President Trump announced recently that he will be implementing a reciprocal tariff soon which broadly means whatever tariff a country implements toward U.S., it will be implemented the same amount when they export their goods to the U.S.
In theory, this sounds quite fair since the idea starts with bringing a balance to trade.
However, in practice, these tariffs might affect the U.S. in a negative way. One main reason is importers are the ones that pay the tariffs to U.S. Customs, and this extra cost usually is passed on to the final consumer, causing inflation. The second reason is that the U.S. generally benefits from trade imbalances as the dollar is used for trade which offers big advantages for the economy.
Highest Trade Deficits by Country
When we look at the averages, we see that the U.S. imposes a 2.71% tariff in general to other countries. In contrast, other countries impose an average 6.7% tariff against U.S. goods. When we look at largest trade deficit by nation, we see the below countries in the top 10 (in billions of dollars).
- China (-295.4)
- Mexico (-171.8)
- Vietnam (-123.5)
- Ireland (-86.7)
- Germany (-84.8)
- Taiwan (-73.9)
- Japan (-68.5)
- Korea, South (-66)
- Canada (-63.3)
- India (-45.7)
When we look at average tariffs that are applied to U.S. goods, we see India having the highest amount with 17% average, second is Argentina with 13%, then South Korea with 12%. Surprisingly, China is at 7.5% being number 23 on the list. Mexico’s average against U.S. goods is 7% and both Canada and the European Union are under 2% with the average tariff against U.S. goods.
Highest Tariffs on U.S. Agricultural Products
Tariffs applied to U.S. agricultural goods are as below where per OEC below is the average tariffs based on total dollar value.
- Rice (25%)
- Milk (25%)
- Frozen bovine meat (24%)
- Bovine meat (24%)
- Processed tobacco (22%)
- Rolled tobacco (21%)
- Raw sugar (19%)
- Sheep meat (19%)
- Goat meat (19%)
- Poultry meat (19%)
Again, when we look at the countries that are imposing the highest average tariffs to U.S. agricultural goods, we see India being number one with corn being the highest tariff at 53%, and Thailand second with 23%.
The U.S. may be looking for more balance in trade, but tariffs are a dangerous game.
In summary, as we saw with the above data, it is clear that some countries are quite protective against the U.S. and the current administration has a point asking them to come to the negotiating table. However, tariffs are generally dangerous especially when applied without any exceptions since it might hurt consumers or certain industries and must be used as a last resort only.
