Why Trump’s Tariff Plan Is Getting Riskier, According to Economists

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The next round of President Trump's tariffs will be reciprocal tariffs, which economists say threaten far more countries than his other trade policies.

"Whatever they tariff us, we will tariff them. That’s reciprocal, back and forth," Trump stated.

However, economists overwhelmingly agree that this move will hurt U.S. consumers by causing rising prices. Tariffs generally increase the cost of everyday goods because companies pass higher importing costs onto consumers. Reciprocal tariffs will amplify this effect by raising tariffs across multiple industries.

Tariffs tend to reduce entry by foreign companies. When companies anticipate high tariffs, they may decide that entering the market is not worth the investment. This, in turn, reduces the variety and reliability of products available to American consumers.

Despite this, Trump sees reciprocal tariffs as a way to level the playing field. He has argued that many other nations impose significantly higher tariffs on the U.S. than the U.S. imposes on them. "It’s very unfair. We have been ripped off for decades by nearly every country on earth, and we will not let that happen any longer," he said.

The idea of fairness in trade has traditionally not involved a direct comparison of tariff rates because many other economic factors are at play when determining what constitutes a fair deal.

The U.S. is one of 166 members of the World Trade Organization (WTO). Under WTO rules, countries must offer all members their best trade rates unless they negotiate special agreements with specific partners. The WTO is based on the principle that lower overall tariffs benefit both the global and individual national economies.

Trump blames the imbalance in tariff rates for the growing U.S. trade deficit. He has pointed out that China’s average tariff on American products is twice as high as the tariff the U.S. imposes on Chinese goods.

However, some economists argue that the U.S. trade deficit exists because other countries seek to acquire dollar-denominated assets, which have historically been viewed as safe investments. Others suggest that the U.S. federal budget deficit is another reason for the large trade deficit, as it necessitates borrowing from foreign sources.

Economists generally do not see the trade deficit as a major concern. Debt itself is not inherently bad—it simply means the U.S. is borrowing from the rest of the world. However, they do monitor overall U.S. debt levels closely. Some argue that the U.S. needs to reduce consumption relative to income, but they believe bilateral tariffs are not the right solution.

Higher tariffs do not just reduce imports—they also reduce exports. When tariffs make foreign goods more expensive, U.S. companies buy fewer imports. This leaves fewer dollars in foreign markets, raising the value of the U.S. dollar. As a result, American exports become more expensive for trade partners, leading to decreased sales. In the end, both imports and exports decline, leaving the trade deficit unchanged.

Another reason reciprocal tariffs are unlikely to reduce the trade deficit is that companies often shift their supply chains to avoid high tariffs. For example, when tariffs on Chinese goods were imposed under the Trump administration, companies that manufacture footwear turned to subcontractors in Vietnam to bypass the increased costs. As a result, while U.S. trade with China declined, the trade deficit with Vietnam grew. This pattern suggests that attempts to close the deficit with one country will simply cause it to appear in another, much like a game of whack-a-mole.

Trade experts warn that implementing reciprocal tariffs will be logistically complex. Thousands of goods are affected by tariffs, and the U.S. has nearly 200 trading partners. Some economists also argue that reciprocity does not make sense as an industrial policy. If the U.S. adopts a policy of mirroring other countries' tariffs, it effectively allows those countries to dictate American tariff rates.

Many countries already have lower tariff rates than the U.S., and it is unclear whether Trump's plan includes lowering U.S. tariffs as well. Additionally, Trump has suggested using reciprocal tariffs to target the European Union’s Value Added Tax (VAT), which functions similarly to a sales tax.

Trump's administration has framed the policy as a way to protect American industries, particularly the struggling U.S. auto sector. Officials have emphasized that the policy is about ensuring fair treatment for American workers.

Ultimately, economists view this policy as part of Trump's broader protectionist agenda. Some believe it could trigger a global wave of retaliatory tariffs, leading to widespread trade wars. Others suggest that rather than following the U.S. in imposing tariffs, other countries may instead strengthen trade alliances among themselves, further isolating the United States.

According to sources familiar with the administration’s discussions, it could take six months or more to fully implement reciprocal tariffs. However, many economists worry that these tariffs will contribute to inflation and potentially push the U.S. into a recession.

Historically, when the U.S. trade deficit shrinks, it often coincides with economic downturns rather than growth. As one expert noted, "You may say, 'Oh, the trade deficit is falling—that’s good,' but in fact, it often signals that the U.S. economy is going through a rough time."