WASHINGTON: US President Donald Trump has announced that he will introduce “reciprocal tariffs” on trading partners on Thursday, potentially escalating trade tensions and fuelling inflation. However, he provided no further details about the plan, which could target any country that imposes duties on US imports.
Since taking office, Trump has imposed a range of tariffs on some of the United States’ largest trading partners, arguing that such measures help counter unfair trade practices. He has used tariffs as a tool to generate revenue, address trade imbalances, and pressure countries to meet US demands.
On Thursday, the president is scheduled to hold a press conference at the White House at 1:00 pm local time (1800 GMT) to outline the details of the new tariffs.
“Three great weeks, perhaps the best ever, but today is the big one: reciprocal tariffs!!! Make America great again!!!” Trump wrote in all capital letters on his social media platform, Truth Social.
The new policy is expected to align US tariff rates on imports with the rates that other countries impose on American goods.
Trump’s announcement comes just hours before he is set to meet Indian Prime Minister Narendra Modi in Washington.
Trade war to fuel inflation
Analysts warn that reciprocal duties could lead to a broad tariff hike, particularly affecting emerging market economies such as India and Thailand, which have higher effective tariff rates on US products. Countries such as South Korea, which have trade agreements with Washington, may face less of an impact.
Rising living costs were a key issue in the November election that saw Trump return to office, and he has pledged to swiftly lower prices. However, economists caution that his wide-ranging tariffs on US imports are likely to increase inflation in the short term and could eventually hamper economic growth.
Trump’s nominee for Commerce Secretary, Howard Lutnick, has dismissed concerns that tariffs would lead to widespread inflation, though he acknowledged that certain costs might rise.
During his election campaign, Trump repeatedly stated: “An eye for an eye, a tariff for a tariff, same exact amount.”
For instance, if India imposes a 25% tariff on US-made cars, Washington would apply the same 25% tariff on cars imported from India, according to a report by Nomura.
Modi will hold talks with Trump at the White House on Thursday, and ahead of his visit, New Delhi offered some tariff concessions, including reductions on high-end motorcycles.
Among Asian economies, India imposes a weighted average effective tariff of 9.5% on US exports, while US tariffs on Indian exports stand at 3%. Thailand has an effective rate of 6.2%, while China applies a 7.1% rate on US products, according to Nomura’s analysis.
The prospect of significant tariff hikes could send shockwaves through the global economy, potentially stifling growth while exacerbating inflationary pressures.
Trump maintains that these tariffs will help create domestic manufacturing jobs, but most economists argue that they would function as a tax increase on US consumers, further driving inflation.
Growing trade tensions
The Republican president has been increasingly antagonistic towards US trading partners in recent weeks, issuing tariff threats that could trigger retaliatory measures and lead to an all-out trade war.
Trump has already imposed an additional 10% tariff on Chinese imports. He has also prepared tariffs on Canada and Mexico—America’s two largest trading partners—that could take effect in March after a 30-day suspension.
On Monday, he removed exemptions from his 2018 tariffs on steel and aluminium, and he has also hinted at introducing new tariffs on semiconductors and pharmaceuticals.
In response, the European Union, Canada, and Mexico have prepared countermeasures to impose economic pain on the United States, while China has already retaliated with its own tariffs on US energy products, agricultural machinery, and large-engine vehicles. Additionally, China has launched an antitrust investigation into Google.
Trump has yet to clarify how he defines “reciprocal” tariffs. It remains uncertain whether his proposed measures will apply solely to matching tariff rates or if they will also target other foreign taxes that he deems barriers to US exports.
The White House argues that aligning US import duties with those imposed by other nations would create fairer trade conditions while potentially increasing government revenues and fostering negotiations that could lead to improved trade agreements.
However, Trump is also making a political gamble that voters will tolerate rising inflation levels. Price increases in 2021 and 2022 significantly damaged the popularity of his predecessor, Joe Biden, as many Americans saw their purchasing power eroded. This frustration played a key role in Trump’s return to the White House.
Since the November election, inflation has continued to rise, with government figures released on Wednesday showing the consumer price index running at an annual rate of 3%.
