for both:
I can’t imagine why any elected official wouldn’t propose these solutions…
I have posted one already. I balanced the budget.
I will update my proposal soon.
https://mishtalk.com/economics/an-interactive-exercise-what-would-you-do-to-balance-the-budget/
The free market gods are wooden idols. So called free markets when taken out of context with political and social implications, are dangerous fictions. The biggest problem with international trade imo is labor arbitrage which may benefit so called consumer’s over consumption in an overfinancialized, meaning over leveraged economy, definitely benefits corporates raising profit margins as well as the narrowing pyramid of oligarchs who get the cream. If new job growth was located within the immigrant / alien community, is this internalized labor arb an absolute good? Do NZ sheep create labor arb? Baaaaaaaaaa. Looking in the wrong places. Do Euro NATO members live up to their NATO commitments? If not, who is paying for NATO? Who is paying for Chinese aircraft carriers? Etc.
Don’t forget environmental arbitrage.
Let’s say the goal is little to no tariffs. Can we agree on that? If this process leads to that would you say that it’s worth it? You are assuming an outcome of nothing positive. The fact is we don’t know yet. You can disagree with the methodology which is fine. But the ultimate outcomes are what matters.
I can see your book now “The Road to No Tariffs Drives Through a Depression Created by Tariffs”
The man is a perfect circle of stupid.
Has Trump specifically stated his end goal is little to no tariffs? Because most of what I hear from him is that our trade deficits are too high and we need to produce more here in the US (which is not the same thing)
And that’s another reason this tariff back-n-forth is not helpful. China, Canada, Mexico, etc. is not forcing their products on us. We US consumers want to buy them because they are better, cheaper, our only real option, whatever. So when Trump puts tariffs on these things we want, we are worse off (just like with any tax).
If we want more US production, there are better ways than using tariffs
Good points. What I would say is that he said he would go to zero tariffs if the other countries did the same(said during Modi visit among others). Thus I would say this a goal.
No tariffs is what we have with Mexico and Canada. Trump tore up that deal that he negotiated. So no. No tariffs is not what he is after.
Sorry that’s not accurate at all. Depending on the items or materials, Canada had many tariffs on American goods. And that was before March of this year. You can say that was already agreed to which is fine, but no tariffs would be no tariffs and that’s not what existed before.
True. With volumes tresholds to trigger the tariffs so high that in fact none were imposed.
https://mishtalk.com/economics/cheese-was-a-key-achievement-of-trumps-usmca-trade-agreement/
In terms of ‘non-tariff barriers’, will other countries now take into account the more than $30 billion a year the federal government spends on subsidies for farm businesses and agriculture ?
The path top no tariffs is easy.
Don’t have any