Snapshot

President Donald Trump has taken initial steps to impose a new system of “reciprocal” tariffs that could upend US trade policy. Under current trade rules, the United States generally charges the same tariff for a given good that enters the United States regardless of the country of origin of that good (subject to certain exceptions like free trade agreements and trade preference programs). Under Trump’s proposal, the United States would take a different approach—not immediately, but potentially in the coming months—and charge different tariffs based on the country of origin. According to the White House, tariff rates will be set to “restor[e] fairness in US trade relationships and counter[] non-reciprocal trading arrangements.” Tariffs on goods from certain countries would potentially increase significantly.

Details

On February 13, 2025, Trump signed an executive memorandum titled “Reciprocal Trade and Tariffs” (the Reciprocal Trade Memorandum). The Reciprocal Trade Memorandum is the latest in a series of tariff-related actions that Trump has taken in recent weeks, including the 10% tariff he imposed on China on February 4, 2025, in connection with imports of fentanyl; the 25% tariff he imposed on Canada and Mexico for the same reason and then postponed until March 4, 2025; and the expansion of tariffs on steel and aluminum that he announced on February 10, 2025, which are scheduled to take effect on March 12, 2025.

The Reciprocal Trade Memorandum states that it is the policy of the United States to reduce the country’s large trade deficit in goods and address other unfair aspects of its trade with other countries. It also states that Trump will introduce the “Fair and Reciprocal Plan” (the Plan) to address “non-reciprocal trading arrangements” with such countries by determining the equivalent of a reciprocal tariff with respect to each.

The Reciprocal Trade Memorandum defines “non-reciprocal trade arrangements” quite broadly, including tariffs; unfair, discriminatory or extraterritorial taxes, including value-added taxes; nontariff barriers, including subsidies and burdensome regulatory requirements in foreign markets; exchange rate policies; and any other practice that is judged to impose an unfair limitation on market access or any structural impediment to fair competition with the United States. It also states that the Plan shall 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.”

A Fact Sheet accompanying the Reciprocal Trade Memorandum provides examples of such measures, including Brazil’s tariff on ethanol, India’s tariff on US motorcycles, the EU’s restrictions on US shellfish, the EU’s tariff on automobiles, and Canada’s and France’s digital services taxes, among others.

Trump’s January 20, 2025 “America First Trade Policy” memorandum directed agencies to prepare a series of reports on a variety of trade issues by April 1, 2025. The Reciprocal Trade Memorandum states that after the agencies submit the reports, the secretary of commerce and the US trade representative (USTR) will initiate “all necessary actions” to investigate harm to the United States from other countries’ non-reciprocal trade arrangements. When those actions are complete, the commerce secretary and USTR will submit a report to Trump setting out proposed remedies.

Contrary to some early expectations, statements from White House officials indicate that the administration is not envisioning a process that would result in the United States increasing tariffs on a line-by-line basis. Rather, it appears that for each country under examination, the agencies will examine both tariff and nontariff measures, estimate the trade effects of each, and calculate a single additional tariff rate for the country’s products. The Reciprocal Trade Memorandum does not explain how the agencies will do this, however, and it is possible the approach will change.

Further, it is expected that the administration will focus initially on a subset of countries of particular concern, some of which are likely to seek to negotiate deals with the administration. In some cases, this could result in significant delays in the imposition of the additional tariff, if it is imposed at all. Countries of lesser concern may escape examination altogether.

Implications for Business Planning

There are many uncertainties regarding the Plan. For example, it is not clear (a) which legal authorities the President might invoke to impose reciprocal tariffs (and the rules and restrictions pertaining to the use of such authorities) and (b) whether reciprocal tariffs will be supplemented by a universal tariff, which the President has previously embraced. Trade principals in the administration can be expected to have differing views on these and other questions that will need to be reconciled.

In this uncertain environment, companies should take proactive steps to advance and protect their business interests. For example, companies should:

• ensure they have a firm understanding of imports they rely on and their countries of origin;

• assess the range of potential impacts of increased tariffs on key imports; and

• closely monitor the administration’s process and be mindful of opportunities to provide evidence and analysis to inform the development of reciprocal tariffs and potential alternatives (e.g., investigations, deals or dispute settlement).

WilmerHale is following these developments closely and is prepared to advise clients on business planning as the Plan moves forward.