History Suggests Trump’s Approach to Trade is Wrong
Business leaders worry about giving Trump more tariff authority.
President Donald J. Trump’s State of the Union address was light on trade talk. One notable exception, however, was his attempt to encourage Congress to pass the United States Reciprocal Trade Act. This Act, if passed, will expand Trump’s authority to levy new tariffs.
The History of Reciprocal and Non-Reciprocal Trade Agreements
Reciprocal trade means the tariffs imposed by countries are equal. Currently, reciprocal trade is often free trade. The United States doesn’t impose a tariff on Mexican tomatoes and Mexico buys American tomatoes duty-free. While a non-reciprocal tariff scheme is when those percentages are unequal. The United States imposes a 10 percent tariff on Mexican tomatoes and Mexico imposes a 30 percent tariff on American tomatoes. Trump wants to be able to match Mexico’s higher tariff to encourage change.
New tariffs may or may not be reciprocal.
Prior to 1934, most of the international trade-related legislation passed by Congress increased tariff rates. This includes the Tariff Act of 1930, which is commonly known as the Smoot-Hawley Tariff. The higher rates and the retaliatory tariffs by…
