The Trump administration plans to introduce reciprocal tariffs from April 2, 2025, after completing an analysis of which countries impose tariffs on the United States. Additionally, negotiations with Mexico and Canada are to be finalized by this date. Kevin Hassett, White House economic advisor, highlights progress in negotiations, particularly on border security and the fight against fentanyl. The customs policy study is to be published on April 1, 2025, which will influence the final form of the tariffs.
Reciprocal Tariffs and Treating VAT as a Tariff
Reciprocal tariffs aim to balance trade by imposing tariffs on goods from other countries at a level corresponding to the rates applied to American goods; therefore, tariffs are expected to reach up to 25%. There has also been renewed discussion about VAT, which Trump wants to treat as a type of tariff. President Trump argues that VAT acts as a trade barrier because countries with VAT (e.g., European countries) refund the tax to exporting companies. However, economists and international organizations such as the WTO dispute this approach, arguing that VAT is a consumption tax, not a tariff.
Potential Economic Impacts
Studies indicate that customs policy, including adjusting rates to VAT taxes in individual countries, could lead to:
- An increase in PCE prices by 1.7-2.1% in the short term, resulting in consumer losses of $2,700-$3,400 per household annually.
- A decrease in real GDP growth by 0.6-1.0 percentage points in 2025.
- An increase in fiscal revenues, but with a potential reduction due to dynamic effects.
- A regressive impact on households, with the greatest losses for the lowest-income consumers.
Trade uncertainty is one of the factors that has recently led to the rise of gold prices to $3,000 per ounce.
Gold broke the $3,000 level last Friday, but the closing occurred below this key level. Today, there is another chance to set a record. Source: xStation5.
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