Nothing is 'reciprocal' about Donald Trump's tariffs

03 Apr 2025, 05:00 by Edmund Heaphy, https://www.facebook.com/rtenews/ · RTE.ie

The idea of reciprocity in trade isn't exactly a new thing - it's a long-standing principle in international trade agreements.

However, Donald Trump can undoubtedly claim credit for popularising the term "reciprocal tariffs" to describe his administration's purported mission to create a level playing field in global trade.

Through sheer force of repetition, he has elevated it from economic jargon to something akin to a personal catchphrase.

"Reciprocal - that means they do it to us and we do it to them," he said last night. "It can't get any simpler than that."

If only any of this was as straightforward as Mr Trump contends.

To make matters that bit more convoluted, the US President last night coined a new term: the "discounted reciprocal tariff".

The discount, he explained with apparent sincerity, was the product of kindness on behalf of the US. On the whole, his administration would only impose tariffs at half the rate of what other countries apply to US exports.

"We're being very kind," he said.

Let's put aside, for a moment, this curious characterisation of a policy that economists warn could trigger an international recession.

Is there anything actually "kind" about the 20% tariff that will be imposed on the EU?

If we were to accept at face value the chart he brandished during his speech - the one claiming the EU imposes a 39% tariff on US exports - then perhaps there is some element of generosity at play.

But, as my colleague Tony Connelly pointed out, that 39% figure is mystifying.

You'd be hard pressed to find any credible estimate that puts the EU's average tariff rate on US exports anywhere near that level.

While the bloc does impose steep tariffs - exceeding 30% - on certain agricultural products like dairy, the weighted average tariff on American goods hovers around just 3%.

This makes Mr Trump's 20% tariff neither kind, nor reciprocal.

Of course, if you were to read the small print on the chart, you'd spot that their calculations mysteriously incorporate "Currency Manipulation and Trade Barriers".

Tellingly, the administration has not released their methodology - other than to confirm suspicions they used a formula that divides a country's trade deficit by their exports.

That blunt ratio is really not an appropriate way of calculating tariffs.

"This is insane," said Scott Lincicome, a Vice President of the Cato Institute, a libertarian think tank.

The formula essentially allows them to fold in virtually anything they dislike about a trading partner - from VAT, to regulatory differences, to alleged exchange rate manipulation. These are what Mr Trump has been referring to as "non-tariff barriers".

Critics have long pointed out that the inclusion of non-tariff barriers is a kind of sleight of hand that, at once, transforms a country's actual tariff rate into whatever figure is needed to justify Mr Trump's predetermined policy.

The US President betrayed his true motivation when he cited the EU's "unfair trade practices" last night - a grievance that reflects his long-standing hostility towards a bloc he has repeatedly characterised as "worse than China" when it comes to trade.

To be fair, Mr Trump has other, potentially more pragmatic, aims.

He frames these tariffs as multi-pronged beasts: they'll reduce America's "massive" trade deficits, force companies to relocate production to the US, and raise "hundreds of billions" annually to help fund his proposed tax cuts.

Economists widely question whether these tariffs can achieve these goals without damaging the very economy they're meant to protect.

But if the stated headline purpose of these tariffs is to be reciprocal - to create a level playing field - then the administration appears to be tilting the pitch dramatically in America's favour while claiming, with a straight face, that they're merely correcting the slope.