U.S. to Impose Reciprocal Tariffs as Global Trade War Looms

Reuters

The Trump administration will announce reciprocal tariffs on all countries that impose duties on U.S. imports by Thursday. The move, set to take effect before Indian Prime Minister Narendra Modi’s visit, has raised fears of a global trade war and inflation spikes.

U.S. President Donald Trump’s administration is set to impose reciprocal tariffs on any country that charges duties on American imports, White House spokeswoman Karoline Leavitt confirmed on Wednesday. The announcement is expected before Indian Prime Minister Narendra Modi’s visit to Washington on Thursday.

Trump previously stated that new tariffs would target cars, semiconductors, and pharmaceuticals. However, Republican House Speaker Mike Johnson suggested that certain exemptions—possibly for the automotive and pharmaceutical industries—were being considered. The White House has yet to confirm details.

Markets React as Inflation Rises

The tariff announcement follows new inflation data showing a sharp rise in U.S. consumer prices. Bureau of Labor Statistics data on Wednesday revealed the biggest monthly increase in nearly 18 months, prompting concerns that tariffs could further drive up costs.

Trump’s plans have already unsettled global markets. On Monday, he stunned investors by imposing broad tariffs on steel and aluminum imports, set to take effect on March 12. The move drew immediate criticism from Mexico, Canada, and the European Union, while Japan and Australia are seeking exemptions.

Trade ministers from the 27-member EU met on Wednesday to discuss their response, with officials indicating they will prioritise negotiations before considering retaliatory measures.

One EU diplomat urged caution, saying it was time to remain "cool-headed" with a month left before the tariffs take effect. However, officials are weighing the reinstatement of countermeasures first imposed in 2018 under Trump, which targeted U.S. products like bourbon and Harley-Davidson motorcycles.

Global Trade Fallout

The Trump administration’s new trade stance has already sparked tensions with major economies. Last week, Trump imposed a 10% tariff on Chinese imports, prompting Beijing to respond with countermeasures. Meanwhile, he delayed a 25% tariff on Mexican and Canadian goods until March 4, allowing time for border security negotiations.

Steel and aluminum tariffs have left manufacturers scrambling. European steelmakers fear an influx of cheap imports as U.S. markets tighten. French steelmaker Aperam has urged Brussels to impose restrictions if necessary, while Austria’s voestalpine has called for immediate countermeasures.

In Canada, Prime Minister Justin Trudeau warned that U.S. job losses and economic disruption would follow if tariffs on Canadian steel and aluminum were imposed. A delegation of Canadian provincial leaders was expected to meet with Trump in Washington on Wednesday.

Australian officials are also pushing back. Industry Minister Ed Husic dismissed concerns that Trump’s tariffs would disrupt Australia’s aluminum exports, arguing that demand remains strong due to global net-zero commitments.

A Monumental Task

Trump’s plan for reciprocal tariffs presents a significant logistical challenge. Structuring duties to match each country’s tariffs would require extensive legal and economic adjustments.

Experts suggest the administration could opt for a flat 10% or 20% tariff rate, but a more complex approach—adjusting duties to match each country's individual rates—would be difficult to implement.

“It’s almost an artificial intelligence project,” said Damon Pike, a trade specialist at BDO International, noting that every member of the World Customs Organization applies different duty rates.

Trump adviser Peter Navarro has dismissed concerns about rising prices, arguing that previous tariffs did not lead to major inflation spikes. However, economists warn that new duties could add upward pressure on U.S. consumer prices.

Despite uncertainty, the administration appears set to proceed with its tariff plan. The coming days will reveal whether exemptions will be granted—and how trading partners will respond.

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