President Trump Announces Reciprocal Tariff Policy
Citing his authority under the International Emergency Economic Powers Act (IEEPA) on April 2, President Donald Trump signed an executive order placing a minimum 10 percent tariff on all imports into the United States and higher reciprocal rates on countries that his administration has determined maintain egregious unfair trade barriers for U.S. products. (Click this link to see the reciprocal rates for each affected country.)
The 10 percent tariff went into effect April 5, 2025. The reciprocal tariff rates will go into effect Wednesday, April 9, 2025.
As a White House fact sheet explains, some goods will not be subject to the reciprocal tariffs. These include:
- Steel and aluminum articles and autos and auto parts that are already subject to Section 232 tariffs;
- Copper, pharmaceuticals, semiconductors, and lumber articles;
- All articles that may become subject to future Section 232 tariffs;
- Energy and other certain minerals that are not available in the United States;
- Articles subject to 50 USC 1702(b); and
- Bullion.
With the exception of the products listed above, the new penalties will be stacked on top of previously-announced tariffs. For example, reflecting the 34 percent reciprocal rate and previously-announced 20 percent tariffs that already have been put into place by the United States, Chinese imports will be subject to 54 percent tariffs. Including tariffs imposed during the first Trump administration, the average U.S. tax on Chinese imports will be 76 percent.
When it comes to products from the North American trading partners, goods that qualify for, and claim, preferential treatment under the United States-Mexico-Canada Agreement (USMCA) may continue to enter the United States on preferential terms. That exemption excludes products, including industrial metals products, that are subject to Section 232 tariffs. For products that cannot claim USMCA preferential treatment, the 25 percent IEEPA duty rates that were established on Feb. 1 still apply. (A 10 percent tariff continues to apply to energy, energy resources, and potash from Canada as well.) In the event the existing IEEPA orders are terminated, USMCA compliant goods would continue to receive preferential treatment, while non-USMCA compliant goods would be subject to a 12 percent reciprocal tariff.
The new tariffs announced last week will remain in effect until President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated. Find more analysis of the reciprocal tariffs here, here, and here.
The new tariffs already are being challenged in court. The New Civil Liberties Alliance (NCLA), a conservative legal advocacy group, has filed a lawsuit on behalf of Simplified, a Florida-based small business that sells planners and purchases products from China. The lawsuit challenges the president’s authority to use the IEEPA to impose tariffs.
As expected, the United States’ trading partners strongly opposed the new policy. Many already have announced retaliatory measures. For example:
- Canadian Prime Minister Mark Carney introduced a 25 percent tariff on cars and trucks made in the United States.
- Starting April 10, the Chinese government will impose a 34 percent tariff on imports of all U.S. products.
- France’s prime minister said the tariffs were “a catastrophe for the economic world.”
- Italian Prime Minister Giorgia Meloni said the tariffs were “wrong.”
- European Commission chief Ursula von der Leyen vowed a unified response, including preparation of countermeasures.
- Taiwan’s government condemned the tariffs as unreasonable.
Stay tuned to Connecting the Dots as this story develops.
Wondering how these tariffs will continue to affect stock and bond markets and the industrial metals industry? Join the Metals Service Center Institute on April 29, 2025 at 2 p.m. for a free webinar with Morgan Stanley Managing Director And Senior Portfolio Management Steven Ploder. More information and registration is available at this link.