US Daily_ What Might Reciprocal Tariffs Look Like_ (Phillips_Peng)

Summary of Key Points from the Conference Call Industry or Company Involved - The discussion revolves around the potential implementation of "reciprocal tariffs" by the Trump administration, impacting various industries reliant on imports and exports, particularly the automotive and steel industries. Core Points and Arguments 1. Announcement of Reciprocal Tariffs: President Trump plans to announce reciprocal tariffs, which would raise US tariffs on imports to match the tariffs imposed by exporting countries on US products. This could lead to an estimated increase of around 2 percentage points (pp) in the US weighted average tariff rate if applied at the product-specific level [3][6][9]. 2. Non-Tariff Barriers (NTBs): There is a risk that the administration may attempt to equalize non-tariff barriers, which are harder to quantify but could lead to a greater increase in tariffs. The inclusion of value-added taxes (VATs) in the calculation could raise the average effective tariff rate by an additional 10 pp [3][6][25]. 3. Legal Authority for Tariffs: The legal authority for imposing these tariffs is uncertain. The administration may rely on the International Emergency Economic Powers Act (IEEPA) or a rarely used law allowing up to 50% tariffs in response to discriminatory trade practices [3][19][20]. 4. Impact on Trade Policy Uncertainty: While reciprocal tariffs pose risks, they may also reduce trade policy uncertainty once announced. This policy could be seen as an alternative to broader universal tariffs previously discussed by Trump [3][23][24]. 5. Changes to Existing Tariffs: On February 10, Trump announced the rescinding of prior exclusions to the 2018 tariffs on steel (25%) and aluminum (10%), raising the aluminum tariff to 25%. This change affects approximately $50 billion worth of imports and is expected to raise the US average effective tariff rate by around 0.4 pp [4][26]. Other Important but Possibly Overlooked Content 1. Country-Level vs. Product-Level Reciprocity: The administration might adopt a simpler country-level approach, increasing tariffs on all goods from a country by the average tariff that country applies to US imports, which could raise the average US effective tariff rate by less than 1 pp [8][9]. 2. Potential for Future Tariff Announcements: The current announcement may not be the last, as the administration is likely to continue making tariff announcements throughout the presidential term [3][25]. 3. Impact on Trading Partners: Some countries could face tariff increases of over 10 pp, but many account for a small share of US imports. The majority of US imports may not face additional tariffs under a reciprocal tariff plan [11][12][17]. 4. VAT Considerations: The discussion highlights that VATs are similar to sales taxes and should not be included in the reciprocal tariff calculations. However, Trump's past criticisms of VATs raise concerns about their potential inclusion [12][25]. This summary encapsulates the key points discussed in the conference call regarding the implications of reciprocal tariffs and their potential impact on various industries and trade relationships.