Mirror, Mirror, on the Wall: The Danger of Imposing 'Reciprocal' Tariff Rates
22 Pages Posted: 3 May 2019
Date Written: January 24, 2019
Proposals to match higher foreign tariffs with higher, “reciprocal” US tariffs would be an economic and administrative nightmare. This policy would violate the long-standing US commitment to apply tariffs on a nondiscriminatory “unconditional most-favored nation” (MFN) basis, a core principle of the international trading system. Applying reciprocal rates would exponentially complicate the US tariff code, lead to higher duties on a range of imports important to US consumers and producers, and invite retaliation from major trading partners. Specifically, if applied to the United States’ top 10 MFN trading partners, reciprocal tariffs would result in a nearly 10-fold increase in the number of duty lines in the US tariff code. The average US duty on imports from those nations would more than double, from 2.1 to 5.4 percent. Imposing reciprocal duties would ultimately threaten to unravel a postwar global trading system that has reduced tariffs worldwide while protecting US exporters from discrimination.
Keywords: exports, imports, tariffs, reciprocal, free trade, international trade, trade, trading partners, World Trade Organization, free-trade agreements
JEL Classification: F13, F14, F53, F55, N72
Suggested Citation: Suggested Citation