Reciprocal tariffs in U.S. Pakistan holds cost advantage over key competitors

April 03, 2025 (MLN): President Donald Trump said that the United States will impose reciprocal tariffs of at least 10% on all imported goods, with higher rates for some nations, equivalent to "half" of the tariff they impose on U.S. exports.

Meanwhile, Pakistan will hold a cost advantage over Vietnam (17%), Indonesia (3%), Cambodia (20%), China (25%), and Bangladesh (8%). However, it will face a competitive disadvantage of 3% compared to India, 19% compared to Turkey, and 6% compared to Jordan, Egypt, and most Central American countries.

The final outcome will depend on how each country negotiates its terms.

Trump’s tariffs, including a 25% levy on imported automobiles and auto parts, as well as on goods from Mexico and Canada, are expected to reshape global trade.

Countries such as China, Japan, and South Korea are reportedly considering a joint response, while the European Commission has hinted at possible retaliation.

Regardless of these shifts, sales in the U.S. are expected to decline.

"I will sign a historic executive order instituting reciprocal tariffs on countries throughout the world," the president said. "Reciprocal... that means they do it to us, and we do and to them."

The 10% baseline tariff will go into effect on Apr. 5, while the higher tariffs will begin on Apr. 9. 

In calculating the tariff rate that other countries charge the U.S., Trump included currency manipulation and trade barriers, such as the VAT in the EU.

China, which charges a 67% of tariff on U.S. imports, will be among the among the worst hit, with new levy of 34%.

That would be in addition to the 20% tariff on goods from China, taking the total rate to 54%.  

Trading partners such as the United Kingdom and Brazil that currently levy a 10% tariff on U.S. goods will see a 10% levy on their exports to the U.S, under Trump’s plan for a 10% minimum baseline tariff on all imported goods. 

The move, unveiled at a Rose Garden address, is designed to level the playing field, targeting nations that charge higher duties on U.S. goods, as well as those with non-tariff barriers.

The tariffs will impose taxes on goods shipped into the United States and are intended to shift global trade dynamics, according to the administration.

The President said these measures were aimed at restoring American manufacturing dominance, stating they are essential to counteract what he describes as unfair trade practices.

"We will pry open foreign markets and break down foreign trade barriers, and ultimately, more production at home will mean stronger competition and lower prices for consumers, this will be, indeed, the golden age of Americans coming back, we’re going to come back very strongly," Trump added.

The reciprocal tariffs, effective immediately, will impose taxes on goods shipped into the United States and are intended to shift global trade dynamics, according to the administration.

Trump also confirmed that the previously planned 25% tariffs on imported automobiles and auto parts would go into effect at midnight. 

As well as the tariffs on imported autos, the Trump administration has also implemented a 25% tariff on goods from Mexico and Canada, as well as a 25% tariff on steel and aluminum.

Trading partners are expected to announce countermeasures, setting the stage for a potential trade war.

U.S. stock futures were lower following the news, with the S&P 500 down 1.6%.

Ahead of the reciprocal tariffs announcement, various nations have vowed to retaliate, with some even floating the idea of responding as a collective. 

China, Japan and South Korea reportedly agreed to jointly respond to U.S. tariffs.

While the head of the European Commission Ursula von der Leyen said the EU has a “strong plan” to retaliate against tariffs imposed by Trump but would prefer to negotiate.

“Europe has not started this confrontation. We do not necessarily want to retaliate, but if it is necessary we have a strong plan to retaliate and we will use it,” she said.

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