President Donald Trump signed an executive order Thursday outlining plans for “reciprocal” tariffs on U.S. trading partners that have higher duties on imports than the U.S. imposes.
The order directs departments and agencies to investigate the harm to U.S. industries from non-reciprocal tariff rates, as well as non-tariff trade barriers that countries apply to U.S. products, subsidies to domestic industries, policies to manipulate exchange rates and value-added taxes. They will then have to submit a report on proposed remedies.
“For many years, the U.S. has been treated unfairly by other Countries, both friend and foe,” Trump wrote in a Truth Social post announcing the tariffs. “This System will immediately bring Fairness and Prosperity back into the previously complex and unfair System of Trade.”
The analysis would occur after a slate of reports on U.S. trade policy are due on April 1, the executive order says. But during a press conference with Trump, nominee for Commerce Secretary Howard Lutnick suggested that the analysis could be completed the same day as the other reports.
“I think we'll be ready to go April 1, and we'll hand it to the president, and he'll make his decisions,” Lutnick said.
In a fact sheet accompanying the executive order, the White House singled out Brazil’s 18% tariff on U.S. ethanol compared to the U.S.’ 2.5%, in addition to the U.S.’ low applied average tariff on agricultural imports.
“The farmers are going to be helped by this very much, because product is being dumped into our country,” Trump told reporters in the Oval Office Thursday. He added that this executive order could be “the most important thing I've signed.”
U.S. tariff rates are, on average, lower than many of its trading partners, particularly for agriculture products. Around 70% of all U.S. imports enter the country duty-free, according to the Congressional Research Service. The weighted average tariff applied to U.S. agriculture imports in 2023 was 4%; for non-agriculture imports it was just 2.1%.
Meanwhile, Canada subjects agriculture imports to a weighted average tariff of more than 14%.
These low tariffs were intentional, however, as successive administrations prioritized lower food prices for consumers, Luis Ribera, a professor of agricultural economics at Texas A&M University, told Agri-Pulse. The approach was to preserve tariffs on agriculture products that the U.S. produces to limit competition to domestic industry, but to drive down tariffs on products the U.S. doesn’t produce, to reduce consumer prices.
“We're really good at producing the products that we're good at producing, and then the rest we import. And we import with very low or no tariffs at all,” Ribera said.
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The strategy worked as intended. The U.S. spends the least on food as a share of national expenditures than any country on the planet, according to Agriculture Department data. Just 6.7% of consumer expenses went for food in 2023.
In his press conference on Thursday, Trump admitted that prices could go up in the short term but suggested that in the longer term they would fall.
“Ultimately, prices will stay the same – go down – but we're going to have a very dynamic country,” he said. The president did not elaborate on how the tariffs would lead to lower long-term prices.
Under World Trade Organization rules, developing economies are allowed to maintain higher tariffs than developed countries – a principle known as “special and differential treatment.” The goal, Ribera said, is to allow developing countries to build out domestic industries – which boosts development, consumer spending power, and, in theory, demand for foreign exports – and then have them lower their tariffs and compete on more level footing.
“In reality, that doesn't happen very often,” Ribera said.
Accordingly, multiple emerging economies stand to be particularly affected by the new reciprocal tariff. Full reciprocity would mean a new U.S. weighted tariff rate on India of more than 15%, up from around 3% today, according to Mitsubishi UFJ Financial Group, a Japanese bank. Similarly, Indonesian exports would face a weighted tariff of almost 10%.
In the press conference, Trump also highlighted the potential impacts on imports from India.
“India is right at the top of the pack,” Trump said. “They charge tremendous tariffs.”
In both his Truth Social post earlier in the day and during the press conference, Trump suggested that countries could avoid any new tariffs reducing or eliminate their own duties on U.S. goods.
“[I]f a Country feels that the United States would be getting too high a Tariff, all they have to do is reduce or terminate their Tariff against us,” Trump wrote on Truth Social.
Some countries are already eyeing the potential for dealmaking. Bernd Lange, who chairs the European Parliament’s international trade committee, told the Financial Times last week that the bloc could lower its 10% tariff on U.S. cars as part of a deal to head off new tariffs. During the press conference, Trump claimed the EU had already lowered its tariff rate to match the U.S.' 2.5%, but Brussels has not announced any such reduction publicly, according to a spokesperson at the EU delegation in Washington, D.C.
Indian Prime Minister Narendra Modi is in Washington on a two-day visit, with tariffs likely to feature prominently in his discussions with Trump and other administration officials. Officials in Modi’s government have discussed lowering tariffs on U.S. whiskey and pecans to strike a deal with Trump, according to reporting from India’s Economic Times.
If imposed as described, the new tariffs would take the U.S. further away from the WTO principles that have undergirded international trade for generations. WTO members are supposed to apply tariffs in a non-discriminatory fashion under the “most-favored nation” principle. This principle dictates that if a country reduces a tariff for one trading partner, it does so for all trading partners and does not apply varying tariff rates on the same products depending on the country of origin.
What this all means for U.S. agriculture will take time to discern, however, and will depend on which tariffs materialize, how trading partners respond and whether, or what, deals can be struck, executive head of Terrain and former Senate Agriculture Committee chief economist, John Newton, told Agri-Pulse on Thursday morning.
“If there's a response, how does that change purchasing patterns?” Newton said. “At this point, all the conversations around tariffs – outside of China, right now – it’s just been conversation, and I think it's important to take a wait and see approach before evaluating what any economic implications may be.”
