On February 13, 2025, President Donald Trump signed a memorandum calling for "fair and reciprocal" trade tariffs on every country that charges duties on U.S. imports. “[W]hatever countries charge the United States of America, we will charge—no more no less,” Trump said. The “Fair and Reciprocal Plan” would counter non-reciprocal trading arrangements by implementing reciprocal tariffs and other measures against countries that impose tariffs, value-added taxes, or non-tariff barriers that disadvantage U.S. exports. The memorandum establishes a framework for implementing these tariffs.
The memorandum orders the Director of the Office of Management and Budget (OMB) to assess the trade effects of non-reciprocal trade arrangements, including tariff and nontariff measures, using the country-by-country review requested in the America First Trade Policy Memorandum. The reviews are due April 1, 2025. The OMB will then calculate an additional tariff rate for each country.
The proposed reciprocal tariffs replace the universal tariffs of 10% to 20% that Trump proposed during his campaign. Universal tariffs would apply to all imports at the same rate, while reciprocal tariffs would match the tariffs that other countries impose. This would potentially keep tariffs lower on some imports.
The Fair and Reciprocal Plan would be a significant change in U.S. policy. The United States currently matches the tariffs on goods imported into the United States regardless of the country of origin. Under Trump’s approach, the United States would charge different tariffs based on the country of origin.
Background: “Large and Persistent” Trade Deficit
The memorandum states that United States “has been treated unfairly by trading partners.” This “lack of reciprocity is one source of our country’s large and persistent annual trade deficit in goods,” the memorandum noted, as “closed markets abroad reduce United States exports and open markets at home result in significant imports.”
The memorandum states that the “trade deficit of the United States threatens our economic and national security, has hollowed out our industrial base, has reduced our overall national competitiveness, and has made our Nation dependent on other countries to meet our key security needs.” More reciprocal and balanced trade can “reduce the trade deficit; grow the United States economy; and improve our trade relationships with trading partners to the benefit of American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.”
Trump declares that the policy of the United States is to “reduce our large and persistent annual trade deficit in goods and to address other unfair and unbalanced aspects of our trade with foreign trading partners.” The Fair and Reciprocal Plan will counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner.
Definitions: Non-Reciprocal Trade Arrangements
In addition to tariffs on U.S. products, the memorandum defines “non-reciprocal trade arrangements” broadly to include:
Unfair taxes: Non-reciprocal trade arrangements include “unfair, discriminatory, or extraterritorial taxes, including a value-added tax.” The memorandum defines a “value-added tax” as “a type of consumption tax that is levied on the incremental increase in value of a good or service at each stage of the supply chain.”
Nontariff barriers: The memorandum also includes nontariff barriers or measures and unfair or harmful acts, policies, or practices, including subsidies and “burdensome regulatory requirements” on U.S. businesses operating in other countries. The memorandum defines a “nontariff barrier” or “measure” as “any government-imposed measure or policy or nonmonetary barrier that restricts, prevents, or impedes international trade in goods, including import policies, sanitary and phytosanitary measures, technical barriers to trade, government procurement, export subsidies, lack of intellectual property protection, digital trade barriers, and government-tolerated anticompetitive conduct of state-owned or private firms.”
Exchange rate manipulation: Non-reciprocal trade arrangements also include exchange rate policies and practices that “cause exchange rates to deviate from their market value, to the detriment of Americans.”
Wage suppression: The memorandum cites wage suppression and “other mercantilist policies that make U.S. businesses and workers less competitive.”
Any other practice: Lastly, non-reciprocal trade arrangements include “any other practice that U.S. officials judge to impose any unfair limitation on market access or any structural impediment to fair competition with the market economy of the United States.”
The memorandum also states that it will factor in “losses as a result of measures that disadvantage the United States as applied, regardless of what they are called or whether they are written or unwritten.”
An accompanying fact sheet provided examples of nonreciprocal trading practices that the policy aims to address, including Brazil’s ethanol tariff, India’s tariff on U.S, motorcycles, the EU’s ban on U.S. shellfish from 48 U.S. states, the EU’s automobile tariff, and Canada’s and France’s digital services taxes.
Impact on Trade Policy
Reciprocal tariffs would be a sea change in U.S. trade policy. Under the current “most-favored-nation” global trading system, countries apply negotiated tariff rates to other World Trade Organization (WTO) members without discrimination. This multilateral system was intended to reduce tariffs globally, although it did not necessarily achieve this goal. The reciprocal trade plan would move the United States, and potentially its trading partners, to a system in which the country negotiates tariffs on a country-by-country basis. This could lead to higher tariffs globally.