The Trump administration has promised that countries around the world will face new reciprocal tariffs from the U.S. starting April 2, with President Donald Trump and other administration officials often saying something along the lines of, "Whatever they charge us, we'll charge them."
Their rhetoric portrays the U.S. as having imposed uniquely low tariffs on imported goods for many years. Commerce Secretary Howard Lutnick told Fox Business Network earlier this month that "it's absolutely accurate" to say that America has the lowest tariffs in the world.
Experts on global trade have big doubts about the administration's plan to impose widespread tariffs on countries as a response to tariffs on goods from the U.S., as well as the rhetoric in support of such a move. Their concerns include that the United States' tariff rates and nontariff barriers actually have not been at rock-bottom levels compared with all other countries, and that the Trump administration might not have as much leverage in trade negotiations as it thinks. Other worries are that tariffs won't bring back U.S. manufacturing to the hoped-for extent, and that administration officials are moving too quickly on a complex issue.
Here are four big hurdles economists and trade lawyers say will challenge Trump's tariff plan.
Trump is overstating how unfair or unbalanced the current system of tariffs is, according to Jennifer Hillman, a Georgetown University law professor focused on trade who served as general counsel for the Office of the U.S. Trade Representative during the Clinton administration.
"If you just look at it, the United States' trade-weighted average tariff is 2.2%," she said. "There's plenty of countries that are below the United States. Even China's trade-weighted average tariff is only 3%," she added, making it wrong to say there's a "big gulf" between the U.S. and key trading partners. Her remarks came during a recent Washington International Trade Association event.
Nations with a trade-weighted average tariff below the U.S. level include Japan, Switzerland, Taiwan, Peru and Singapore, according to 2023 data from the World Trade Organization. Hillman told MarketWatch that she thinks the trade-weighted average tariff, which takes into account how much trade is occurring, gives a better picture than a simple average of how protected a given market might be.
In addition, the Georgetown expert is among the critics who say Trump and his allies are cherry-picking data on tariffs, such as by highlighting how the European Union has a higher tariff on American cars than the U.S. imposes on vehicles from the E.U. What doesn't get mentioned, they say, is how the U.S. imposes a higher duty on imported trucks and sport-utility vehicles than the E.U. does. This duty of 25% - which is called "the chicken tax" and has been in place for 60 years - is well known for having helped make trucks and SUVs more important to U.S. automobile manufacturers.
"We have our own high tariffs, but those are washed out" in average tariff rates thanks to "a bunch of zeros" - meaning no duties - for other products, said Scott Lincicome, a vice president focused on economics and trade at the Cato Institute, a libertarian think tank.
"We have our own dairy protectionism. We have a 25% tariff on trucks. We have 40% tariffs on footwear," Lincicome told MarketWatch. Meanwhile, many U.S. imports had a 0% tariff before Trump's second term, including metal goods, a range of food products and consumer electronics. The Office of the U.S. Trade Representative has said half of all industrial goods have been entering the U.S. duty free.
But Lincicome also emphasized that the U.S. has nontariff barriers and subsidies that restrict trade, while developing countries must rely more on tariffs because they don't have the money for subsidies or the administrative capacity for other trade measures. "We don't need tariffs for protection of revenue, because we have all these other tools," he said.
A White House official told MarketWatch that the administration is not exaggerating and pointed to the BofA Global Research chart below that suggests the U.S. has the lowest level of tariffs and nontariff trade barriers among the Group of 20 countries.
Lincicome, however, criticized BofA's accounting of America's nontariff barriers as far from complete, saying it fails to include things such as antidumping and countervailing measures, big subsidies for domestic industries and "Buy American" programs. "No wonder they came up with such a small number for the United States," the Cato expert said.
While Canada and Mexico are heavily reliant on the U.S. market, the Trump White House is overestimating the extent of its power over its other trading partners, according to Simon Evenett, a professor of geopolitics and strategy at the IMD Business School in Switzerland.
It's important to look at the rate at which a country's exports are going to potential third markets, according to Evenett.
"At the current rate of export growth, China could replace all of its lost export sales to the United States, if everything was lost, in under three years," Evenett said during the recent WITA event. "There's 70 countries who could replace all of their lost export sales to the United States in less than 12 months - Australia is one of them - and so when you factor these types of real-world considerations in ... the subset of countries that you have actually excellent leverage over is probably much smaller than many people in Washington realize."
In other words, if Australia - which exports mostly goods derived from its extensive natural resources - were cut off from the U.S. market, it could make up the revenue lost within one year thanks to its growing levels of exports to other nations, largely Asian countries.
The U.S. share of world imports has fallen to about 13.5% from 19.6% in 2000, according to a report by Evenett, who is also the founder of a nonprofit that runs a service called Global Trade Alert. The report features the below chart, which shows that more than 100 countries could recover fully from closure of the U.S. market by 2030. The report says that while completely losing access to the American market is a worst-case scenario, it's a useful exercise to consider that potential situation.
Georgetown's Hillman agrees that American leverage is diminishing. There has been an increase in regionalization in the past decade - trading within Asia or within Europe, for example - so a number of countries aren't as reliant on the U.S. market as they used to be, she said. The U.S. in 2023 took in an estimated 15% of China's exports, down from 21% in 2000, according to one researcher.
