US President Trump’s tariff policy has once again drawn global attention, particularly his proposed “Reciprocal Tariffs” plan, which could further escalate the risk of a global trade war. Since taking office, the Trump administration has repeatedly used tariffs as a policy tool to advance the “America First” strategy and attempted to revise trade agreements to encourage economic reshoring to the US. However, with the introduction of the reciprocal tariffs plan, global trade relations and the world economy are facing new challenges and uncertainties.
Reciprocal Tariffs refer to imposing tariffs on imports into the US that match the tariffs other countries impose on US goods. Trump stated that such measures could ensure fairness in trade and hoped to pressure trade partners to levy the same or even higher tariffs on their imports from the US. This policy is not only a bargaining chip in trade negotiations but may also become an important tool for exerting pressure by the Trump administration.
Under Trump’s plan, reciprocal tariffs may cover several key industries, including steel, aluminum, automobiles, semiconductors, and pharmaceuticals. This could have a profound impact on the global trade structure, especially for countries with significant trade surpluses with the US.
Trump’s tariff policy has already had a direct economic impact on multiple countries, particularly in the steel and aluminum sectors. Since 2018, the US has imposed high tariffs on steel and aluminum, triggering strong reactions from countries including the European Union, Mexico, and Canada. These countries not only imposed tariffs on US imports but also raised trade barriers, further intensifying global trade frictions.
The further implementation of the reciprocal tariffs policy will escalate these trade tensions and may lead to a further divergence in global trade strategies. For example, economies such as the EU, India, and China, whose exports to the US account for a significant proportion of their total exports, will be heavily impacted if the US imposes reciprocal tariffs on their products. This could significantly alter the global trade structure and potentially trigger retaliatory tariff measures.
Although the Trump administration is promoting the reciprocal tariffs plan, the policy faces several challenges. First, global tariff structures vary widely, and the categories of import and export products differ across countries, making a unified reciprocal tariff difficult to implement. In addition, the implementation of reciprocal tariffs may lead to higher costs for US consumers and businesses, further increasing inflationary pressures.
Experts point out that the Trump administration will face legal and international challenges when implementing this policy. US trade partners may file lawsuits and request intervention from the World Trade Organization (WTO). If the US enforces reciprocal tariffs without adequate negotiations, it may trigger a series of retaliatory trade actions, further increasing the risk of a global trade war.
Despite the Trump administration’s aggressive promotion of a reciprocal tariff programme, the policy faces a number of challenges. Firstly, the tariff structures of countries around the world are quite different, making it technically difficult to implement reciprocal tariffs. Secondly, the cost of tariffs may be passed on to US consumers, fuelling inflationary pressures and affecting the Federal Reserve’s monetary policy direction. However, amidst the challenges, investors can also find potential investment opportunities:
Trump’s reciprocal tariff plan will undoubtedly create more uncertainty in global trade and financial markets. For investors, the key is to be flexible and adopt the following strategies:
Trump’s reciprocal tariff plan will undoubtedly expose global trade to greater complexity and uncertainty. While Trump’s aim is to facilitate the return of the US economy and reduce the trade deficit, this policy could cause long-term damage to the US relationship with its major trading partners. With the implementation of the tariff measures, the risks to global markets will intensify, and investors and trading companies will need to monitor developments closely and adjust their strategies in a timely manner.
In the long term, the global trade structure will likely undergo significant changes as a result of Trump’s reciprocal tariff policy. Both US trading partners and other emerging economies need to be prepared for the escalation of trade wars and think about how to seek new opportunities and risk management solutions in this new trading environment.
*The content of this article is for sharing and reference purposes only and does not constitute professional investment advice. Due to differences in individual circumstances and needs, you may contact the Cashback Island team or consult your financial planner for professional advice.
It means that the US imposes “exactly the same” tariffs on goods from other countries as the US imposes on goods from other countries. For example, if China imposes a 25% tariff on US cars, the US also imposes a 25% tariff on Chinese cars. As a result, imported goods may become more expensive, and consumers may have to pay more to buy things.
If the US raises tariffs, other countries typically “retaliate” by also increasing tariffs (for example, the EU imposing tariffs on US jeans), leading to an escalating cycle where trade volumes decline and business costs rise, this constitutes a trade war.
