WASHINGTON (CN) — President Donald Trump declared an end to “unfair” trade relationships Thursday, proposing sweeping policy changes to increase U.S. tariffs, even against foreign allies, to match the tax rates other countries charge on their imports.
“Tariffs are good; tariffs are great, actually,” Trump said during an Oval Office press briefing with reporters.
Under the “Fair and Reciprocal Plan” the administration will tackle what it sees as longstanding imbalances in international trade. The White House claimed that the U.S. is one of the most open economies in the world, but its trading partners closed their markets to American exports.
That lack of reciprocity, according to the administration, causes an annual trade deficit that threatens economic and national security, hollows out the U.S. industrial base and reduces America’s overall national competitiveness.
Trump called for federal agency reports scrutinizing trade relationships to allow the administration to tailor “reciprocal tariffs” to each foreign trading partner — whether it’s a foreign rival or U.S. ally.
Gregory Shaffer, a Georgetown Law professor who specializes in international trade, said applying different tariff rates for different goods from different countries would destroy the system created after World War II.
“This is the most radical shift that he has announced because it completely undermines the international trading system,” Shaffer said.
The White House did not provide a clear timeline for when the tariffs would be implemented, but early predictions suggest the administration could begin rolling out changes in April.
Scott Lincicome, vice president of general economics at the Cato Institute, refuted the White House’s claim that the U.S. has among the lowest average weighted tariff rates in the world.
Instead, Lincicome said the U.S. ranks somewhere in the middle among wealthy, industrialized countries. Under a reciprocal system, he said the U.S. would need to reduce tariffs on manufactured goods from Europe, Mexico, Canada and possibly the U.K.
Trump suggested that any time another country has a higher tariff on exports than the U.S., it has an unfair advantage. But Colin Grabow, the associate director at the Cato Institute’s trade policy program, said low tariffs carry advantages for the U.S.
Lower tariffs equal cheaper goods, Grabow said, which is an automatic win for Americans — even if it means businesses rely on imports.
“I think [Trump’s] mentality is that low tariffs are a favor we’re doing for other countries when I think more properly, we should view them as a favor that we do to ourselves and improve our own competitiveness,” Grabow said. “If other countries benefit, that’s fine, but primarily that’s just good for us on its own terms.”
The effects of Trump’s reciprocal tariff plan are not immediately clear, but experts said it would almost certainly result in more strain on American pocketbooks.
“We can be fairly sure that the intention of the president is for tariffs to rise, which is likely to mean higher prices for businesses and consumers,” David Henig, the director of the U.K. trade policy project at the European Center for International Political Economy, said in an email. “Given the complexity of what has been announced, if implemented it would also mean importing businesses spending a lot more time on administration, also costs likely to be passed on to consumers.”
Even before any rate changes are cemented, experts said the potential for significant upheaval in global trade creates market uncertainty.
“Certainty and unpredictability will not be good for pricing,” Georgetown Law’s Shaffer said. “It’s not going to be good for employment and it’s not going to be good for investment, at least in the near term — until there’s greater clarity in the long term.”
He said any resulting trade wars could hinder international economic cooperation.
“When, inevitably, from time to time, decade to decade, we have a financial crisis, it will be much more difficult to address because we’ll be back in a situation that we were in in the 1930s — before World War II, before we created the system that we have now,” Shaffer said.
The reciprocal tariff proposal is the latest salvo in the trade upheaval since Trump returned to the White House. Earlier this week, Trump reimposed his 2018 steel and aluminum tariffs after nearly jumping into a trade war with Canada and Mexico last week. The president also put an additional 10% tariff on Chinese imports.