The U.S. has some power over trading partners, but Trump is exaggerating the extent of it, Hillman said. She added that other countries would face a "very painful period" if they lose out on the American market, but that it would also be painful for the U.S., which would get hit with retaliatory measures.
"These countries have enough confidence in their own economies and in their ability to diversify their economies that they're prepared to take retaliatory action against the United States," she told MarketWatch.
Trump and other administration officials often stress that a major goal of the new U.S. tariffs is to boost American manufacturing of cars, metal products and other goods and thereby to increase the number of factory jobs.
Ahead of the April 2 reciprocal tariffs, the administration has favored levies of 25% when it has rolled out new duties, such as on certain Canadian and Mexican imports and all imported steel and aluminum. So it's easy to imagine that the 25% level could get used again with reciprocal tariffs. But would that spark a reshoring of manufacturing?
One financial commentator has said that a 25% tariff is not high enough to make the supply chains of corporations untenable, and that the Trump administration would actually need to impose import taxes of perhaps 100% to 200%, as well as offer big government subsidies, to get companies to reshore their manufacturing.
Cato's Lincicome said it depends on the product and that 25% levies could lead to more domestic manufacturing in the automobile sector, as has happened for trucks and SUVs. But he agreed that 25% tariffs wouldn't move the needle for a great deal of lower-value manufacturing. "For things like textiles and apparel, no chance," he said.
U.S. companies could keep importing some materials that are necessary components of complex products even with a 25% tariff, Hillman said. In such cases, it often takes time to find a replacement, so the companies would pay the duty and potentially increase their prices. But the situation varies by product, and there are cases where a 25% tariff is high enough to boost U.S. production or simply curtail use of a given material.
Lincicome warned that the Trump team is moving too fast with its reciprocal tariffs. He said it could take years to study a wide range of goods and come up with reciprocal duties that address the tariff and nontariff barriers established by the U.S. and each of its trading partners.
"It would lead to an immense amount of complexity, but if you want an accurate number, that's what you need to do," he said. "Or you can just fake it and do it really quickly, and it's increasingly clear that the Trump administration is leaning toward the latter approach."
Hillman expressed similar concerns, saying that the upcoming trade move looks "incredibly difficult" if "you intend to do this in an accurate way." While she is skeptical overall, she also said the Trump administration is "modestly on the right track" because there is "some need to bring tariff schedules up to date and bring some measure of rebalancing back into the system."
The Trump team may roll out individualized reciprocal tariff rates for countries instead of going with a simpler approach of sorting nations into three tiers, according to a Wall Street Journal report. Trump adviser Peter Navarro backed a three-tiered approach during the 2024 presidential campaign.
Trump's Treasury secretary, Scott Bessent, has argued the reciprocal tariffs will be a "win-win," because they'll lead either to other countries dropping their tariffs or to greater tariff revenue for the U.S. government.
"On April 2, we're going to produce a list of other countries' tariffs, and we are going to go to them and say, look, here's where we think the tariff levels are, nontariff barriers, currency manipulation, unfair funding, labor suppression," Bessent said in a Fox Business Network interview on Tuesday. "If you will stop this, we will not put up the tariff. If you do, then we will put up the tariff wall to protect our economy, protect our workers and protect our industry."
He also said: "I'm optimistic that April 2, some of the tariffs may not have to go on because a deal is prenegotiated, or that once countries receive their reciprocal tariff number, that right after that, they will come to us and want to negotiate it."
Kevin Hassett, who is the director of Trump's National Economic Council, has suggested that the Trump team isn't that concerned about more than 100 countries that have minimal trade barriers, and that officials are instead focused on about 10 to 15 nations that have significant barriers and account for the bulk of the U.S. trade deficit. That echoed a similar point made by Bessent, who suggested officials are concentrating on 15% of U.S. trading partners - what he called "the dirty 15."
Hassett also promised clarity on April 2. "There's going to be a very, very clear, detailed, easy-to-understand plan for reciprocal tariffs that will be revealed to everybody on April 2," Hassett said in a Fox Business interview on Wednesday.
When asked about criticisms of the reciprocal tariffs, such as the extent of Washington's leverage and whether reshoring efforts will be disappointing, White House spokesman Kush Desai said the U.S. "has the best and biggest economy in the world, far outweighing other comparable markets such as the European Union." Desai also pointed to recent announcements by companies such as Taiwan Semiconductor Manufacturing Co.
"The United States Industry leaders - including TSMC $(TSM)$, Honda $(HMC)$, Apple $(AAPL)$ and Nvidia $(NVDA)$ - have already responded to President Trump's America First agenda of tariffs, deregulation, and the unleashing of American energy with trillions in historic investment commitments to make in America. President Trump used tariffs to deliver historic job, wage, and investment growth in his first term, and he's set to do so again in his second term," Desai told MarketWatch in a statement.
In addition to the reciprocal tariffs, Trump has also floated announcing sectoral tariffs on April 2, saying there could be 25% levies on imports of cars, computer chips and pharmaceuticals.
U.S. stocks SPX have sold off in late February and early March, with much of the blame pinned on worries about the Trump administration's tariffs. The S&P 500 index has suffered four straight weekly drops.
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