Trump signs order for reciprocal tariffs on US trading partners

President Donald Trump released a plan to increase U.S. tariffs to match the tax rates that other countries charge on imports on Thursday afternoon.

What they're saying:

"I’ve decided for purposes of fairness that I will charge a reciprocal tariff," Trump said in the Oval Office at the proclamation signing. "It’s fair to all. No other country can complain."

Trump's tariff plan

According to the Associated Press, the tariff increases would be customized for each country with the partial goal of starting new trade negotiations. However, other nations may feel the need to respond with their own tariff increases on U.S. goods.

The president's proclamation identifies value added taxes — which are similar to sales taxes and common in the European Union — as a trade barrier to be included in any reciprocal tariff calculations, according to a senior White House official who insisted on anonymity to preview the details on a call with reporters, the AP reported.

An official tells the AP that the expected tariff revenues would help to balance a projected $1.9 trillion budget deficit. The official also explained to the news outlet that the reviews needed for the tariffs could be completed within weeks or a few months.

FILE-President Donald Trump talks to reporters from the White House. (Photo by Chip Somodevilla/Getty Images)

Citing the Census Bureau, the AP reported that trade in goods between Europe and the United States nearly totaled $1.3 trillion last year, with the United States exporting $267 billion less than it imports.

Trump has said that such tariffs will help to create domestic factory jobs, but most economists tell the AP there would effectively be a tax increase on U.S. consumers that would add to inflationary pressures.

The Trump administration contends that charging the same import taxes as other countries do would improve the fairness of trade, possibly raising revenues for the U.S. government while also creating negotiations that may improve trade.

The backstory:

The president has levied tariff threats on Canada, Mexico, and China, inviting them to retaliate with import taxes of their own that could send the economy into a potential trade war.

He put an additional 10% tariff on Chinese imports due to that country's role in the production of the opioid fentanyl. The Associated Press reported that he also prepared tariffs on Canada and Mexico, America's two largest trading partners, which could take effect in March after being suspended for 30 days.

Meanwhile, Trump on Monday removed the exemptions from his 2018 steel and aluminum tariffs. And he's mused about new tariffs on computer chips and pharmaceutical drugs.

According to the AP, the European Union, Canada, and Mexico have countermeasures in place to affect the U.S. economically in response to Trump's tariffs, and China has already taken steps with its own tariffs on U.S. energy, agricultural machinery and large-engine autos and an antitrust investigation of Google.

Separately, the Trump administration tells the AP that the tariffs must be measured against a potential extension and expansion of Trump's 2017 tax cuts and efforts to curb regulations and force savings through the spending freezes and staff reductions in adviser Elon Musk's Department of Government Efficiency initiative.

In a report released Thursday, Wells Fargo bank analysis explained that the tariffs could hurt growth in 2025, just as the extended tax cuts could help growth recover in 2026.

"Tariffs impart a modest stagflationary shock to an economy," according to the report. "The U.S. economy entered 2025 with a fair amount of momentum, but we look for real GDP growth to downshift a bit over the next few quarters as the price-boosting effects of tariffs erode growth in real income, thereby weighing on growth in real consumer spending."

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