Opinion
Commentary
‘Reciprocal’ Tariffs Make No Sense
How is it in America’s national interest to let other countries decide what duties we pay?
By Douglas A. Irwin
Feb. 13, 2025 4:47 pm ET
At an Oval Office press conference Thursday, President Trump confirmed that he’s going ahead with his reciprocal tariff plan. The U.S., he said, will impose the same tariffs on other countries as they impose on the U.S.: “No more, no less.” That sounds fair—we treat them the way they treat us—but it’s actually a terrible idea.
It amounts to outsourcing U.S. tariff policy to other countries. They would dictate what our tariffs would be. If other countries put high tariffs on American goods, then we would impose high tariffs on their goods. So much for American sovereignty. So much for deciding what’s in our own national interest. The British economist Joan Robinson once said that a country shouldn’t throw rocks into its own harbors just because other countries have rocky coasts. The same principle applies here: The U.S. shouldn’t have stupid tariff policies just because other countries have stupid tariff policies.
A reciprocal policy would enormously complicate the U.S. tariff system. The Harmonized Tariff Schedule of the U.S., which details individual rates on particular commodities, has about 13,000 line items. The U.S. trades with roughly 200 countries. Is Washington ready to impose and manage 2.6 million individual tariff rates? The lobbying pressures for exemptions and exceptions on the U.S. side would be enormous. This would fill the swamp, not drain it. Foreign exporters would go to great lengths either to get their products under a lower tariff classification or to transship them to another country to reduce the duty they would face.
Reciprocal tariff systems lead to nonsensical policies. Consider: China exports rare-earth minerals that are essential for the production of many high-technology goods. The U.S. doesn’t export such goods to China. But if China were nonetheless to impose high tariffs on them, would the U.S. then be required to impose real prohibitive duties on mineral imports from China?
It also isn’t clear if reciprocal really means reciprocal. Some U.S. industries are heavily protected from foreign competition. Will the U.S. match tariff rates on products from countries with lower tariffs on U.S. goods? If New Zealand doesn’t impose any import duties on dairy products, will the U.S. allow all New Zealand dairy into the U.S. duty-free? If Brazil does the same for U.S. sugar exports, will the U.S. reciprocate? Someone should ask Wisconsin dairy farmers or Florida sugar barons if they are ready to face open competition.
Behind the superficial appeal of reciprocal tariffs are two major fallacies. The first is that other countries are taking advantage of us in trade, and we know this because we have a trade deficit. But macroeconomic factors, such as the balance between domestic savings and investment and the flow of capital between countries, determine the trade balance—not tariffs. The U.S.-Mexico-Canada agreement, the Trump-negotiated successor agreement to Nafta, ensures that U.S. goods have duty-free access to Mexico and Canada, as we also provide them. That’s equal treatment, or pure reciprocity, but it doesn’t guarantee balanced trade. The U.S. runs trade surpluses with Australia, Brazil, the Netherlands, the U.K., Singapore and most of Central and South America. Is the U.S. exploiting those countries? Does our trade surplus justify their putting tariffs on our goods?
Another fallacy is that other countries’ value-added taxes constitute discrimination against the U.S. Most European countries tax imported goods because they also levy taxes on domestic producers. In the end, VATs are taxes on consumption and don’t discriminate against imports. Even Adam Smith, a champion of free trade, accepted the idea that tariffs designed to equalize the tax treatment of domestic and foreign goods are legitimate because they level the playing field.
Reciprocal tariffs don’t make sense even using the mercantilist logic that pervades the Trump administration. A prolonged bout of inflation has made the American public sensitive about prices. The U.S. shouldn’t be imposing tariffs that will raise the cost of living for American consumers on all manner of goods and justify it on the illusory basis of fairness and reciprocity. If we truly want reciprocity—meaning zero tariffs on both sides—then the answer is to conclude free-trade agreements with willing partners. The U.S. could and should be negotiating such trade agreements with the European Union, Japan and other trading partners and allies. But the Trump administration is obsessed with mercantilism and trade balances.
Even worse, by threatening Canada, Mexico and Colombia (with which we have free-trade agreements) with stiff tariffs over nontrade issues, the Trump administration has undermined the value of such agreements. If they no longer constrain U.S. policy, they’re no longer credible.
The Trump administration thinks it’s using tariffs to beat up other countries. In reality, U.S. businesses and consumers will take the hit. Even Mr. Trump’s hero William McKinley said, “Commercial wars are unprofitable.” Sadly, it’s advice that the administration seems likely to ignore.
Mr. Irwin is an economics professor at Dartmouth College and author of “Clashing Over Commerce: A History of U.S. Trade Policy.”
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