President Donald Trump addressed both chambers of the United States Congress on March 4. One of the main topics of his speech was the issue of establishing fair and appropriate customs tariffs on imported products to bring order to U.S. foreign trade.
Trump previously said that the trade between the United States and numerous countries was “unfair.” He specifically criticized trade with Canada and Mexico, asserting that America was essentially “subsidizing” its neighbors. He believed that the injustice was due to the substantial trade asymmetry between the United States and these countries, as the United States had a substantial trade deficit with them. The trade deficit with Canada was $64.2 billion, and with Mexico, it was $152.5 billion by the end of 2023. In 2023, the deficit in U.S. trade with China was even more pronounced, amounting to $279.1 billion. The total U.S. trade deficit with the world that year was $773.4 billion, which Trump referred to as America’s “subsidization” of the rest of the world. This “subsidization” reached a record of $918.4 billion by the end of 2024. China, Mexico, and Canada were responsible for $530 billion of this deficit, according to preliminary estimates. Other substantial contributors to the U.S. trade deficit were Germany, Ireland, and Vietnam.
However, Trump pointed out another aspect of “unfair” trade: many U.S. trading partners impose higher customs tariffs on American goods than the U.S. does on theirs. He cited several examples, stating, “Tariffs in South Korea are on average four times higher than ours—think about that, four times higher. And we provide South Korea with enormous military and other assistance. Both enemies and friends do this to us. This system has always been unfair to the United States.”
Trump reiterated that the European Union, China, Brazil, India, Mexico, and Canada impose significantly higher tariffs on U.S. products than the U.S. does on theirs, describing the situation as “extremely unfair.” India imposes tariffs on American automobiles that exceed 100%, and Chinese tariffs are typically twice as high as those in the United States.
Trump vowed that he would end this injustice: “Other countries have imposed tariffs on us for decades, and now it’s our turn to impose them on them.” From now on, U.S. trade policy would be “symmetrical”: U.S. import tariffs would match the tariffs other countries apply to American goods. “Whatever [tariffs] they impose on us, we will impose the same on them,” Trump emphasized.
The new 25% tariffs on Canadian and Mexican products were implemented on March 4, following the signing of the order by President Trump on February 2. It had been in effect since early February that 10% tariffs were in place on Chinese products. Trump increased them to 20% on March 4. Additional tariffs on goods from other countries were scheduled to take effect on April 2, though Trump did not specify which countries or the tariff rates.
Washington had not yet developed a comprehensive tariff analysis for other countries. Trump directed the Department of Commerce and the U.S. Trade Representative (USTR) to assess tariffs for each country and product in collaboration with the Treasury and Homeland Security departments on February 13. This substantial undertaking entails the examination of more than 17,000 import classifications for 186 countries that are currently granted Most Favored Nation (MFN) status by the United States. USTR Chief Jamieson Greer and Commerce Secretary Howard Lutnick are the leading figures in the initiative.
American media has extensively documented Trump’s argument regarding trade “unfairness,” highlighting the “unjust” nature of U.S. trade with India. India’s tariffs are the highest among the United States’ top 15 trading partners, with an average of 17%, as reported by the World Trade Organization. In contrast, the United States has an average of 3.3%. The European Union imposes a 10% tariff on imported vehicles, which is four times higher than the 2.5% tariff in the United States. At the same time, Brazil imposes an 18% tariff on U.S. ethanol, while the United States permits Brazilian ethanol to be imported virtually duty-free.
In addition to tariff equalization, Trump directed that U.S. tariffs be adjusted to reflect non-tariff trade barriers that foreign partners have implemented. He cited examples such as the European Union’s value-added tax (VAT) and Chinese state-owned enterprises receiving government subsidies. According to an article published by Reuters, “What’s in Trump’s new order on reciprocal US tariffs?”, the inclusion of non-tariff barriers could result in tariffs that are even higher than those imposed by other countries.
According to an internal U.S. government memo cited in the article, a non-tariff barrier is defined as any state-imposed measure, policy, or non-monetary restriction that limits, prevents, or hinders international trade in goods, including import policies, sanitary and phytosanitary measures, technical trade barriers, government procurement policies, export subsidies, lack of intellectual property protection, digital trade barriers, and state-permitted anti-competitive behavior.
In the past, the United States has implemented protectionist policies against nations that have been accused of manipulating their currencies. Trump accused Beijing of devaluing the yuan and imposed additional tariffs on Chinese goods during his first term. The Reuters article noted that the new tariff calculations would also consider exchange rates, as undervalued currencies increase the U.S. trade deficit by increasing the cost of American exports.
In his address to Congress, Trump issued a warning that all non-tariff trade tactics would be retaliated against: “Whatever they charge us, we will charge them. If they impose non-monetary barriers to keep us out, we will impose non-monetary barriers to keep them out.”
According to certain analysts, Trump’s tariff strategy has two primary objectives. The first one is to promote “reindustrialization” by substituting imports with domestic production. The second is to increase government revenue from import tariffs to reduce the substantial federal budget deficit, which amounted to $1.83 trillion in the 2024 fiscal year.
The Office of Management and Budget was directed by Trump’s February 13 order to submit a report on the financial effect of the new tariffs on federal revenues within 180 days.
Regarding reindustrialization, Trump anticipates that the implementation of increased import tariffs will motivate businesses, both domestic and international, to produce products within the United States. As a result of the reduced cost of labor, numerous American companies have relocated their production facilities to Mexico. A 25% tariff on Mexican products could potentially encourage them to relocate their production facilities to Mexico. During his address to Congress, Trump issued a direct warning to businesses: “If you manufacture your product outside America, under the Trump administration, you will pay tariffs—sometimes very high ones.” This was a clear message that encouraged American companies to resume domestic production.
The outcome of Trump’s trade conflict is a topic of debate among experts. A peaceful resolution could be achieved, which would promote trade cooperation if trading partners agreed to reduce their tariffs to the same level as the U.S. before Trump assumed office and eradicate all non-tariff barriers.
Nevertheless, there are many indications that the trading partners of the United States are preparing for a protracted trade conflict. Retaliatory tariffs against Washington have been announced or implemented by numerous countries, such as Canada, China, and Mexico.
Furthermore, no nation intends to eliminate non-tariff barriers, citing factors such as public health standards, environmental concerns, and technical safety. Rather than safeguarding domestic markets from competition, foreign officials contend that these measures safeguard the well-being of citizens.
The United States and the rest of the world are on the brink of a significant trade conflict, which may even involve Washington’s closest allies. On March 4, Canadian Prime Minister Justin Trudeau declared, “Today, the U.S. has launched a trade war against Canada. Our country will not let this unjustified decision go unanswered.”
European leaders also responded. In his address to the French people on March 5, French President Emmanuel Macron warned, “We must be ready for the possibility that the U.S. will impose tariffs on European goods, just as they have on Canada and Mexico. This incomprehensible decision will have consequences for some of our industries, but it will not go unanswered.”