Colin Grabow
Colin Grabow
Citing alleged unfairness in the current trading system, President Donald Trump appears to be laying the groundwork for the adoption of a tariff policy based on reciprocity. Whatever tariffs other countries levy on US imports will be the tariff charged by the United States on their same products. It’s not a new position for Trump, who also enthused about reciprocal tariffs during his first term.
The approach no doubt has superficial appeal. Why not give countries a taste of their own medicine? What’s good for the goose is good for the gander, and all that.
Closer scrutiny, however, reveals numerous flaws in such thinking.
Tariff reciprocity means higher US tariffs. Although fairly average compared to other wealthy, industrialized countries, US tariff rates are at the lower end of the global scale. This necessarily means that a reciprocal tariff policy will lead to higher tariffs. Consumers will face higher prices for the goods they purchase, and businesses will pay for more critical inputs, reducing their competitiveness.
This is antithetical to US prosperity. It cannot be overemphasized that a policy of relatively low tariffs and trade barriers is not a favor the United States grants others but a key ingredient in its own economic success. To abandon this would be folly.
Tariff reciprocity surrenders US decision-making over trade policy. US tariff policy should be dictated by self-interest. A policy based on reciprocity, however, essentially hands policymaking to US trade partners. If these countries opt to pursue a policy of high tariffs, that’s regrettable. But it is not a decision the United States should be compelled to mimic. If others decide to jump off bridges (in a manner of speaking), it’s no reason for the United States to follow suit.
Tariff reciprocity means greater complexity. Under the current US tariff schedule, most items face one of two duty rates. » Read More
https://www.cato.org/blog/folly-tariff-reciprocity