The New Tariff Regime Under President Trump

In April 2025, President Donald Trump introduced a sweeping new tariff regime, marking a significant shift in U.S. trade policy. This plan was made to fix unfair trade, help American businesses, and put pressure on countries that don’t trade fairly. A big part of this policy is raising taxes on goods from China, which shows that the U.S. and China are back in a serious trade fight. In this article, we will explore the tariff introduced by President Donald Trumph on the countries worldwide and the implications that can be faced by these countries.

Donald Trump began his second term on January 20, 2025, after winning the 2024 election. After becoming the 47th president of USA, he has introduced and implemented many things to increase the GDP of his country, one such example is the imposition of "reciprocal tariffs" on various countries like India, China, United Kingdom, Singapore etc.

On April 2, 2025, President Trump announced the "Liberation Day" tariffs, declaring a national emergency to address the persistent U.S. trade deficit. The policy introduced a two-tier tariff structure viz. "Universal Tariff", A baseline 10% tariff applied to imports from all countries, effective April 5, 2025 and "Reciprocal Tariffs",country-specific tariffs imposed on approximately 60 nations deemed to have unfair trade practices, set to commence on April 9, 2025.

These measures were implemented under the International Emergency Economic Powers Act (IEEPA), allowing the president to regulate commerce during national emergencies. The administration justified the tariffs as necessary to revitalize American manufacturing and reduce dependency on foreign goods.

In international trade, reciprocal tariffs refer to a policy where one country matches the import taxes or duties that another country places on its goods. It is based on the idea of fairness and balance in trade relationships.

For example, if Country A charges a 20% tariff on a product from Country B, then Country B charges the same 20% tariff on that product coming from Country A. This is what we call a reciprocal response, the same treatment is given back to ensure fairness.

Trump didn’t just focus on whether another country was charging higher tariffs on U.S. products. Instead, he looked at two bigger-picture factors:

Overall Trade Imbalance

• If a country was selling much more to the U.S. than it was buying from the U.S., Trump viewed this as unfair, even if their actual tariffs were lower.

• For example, if China exported $500 billion in goods to the U.S. but imported only $100 billion in return, Trump saw that $400 billion trade gap as a problem—no matter what the individual tariff rates were.

Tariffs as a Tool of Leverage

• Trump used tariffs not just to match other countries’ tax rates, but to punish trade deficits and pressure countries to make new trade deals.

• Even if the other country had lower tariffs, Trump would still raise tariffs on them if the trade relationship felt one-sided.

According to analysts and reports from sources like The Economic Times, this formula wasn’t based on specific product duties or World Trade Organization (WTO) guidelines. Instead, it was a mathematical equation based on the overall trade deficit between the United States and its trading partners.

The formula is:

(Trade Deficit with a Country /Total Imports from that Country) / 2 = Tariff Rate

For example-

• U.S. Imports from China: $600 billion

• U.S. Exports to China: $120 billion

• Trade Deficit: $600B - $120B = $480 billion

first step- 480/600=0.8

second step- 0.8/2= 40% tariff, thus according to Trump, a 40% tariff on Chinese imports would make trade reciprocal.

Impacts and Consequences

While President Donald Trump’s tariff formula in 2025 was meant to fix trade imbalances and protect U.S. industries, it also triggered major global consequences. The approach, driven by a non-standard mathematical model, marked a sharp shift from traditional U.S. trade practices and caused ripple effects around the world.

1. One of the biggest issues with Trump’s tariff strategy was its lack of consistency. The formula was not part of any globally accepted trade standard. This unpredictability made it difficult for foreign governments and companies to plan trade or make investment decisions involving the U.S.

   
   

2. Trump’s aggressive tariff hikes, especially those targeting China and the European Union, prompted swift retaliation. China imposed heavy tariffs on American agricultural products, tech goods, and cars. The EU targeted American exports such as bourbon, motorcycles, and orange juice.

3. Many of the tariffs introduced under Trump’s formula were considered unilateral and unjustified under WTO rules. Trump’s formula, based purely on trade deficits and not linked to any legal framework, led to numerous WTO disputes.

On April 9, 2025, Donald Trump announced a major shift in U.S. trade policy. Trump said the U.S. would pause most trade tariffs for 90 days, giving temporary relief to friendly countries. But at the same time, he increased economic pressure on China, making this a mixed approach of easing and toughness.

U.S. President Donald Trump announced a pause on sweeping new tariffs for most countries around the world—but made one major exception: China.

Instead of lowering or delaying tariffs on Chinese imports, Trump took the opposite approach. He dramatically raised tariffs on China to a punishing 125%, escalating the already intense trade tensions between the two global powers.

Trump justified the sharp move by saying that China poses the “greatest economic threat” to American workers, industries, and national security. He accused China of unfair trade practices, manipulating markets, stealing intellectual property, and refusing to open its markets fairly to U.S. companies. He declared that China has “abused the global trade system for too long,” and that America is no longer willing to tolerate what he described as “cheating.”

China responded swiftly and sharply. In a statement from its Ministry of Commerce, China announced retaliatory tariffs of 84% on American goods, targeting U.S. exports such as soybeans, technology components, and automobiles.

Conclusion

In conclusion, the reciprocal tariff policy implemented by Donald Trump, along with the additional tariffs imposed on China, marked a significant shift in U.S. trade strategy. These measures were intended to address long-standing trade imbalances and perceived unfair practices, particularly by China. By pausing tariffs on other countries for 90 days, the administration aimed to provide space for negotiations and to prevent a broader escalation of trade tensions. While these actions were framed as efforts to protect American industries and jobs, they also introduced uncertainty into global markets and prompted retaliatory measures, ultimately reshaping international trade dynamics during Trump's presidency

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