Reciprocal tariffs equal fair trade

President Donald Trump has announced a common sense policy regarding reciprocal tariffs that would tax imports from other countries at the same rate they tax imports from the U.S.

President Trump says that without reciprocal tariffs the “playing field is tilted against U.S. companies.’’

Trump is right.

Many countries charge higher import taxes than America does on their goods, and the president believes the imbalance perpetuates “America’s massive and persistent trade deficits.”

Fair’s fair, the argument goes. “If they charge us,” Trump said to reporters, “we charge them.”

But Trump’s plan for reciprocal tariffs will upend the global trading system, according to The Associated Press, the once highly trusted independent national news agency that supposedly was paid handsomely by the President Joe Biden adminstration for favorable slants on the news.

A reciprocal tariffs policy “disrupts the way that things have been done for a very long time,’” said Richard Mojica, a trade attorney, to the AP. But with logic like that, Mojica does not win any arguments.

Reciprocal tariffs are partially about encouraging “major powers like China and the European Union to lower their duties” on U.S. imports - or eliminate them all together.

Trump also says he believes that tariffs generally will reduce the trade deficit and help grow American manufacturing.

AP economists say, however, that a trade deficit often actually benefits the United States. When there’s a trade deficit, the AP says, countries sometimes take the income and invest it back in American stocks and bonds. That, in turn, keeps interest rates low and prompts American businesses and consumers “to borrow and spend more.”

Most countries — though not the U.S. — also levy a “value-added tax” on consumption, it was reported. 

Trump says he believes that value-added tax also expands the trade deficit. 

“A VAT tax is a tariff,” he said, indicating that such taxes will be part of calculating the reciprocal tariffs.

Trump’s move to reciprocal tariffs “amounts to outsourcing U.S. tariff policy to other countries,” economist Douglas A. Irwin said at The Wall Street Journal. Tariffs are also “enormously” complicated, Irwin wrote.

The American tariff schedule has 13,000 line items, and the United States has trade with 200 countries, Irwin says.

“Is Washington ready to impose and manage 2.6 million individual tariff rates?” America should “not have stupid tariff policies just because other countries have stupid tariff policies,” Irwin said.

To which Trump would probably answer, “The U.S. will do what it must do to balance trade.’’

Some types of U.S. products “would be hit much harder than others,” said CNBC. The U.S. imports $600 billion worth of goods from the European Union alone, including pharmaceuticals — like the weight-loss drugs Ozempic and Wegovy — as well as vaccines, hearing aids and artificial joints. Other industries will be hit, but the drug and medical industry “will experience among the most significant tariff impacts by sector,’’ it was reported.

Ultimately, wouldn’t it be better if the U.S. produced its own pharmaceuticals?

The Commerce Department is expected to have a plan to implement the reciprocal tariffs by April 1. It will be interesting to see how, and if, the president’s efforts on fair trade helps the U.S. economy.  Reciprocal tariffs can help.