President Moves To Upend Tariff System --- Study will seek to match rates to those of other countries, undoing trade norms

"WASHINGTON -- President Trump ordered federal agencies on Thursday to explore how to adjust U.S. tariffs to match those of other countries, a move that threatens international rules in place for decades.

The order stops short of actually imposing the tariffs immediately, as many foreign capitals feared, and instead directs the Commerce Department and the U.S. trade representative to deliver reports on the steps to be taken to achieve reciprocal trading status. Commerce Secretary nominee Howard Lutnick said those studies should be completed by April 1.

"On 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 said in the Oval Office.

If completed, instituting reciprocal tariff treatment would likely increase duties on scores of trading partners and break with decades of trade norms set up at the World Trade Organization -- the global trade body that still counts the U.S. as a member, despite Trump's attacks on the organization.

Trade experts said such moves would undermine the WTO's paradigm of "most favored nation" status, a principle of the organization that requires member nations to guarantee equal tariff and regulatory treatment to other members unless they have free-trade agreements in place. Trump in his first term undermined the WTO by blocking judges from its top dispute settlement panel -- a practice former President Joe Biden continued -- but trade lawyers said reciprocal tariff action could mean an even more meaningful break from the global trading body.

"If President Trump does move the United States to a reciprocity-based tariff system, that would arguably be a fundamental change to U.S. trade policy," said Tim Brightbill, a partner at the law firm Wiley Rein, "and among the biggest in more than 75 years."

It would also make good on one of the campaign pledges made by Trump, a Republican, and address what has been a longstanding trade irritant for the president and his economic team. During his first term, Trump trade adviser Peter Navarro pushed Republican lawmakers to sign on to a reciprocal trade bill.

"America runs its more than $1 trillion, pernicious trade deficit because the major exporting nations of the world attack our markets with punishing tariffs and even more punishing nontariff barriers," Navarro said Thursday.

Large U.S. companies breathed a sigh of relief on Thursday that tariffs weren't immediately imposed, and expressed hope that Trump would use his reciprocal tariff plan to negotiate lower duties with trading partners, rather than spiraling into a multifront trade war.

"It's a relief that the administration isn't rushing to impose new tariffs, and we welcome the president taking a more nuanced, interagency approach," said Tiffany Smith, vice president for global trade policy at the National Foreign Trade Council, a group for large firms. "Ideally, this process will result in us working with our trading partners to lower their tariffs and trade barriers as opposed to increasing our own."

Trump and his Republican allies in Congress are rolling out policies of higher tariffs and lower taxes just as inflation is proving stubborn. On Thursday, Trump acknowledged that imposing tariffs may raise consumer prices in the short term, but said it would be worth it in the long run.

Asked whether his directive would require studying the inflationary effect of reciprocal tariffs, Trump said: "There's nothing to study. It's going to go very well."

Sen. Elizabeth Warren (D., Mass.) said she was "concerned that instead of wielding tariffs as a strategic tool to protect workers, President Trump's trade war may give cover to giant corporations to raise prices and facilitate corrupt deals through tariff exemptions for his favored friends."

It isn't certain which countries would be the most affected by potential U.S. reciprocal trade actions, but many of the nations with the highest tariff rates on U.S. goods today are countries such as India, Brazil, Vietnam, Argentina. Trump signed the order hours before a meeting with Prime Minister Narendra Modi of India, whose nation was singled out by the White House on Thursday for its tariffs on U.S. exports.

It also wasn't clear what legal authority Trump would use to impose the tariffs, though the White House indicated several laws would likely be deployed.

The eventual action could hit other, lower-tariff nations as well by taking into account nontrade barriers, such as taxes on U.S. companies, government subsidies for companies in their home countries or regulations that prevent U.S. companies from doing business in foreign countries. Trump's team will likely target nations with value-added taxes, such as European Union members. The president's trade advisers have long viewed VATs as an export subsidy because companies are given rebates when they export abroad. Value-added taxes will be viewed as a tariff, Trump said in the Oval Office.

The focus on nontariff barriers, in addition to duties, means nations such as Japan and members of the EU could be on the hook for higher tariffs from the U.S. than the duties they impose on American goods. 

And it also means that nations such as China -- which currently has a lower average tariff rate than the U.S., but a number of nontariff barriers -- might face further tariffs on imports to the U.S." [1]

1. President Moves To Upend Tariff System --- Study will seek to match rates to those of other countries, undoing trade norms. Bade, Gavin; Tarini Parti.  Wall Street Journal, Eastern edition; New York, N.Y.. 14 Feb 2025: A1.