The US president has pledged to target countries that impose taxes on US imports by implementing a reciprocal tariff. Donald Trump has instructed his team to begin calculating duties by early April, raising concerns about a potential global trade war that could also fuel US inflation.
Trump stated on Truth Social, «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.»
This move is expected to kickstart negotiations with numerous countries with the goal of reducing tariffs and trade barriers. The US aims to reduce its goods trade deficit, which exceeded $1.2 trillion last year. A White House official indicated that countries with significant US trade surpluses could be the initial targets, with China, Mexico, Vietnam, Ireland, and Germany identified as the top five by the US Census Bureau.
In the midst of these developments, UK government minister Pat McFadden expressed a cautious approach regarding the tariffs during an interview on Sky News’ Politics Hub with Sophy Ridge. He refrained from confirming whether the UK government would retaliate against the tariffs.
According to Paul Ashworth, chief North America economist at Capital Economics, the UK could face tariffs as high as 24% if Trump proceeds with treating VAT as a tariff. This would position the UK as the fourth most severely impacted, following India (29%), Brazil (28%), and the EU (25%).
Although some estimates vary, the Trump administration also intends to consider regulations, government subsidies, digital services taxation policies, and exchange rate policies in determining tariffs. Despite arguments that VAT is a non-discriminatory tax, the US contends that it functions as a discriminatory tariff due to the disparity in sales tax rates at the state level.
In a separate development, Trump engaged in discussions with Indian Prime Minister Narendra Modi, agreeing to collaborate on artificial intelligence, semiconductors, and strategic minerals. Trump highlighted India’s high tariff rates compared to the US, emphasizing the challenges of selling goods into India.
India, as per the World Trade Organisation, maintains the highest tariff rates, with a simple average of 17% for all products, far exceeding the US’s 3.3% average.
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