Trump says U.S. will push for 'reciprocal tax' on trade partners

Written on Feb 23, 2018

President Trump said last week he would push for a “reciprocal tax” against countries, including U.S. allies, that levy tariffs on American products. Officials have not provided information on how such a tax would be structured or what goods it would apply to.

President Trump said his administration will impose a “reciprocal tax” to charge other countries - “some of them are so-called allies but they’re not allies on trade.”

He did not specify how such a tax would be structured, or whether he meant that U.S. tariff rates should be raised to equal to those charged by other major trading partners.

Trump cited motorcycle maker Harley-Davidson as an example of the problem of unfair trade. Harley is building a factory in Thailand, partly because its U.S.-built bikes face a 60% tariff there.

The United States has pledged to the World Trade Organization a relatively low, 3.5% applied tariff rate, compared to 9.9% for China and 5.2% for the European Union. For some products, the gap is much wider, such as in passenger vehicles, where the United States charges 2.5% tariffs, versus 25% in China and 10% in the EU.

It was also unclear whether President Trump was reviving the idea of a border adjustment tax, an idea rejected by congressional Republicans in last year’s tax reform effort.

Retailers and some import-dependent industries strongly opposed the plan for a 20% tax on imports aimed at offsetting the value-added tax refunds that some countries grant to their exporters. The National Retail Federation at the time called it a “bad tax” that would “drive up the prices of countless products Americans use every day.”

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