US president Donald Trump has tasked his administration to assess the country’s global trade relations and whether reciprocal tariffs should be imposed.

Under the so-called “Fair and Reciprocal Plan,” Washington is setting out to address “unfair and unbalanced aspects of our trade with foreign trading partners” as part of ambitions to “reduce our large and persistent annual trade deficit in goods.”

According to the US Trade Representative office, the country has a trade-weighted average import tariff rate of 2% on industrial goods, which represents 94% of all merchandise imports by value. However, think tank Cato Institute says the US is “no saint” in terms of protectionist measures, and that “true” reciprocity would require a reduction in US tariffs on other countries. 

“What is only hinted at in the presidential memorandum and fact sheet is the possibility of negotiating new trade agreements with these countries to reduce their tariffs and other trade barriers,” comments Mark Linscott, a non-resident senior fellow at the think tank Atlantic Council. “With the announcement coming on the day of Prime Minister Narendra Modi’s visit to Washington, India could be the first test case for negotiations that might mitigate the imposition of new tariffs. So we should all buckle up for what will be a wild ride as this plan is put into place.”

The European Commission says this proposal is “a step in the wrong direction,” adding that it “remains committed to an open and predictable global trading system that benefits all partners.” The EU currently has a 10% tariff on cars imported from the US, while the US imposes a 2.5% duty on EU-made cars, Kallanish reports. 

L. Daniel Mullaney, a non-resident senior fellow at the think tank Atlantic Council, says the EU may be willing to lower its auto tariff as “the US poses no threat to the EU’s auto business.”

Yet, that rate would also apply to South Korea, Japan, and China, “which do pose a real threat,” Mullaney adds. This is because any reductions in tariffs applied to World Trade Organization (WTO) members need to apply to all other members.

“The prospect of reciprocal tariffs can also be viewed as the ultimate bargaining tool, essentially saying: ‘Lower your tariffs to our current levels (and eliminate other barriers that may be identified and turned into tariff equivalents) and face no consequences,’” Mullaney concludes.