Mr. Trump thinks “reciprocal import tax” helps reduce trade deficit but experts say “no”, because the problem is in the characteristic of the US economy.
Last week, US President Donald Trump repeatedly mentioned the reciprocal import tax plan (Reciprocal Tariff) with its trading partners. This concept may sound simple, meaning that the US will increase taxes on the equivalent of goods equal to the export water tax rate on the US goods.
“If they tax us, we also tax them,” Trump said. “If their tax is 25%, we are 25%. If they are 10%, we also 10%. And if they are 25%higher, we too,” he explained.
The source of the attack came from him and his advisers that other countries taxed US goods higher than the US level for their imported goods, causing disadvantages for US businesses and industry.
The White House pointed out some examples of particularly serious imbalance such as Brazil to import 18%Ethanol import tax, while the US only applied 2.5%. India taxed 100% imported motorbike tax and the US was 2.4%. Europe imposed a 10% tax on imported cars, four times the US 2.5% tax rating applied to the car.
In short, the Trump administration believes that the imbalance in the tax rate leads to a huge and persistent trade deficit. In fact, since 1975, the United States has never been over.
US President Donald Trump at the White House Oval Office on February 13. Image: AFP
However, the higher foreign tariffs that Trump complained not to be applied arbitrarily and stealthily. Currently, US tariffs are often lower than partners, partly from their past.
After World War II, the US tried to promote countries to reduce trade and tariff barriers, with the view that free trade will promote peace, prosperity and export, through activities called negotiations Uruguay, lasted from 1986 to 1994.
This round of negotiations went to the signing of the Marrakesh Agreement on April 15, 1994, resulting in the establishment of the World Trade Organization (WTO) in 1995. This is the largest trade negotiation round in history, with the participation in participation of 123 countries, in order to liberalize global trade and reduce tariff barriers.
Under the agreement, countries have the right to set their own tax rates with different products but according to the principle of “Most Favored Nation), regulates equality and non -distinct treatment. That is, the tax level that Mr. Trump complains not only targets the United States but also applies to all.
Since he wanted to apply reciprocal taxes, Mr. Trump applied taxes on steel, aluminum, washing machine, solar panel and near all Chinese goods in the first term. Only three weeks after the second term, he applied an additional 10% tax for Chinese goods, increased steel and aluminum imported, imposed a 25% tax from Canada and Mexico but then delayed for 30 days, Determined to impose car tax from April.
However, the reality shows that tariffs are not effective in narrowing the trade deficit. Despite the taxes that Trump imposed the first term and was maintained by Biden, the US trade deficit still increased to $ 918 billion last year, the second highest level in history.
Economists explain that the cause of trade deficit is not due to tax policies but comes from specific factors of the US economy. The Federal Government maintained a large budget deficit for a long time and US consumers spend strongly, leading to an increase in total consumption and investment of the US.
Over the past 100 years, US public debt has increased from US $ 395 billion in 1924 to 35,460 billion USD to the end of the fiscal year 2024, in the third quarter of last year. Along with that, the US economy has recently surpassed other advanced economies. Before Covid-19 to the middle of last year, the US GDP increased by nearly 9%, compared to only 5.5% of Canada and 1.9% of the European Union and 2% in Germany.
This means that consumer spending power increases sharply, making the demand for goods imports higher. Combining violent and powerful public spending makes part of the need to be met by goods and services from abroad.
Kimberly Clausing, expert at the University of California, Los Angeles (UCLA), former US Finance Finance official said that the trade deficit is actually a macro -imbalance, derived from the lack of savings in the money spending. Books and do not want to increase taxes. “Until solving these problems, the US will continue to maintain trade deficit,” she explained.
Experts also doubt the feasibility of reciprocal taxes. So far, the White House has not published many details. Mr. Trump directed Trade Minister Howard Lutnick to prepare for the report on April 1 on how to deploy.
Antonio Rivera, expert at Arentfox Schiff Law Firm, former lawyer of the US customs office and defended the US border, said there were many questions that have not been answered. For example, will the US consider thousands of items and adjust tax rates for each country? Or will the US consider the average tax rate of each country and compare the US? Also, are there any completely different methods?
Stephen Lamar, President and CEO of the American Garment & Footwear Association, said the reciprocal tax plan created an extremely chaotic business environment. “It is difficult to make long -term planning sustainably,” he said.
In addition, tariffs hit imported goods but eventually often suffered by consumers, increasing inflation risks. Not excited about the reciprocal tax plan, some experts believe that the possibility of Mr. Trump used it as a threatening tool, forcing countries to sit down to negotiate trade.
“This may be a mutually beneficial situation,” said Christine McDaniel, a former US trade official who works at the Mercatus center of George Mason University.
On February 13, during the first bilateral meeting at the White House, Indian Prime Minister Narendra Modi and US President Donald Trump agreed to start the negotiating negotiations and resolve tariffs. “Mr. Trump is trying to change the global trade order. India recognizes this and is seeking practical ways to solve the differences,” said Raja Mohan, analyst at the South Asia Research Institute (Singapore). comment.