“The U.S. implements reciprocal tariffs on all imports under an executive order by President Trump, aiming to address trade imbalances and reduce the trade deficit with surplus nations.”

How the US taxes countries (April 2025)

US reciprocal tariffs

On April 2, 2025, President Donald Trump signed an executive order imposing reciprocal tariffs on all imported goods into the U.S. This aggressive measure aims to balance the U.S. trade deficit with countries that have a significant trade surplus with the U.S.

Figure 1 – About 60 countries facing higher tariffs will be subject to the new rates starting April 9.

Formula for U.S. Reciprocal Tariffs

The U.S. reciprocal tariff is calculated using the following formula:

Reciprocal Tariff ≈ 1/2 × (U.S. Trade Deficit / That Country’s Exports to the U.S.)

President Trump emphasized that this new tax calculation is based on an updated list of trade barriers that the U.S. believes many economies have imposed on American goods—previously relaxed barriers under former President Joe Biden.

Figure 2 – Canada and Mexico are not targeted in this round of U.S. reciprocal tariffs, as they were previously subject to a 25% tariff on goods imported into the U.S.

Examples of Tariff Rates

Below are some examples of reciprocal tariffs applied to countries with a significant trade surplus with the U.S.:

1. Vietnam

• Exports to U.S.: $136.6 billion

• U.S. imports from Vietnam: $13.1 billion

• Trade deficit: $123.5 billion

• Deficit ratio: 123.5 / 136.6 ≈ 90%

• Tariff rate applied: ~46%

2. China

• Exports: $418 billion | Imports: $139 billion

• Trade deficit: $279 billion

• Deficit ratio: 279 / 418 ≈ 67%

• Tariff rate applied: ~34%

3. Indonesia

• Exports: $28 billion | Imports: $10.1 billion

• Trade deficit: $17.9 billion

• Deficit ratio: 17.9 / 28 ≈ 64%

• Tariff rate applied: ~32%

4. Cambodia

• Exports: $12 billion | Imports: $0.3 billion

• Trade deficit: $11.7 billion

• Deficit ratio: 11.7 / 12 ≈ 97.5%

• Tariff rate applied: ~49%

5. Thailand

• Exports: $52 billion | Imports: $17 billion

• Trade deficit: $35 billion

• Deficit ratio: 35 / 52 ≈ 67%

• Tariff rate applied: ~36%

6. Philippines

• Exports: $17 billion | Imports: $8.5 billion

• Trade deficit: $8.5 billion

• Deficit ratio: 8.5 / 17 ≈ 50%

• Tariff rate applied: ~17%

Additionally, Trump also announced a 25% tariff on foreign-manufactured automobiles, effective April 3.

Figure 3 – The White House confirmed that the 25% tariff applies not only to fully assembled vehicles but also to critical auto parts.

Implications of the Reciprocal Tariff

Any country with a large trade surplus with the U.S. will face tariffs based on half of that imbalance.

The primary goal of this order is to protect U.S. businesses and manufacturers from unfair foreign competition.

This policy may lead to new trade negotiations or retaliatory measures from affected countries.

Impact on Businesses and Consumers

• Exporting businesses: Companies exporting goods to the U.S. will face higher tariffs, reducing their competitiveness.

• American consumers: Import prices will rise, potentially leading to inflation.

• Trade relations: The new tax policy could trigger countermeasures from U.S. trade partners.

Figure 4 – South Korean stock market plunges following news of the new tariffs.

Canadian Prime Minister Mark Carney declared that his government opposes U.S. tariffs on imported cars and will support affected workers. He also criticized the U.S. reciprocal tariff policy, arguing that it will fundamentally alter the global trade system.

Conclusion

The U.S. global reciprocal tariff executive order is a significant move to reduce trade deficits and protect domestic industries. However, this policy is expected to have major consequences for global trade and reshape the world’s economic landscape in the coming years.