US President Donald Trump ordered his officials earlier this year to develop reciprocal tariffs on imports to the United States, keeping to an "eye for an eye" campaign promise on matters of world trade.

"I have decided for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them. No more, no less," Trump told reporters in the Oval Office.

Trump's return to the White House has been marked by several tariff announcements — and numerous backtracking — including an additional 20% levy on imports from China that took effect in March, along with 25% tariffs on goods arriving from neighbors Canada and Mexico that are partly on hold for now.

Trump also announced tariffs on imports of steel and aluminum, which took effect on March 12.

Why does Trump want to impose reciprocal tariffs?

Trump has a longstanding belief that the US is being treated unfairly in global trade. He argues that many countries impose higher tariffs on US goods than the US does on theirs, creating an imbalance.

For example, India levies tariffs that are typically between 5% and 20% higher than the US on 87% of imported goods, according to data from Global Trade Alert, an organization which assesses commerce policies.

Trump has said he wants to match the levy on US imports that other countries apply to US products.

As well as forcing major powers like China and the European Union to lower their duties, the president believes reciprocal tariffs will boost his "America First" economic policy by narrowing the country's trade deficit while improving the competitiveness of US manufacturers.

"This is every country, and essentially, when they treat us fairly, we treat them fairly," Trump told reporters when signing proclamations ordering the reciprocal tariffs in February.

However, economists have pointed out that the US benefits from having large trade imbalances with the rest of the world, as the dollar — the de facto global reserve currency — is used in most trade, which offers major tailwinds to the US economy.

Countries use those dollars earned in trade to invest back into the US, often in government bonds, stocks and real estate. This keeps US interest rates lower, and allows US businesses and consumers to borrow and spend more.

How will Trump's plan work?

US federal authorities were given 180 days to identify countries that impose higher tariffs than the US and recommend tariffs on a country-specific basis, according to a White House memo.

However, the tariffs could take effect before that deadline. Trump's secretary of commerce, Howard Lutnick, has said the proposals could be ready earlier.

Instead of hitting the largest US trading partners as widely reported, Trump told reporters onboard Air Force One on March 30 that his reciprocal tariffs would hit "all countries," including close US allies. He did not say how they will be calculated or what he expects in return, but promised more details on April 2.

Once approved, the reciprocal tariffs could be invoked for reasons of national security, unfair trading or under emergency economic powers.

A tally of existing tariffs by Bloomberg Economics suggests that emerging markets would be hardest hit, including India, Argentina, much of Africa and Southeast Asia.

The White House recently singled out Brazil, pointing to a 2.5% ethanol tariff imposed by the US, versus an 18% rate levied by the Brazilian government.

Trump also wants to target other factors he has said put US producers at a disadvantage, including subsidies, regulation, value-added taxes (VAT), currency devaluation and lax intellectual property protections.

What is the likely impact of reciprocal tariffs?

Economists have warned that the tariffs already announced by Trump will raise consumer prices for imported goods to the US, stoking inflation.

After a bout of decades-high inflation in the wake of the COVID-19 pandemic, US inflation has fallen sharply. But in January 2025, the consumer prices index rose to 3% — the highest rate in six months.

S&P Global Ratings has estimated a one-time rise of up to 0.7% in US consumer prices as a result of the tariffs on China, Canada and Mexico, if the levies take full effect. Until they are formally announced and implemented, it remains unclear what impact any reciprocal tariffs could have on US inflation.

While some US domestic producers and retailers will benefit from Trump's tariff strategy, they too will also face higher import costs for raw materials, as well as supply chain disruptions.

US exporters could also be hurt by retaliatory measures initiated by trading partners. Some governments, including the EU and China, have already announced countermeasures, while others are expected to follow suit.

How will countries try to avoid these new tariffs?

Trump's use of tariffs has ratcheted up fears of a global trade war, and has created deep uncertainty across many industries and in many countries.

The announcement of reciprocal tariffs is set to spark a new flurry of negotiations that could bring reductions in levies imposed on US exports.

India, for example, has already cut tariffs on dozens of goods in anticipation of Trump's threat. Indian Foreign Secretary Vikram Misri said after a recent meeting between Trump and Prime Minister Narendra Modi in Washington that a deal to resolve the trade concerns could be made within the next seven months.

Taiwanese President Lai Ching-te recently called for a "win-win scenario" in talks with Washington, "not just to ensure benefit to the US but also to ensure that Taiwan's industries have room for growth."

The European Commission, the EU's executive arm, has labeled the reciprocal tariffs as "a step in the wrong direction" and said in February that Brussels would "react firmly and immediately against unjustified barriers to free and fair trade."

Bernd Lange, who heads the European Parliament's trade committee, told the Financial Times that EU officials are willing to cut car tariffs to US levels and buy more US liquefied natural gas (LNG) and military equipment if the bloc can avoid measures against its exports.

The European Union, for example, levies a 10% tariff on imported vehicles, while the US rate is just 2.5%. However, US tariffs on pickup trucks and commercial vehicles are far higher than the EU.

Under current World Trade Organization rules, more than 160 member countries mostly apply tariffs without discrimination, although there are some exceptions, such as free trade deals and customs unions.

Trump's plan could see other major powers negotiate tariffs on a country-by-country, reciprocal basis, upending decades of rules-based trade.

Edited by: Rob Mudge

Editor's note: This was originally published on March 4, 2025 and updated on March 31, 2025 to reflect new developments.