Reciprocal Tariffs Will Spare Pharma, Lumber, Furniture, Paper, Chips, Books, Section 232 Goods

The 10% tariffs will apply to countries that the U.S. sees as good actors, and those tariffs begin on April 5 at 12:01 a.m. ET, unless the goods are in transit before that date. At 12:01 a.m. ET on April 9, many countries' goods will face higher tariffs, from 11% to 49%, or 50%, the first on Cambodian imports and the latter on goods from Lesotho (see 2504020086. Even though China's "reciprocal" rate is lower than the rate for Vietnam, Laos and some other countries, its 34% rate will be added to the 20% tariffs applied earlier this year and to the existing Section 301 tariffs.

The president is using the International Emergency Economic Powers Act to impose the tariffs, an authority that had not been used for tariffs before this year. The executive order said that the IEEPA emergency is "large and persistent annual goods trade deficits," and said that the increase in the trade deficit is threatening the nation's economic and national security interests.

In comments in the Rose Garden, Trump called it "a national emergency that threatens our security and our way of life."

If goods trade deficits do not get resolved, the order says, the commerce secretary and the U.S. trade representative, with input from other advisers, the treasury secretary and the secretary of state will "recommend to me additional action, if necessary."

"Should any trading partner retaliate against the United States in response to this action through import duties on U.S. exports or other measures, I may further modify the HTSUS to increase or expand in scope the duties imposed under this order to ensure the efficacy of this action," the order says.

However, if a trading partner takes "significant steps to remedy non-reciprocal trade arrangements and align sufficiently with the United States on economic and national security matters," the order said Trump may either lower the duties or modify which products it applies to.

These tariffs don't apply to Canada and Mexico, because the earlier IEEPA tariffs, linked to drug smuggling and migration, still apply. So, too, do the carve-outs for goods eligible for USMCA benefits.

The order says that if the administration decides that the 25% and 10% tariffs on Mexican and Canadian goods over those issues are no longer warranted, it will replace them with a 12% tariff. USMCA-compliant goods will still be able to enter duty-free, and there will be no tariffs on energy, energy resources, potash, "or to an article eligible for duty-free treatment under USMCA that is a part or component of an article substantially finished in the United States."

For imports outside North America, the tariffs will only apply to the non-U.S. content of an article, as long as at least 20% of the value of that article is of U.S. origin. The order says CBP, to the extent permitted by law, can require the documentation on U.S. content with the entry filing.

Among the other top sources of imports to the U.S., the EU will face a 20% additional tariff; Japan, a 24% tariff; South Korea, (a free-trade-agreement partner), 25%; Vietnam, 46%; Taiwan, 32%; and India, 26%.

The order doesn't allow entries into foreign-trade zones to avoid the tariffs. However, unlike the Section 232 orders since Trump entered office, it doesn't prohibit drawback on these duties.

At the same time that this order was issued, the administration said it is ending de minimis for Chinese goods (see 2504020085). To avoid the problem of mail packages not including Harmonized Tariff Schedule codes, the order imposes either a 30% duty or a $25 per item fee, and that $25 fee will go to $50 on June 1. De minimis ends May 2, at 12:01 a.m. ET.

The administration also intends to end de minimis for all imports, but says it has to wait until the commerce secretary certifies "that adequate systems are in place to fully and expeditiously process and collect duty revenue applicable pursuant to this subsection for articles otherwise eligible for de minimis treatment."

The order said the trade deficits are caused by trading partners' higher tariffs, non-tariff barriers, but also countries suppressing domestic wages and consumption, "and thereby demand for U.S. exports, while artificially increasing the competitiveness of their goods in global markets."

The order said: "Efforts by the United States to address these imbalances have stalled. Trading partners have repeatedly blocked multilateral and plurilateral solutions, including in the context of new rounds of tariff negotiations and efforts to discipline non-tariff barriers. At the same time, with the U.S. economy disproportionately open to imports, U.S. trading partners have had few incentives to provide reciprocal treatment to U.S. exports in the context of bilateral trade negotiations.

"Even for countries with which the United States may enjoy an occasional bilateral trade surplus, the accumulation of tariff and non-tariff barriers on U.S. exports may make that surplus smaller than it would have been without such barriers."

The order says the U.S. needs robust domestic manufacturing in "certain advanced industrial sectors like automobiles, shipbuilding, pharmaceuticals, technology products, machine tools, and basic and fabricated metals, because once competitors gain sufficient global market share in these sectors, U.S. production could be permanently weakened." It also said that U.S. defense companies need to develop manufacturing in batteries and microelectronics.

Trump said, "We import virtually all our computers, phones, televisions and electronics. A single shipyard in China now produces more ships every year than all the U.S. shipyards combined."

He declared, "We will supercharge our domestic industrial base. We will pry open foreign markets and break down foreign trade barriers."

Although the order was heavy on the need for manufacturing, it also touched on agriculture, a major exporting strength for the U.S. The order said that agriculture is considered a "critical infrastructure sector" because if the sector was destroyed or incapacitated, it would have a debilitating impact on the country.

"When I left office, the United States had a trade surplus in agricultural products, but today, that surplus has vanished. Eviscerated by a slew of new non-tariff barriers imposed by our trading partners, it has been replaced by a projected $49 billion annual agricultural trade deficit," the order said.

During the event, Trump said U.S. farmers and ranchers "are brutalized by countries all over the world."

The president also ran through a history of tariffs in the U.S., saying that before the implementation of the income tax in 1913, tariffs paid for federal government functions, and he said that the late 1800s was "the wealthiest the U.S. has ever been."

He also fleetingly alluded to Smoot-Hawley, a law passed in 1930 that hiked tariffs in the early years of the Great Depression. Many Democrats are comparing this action to Smoot-Hawley. "They tried to bring back tariffs to save our country, but it was gone. It was too late. Nothing could be done. It's not too late any longer. We're going to start being smart."

Trump noted that he's been for protectionism for 40 years.

"We're going to be an entirely different country, and it's going to be fantastic for the workers, it's going to be fantastic for everyone," he said. "In the coming days, there will be complaints from the globalists, the outsourcers and the special interests and -- always -- the fake news."

But he said these voices were wrong about allowing China into the global trading system, about NAFTA, and about the Trans-Pacific Partnership. He said they were wrong when they said the tariffs he imposed in his first term would harm the economy.

Although the order referred to the possibility of lowering tariffs, a background call with senior administration officials ahead of the event downplayed that possibility. One official said, "This is not a negotiation. It's a national emergency. And any country that thinks that they can simply make an announcement promising to lower some tariffs is ignoring the big central problem with their massive non-tariff barriers and institutionalization in their trade model to cheat America."