Trade War Erupts, Trump Prepares Retaliatory Import Tariffs

WASHINGTON DC, THURSDAY - The global trading system is under threat. United States President Donald Trump is preparing to impose retaliatory import tariffs on every trading partner that imposes tariffs on the US, on Wednesday (12/2/2025) or Thursday (13/2/2025), local time. There are concerns that the trade war will escalate.

A few days ago, Trump imposed an increase in import duty tariffs on steel and aluminum by 25 percent from the previous 10 percent as of March 12, 2025. Several affected countries intend to negotiate or implement reciprocal or retaliatory tariffs.

Previously, the US had imposed an additional 10 percent tariff on China, which was then retaliated by Beijing with a 15 percent tariff on coal and liquefied natural gas products. Additionally, Beijing also imposed an additional 10 percent tariff on crude oil, agricultural machinery, and cars. The US tariff of 25 percent on goods from Mexico and Canada has been postponed until March 4, 2025.

"It is time to be reciprocal. You will often hear that word. Reciprocal. If they charge us, we charge them," Trump told reporters earlier this week.

However, when Trump will impose the new tariffs remains unclear. Previously, Trump hinted that the reciprocal tariffs would be announced on Tuesday (11/2/2025) or Wednesday (12/2/2025). However, Tuesday passed without an official announcement. On Wednesday afternoon, Trump said, "I might do it later, or I might do it tomorrow morning, but we will sign the reciprocal tariffs."

Trump's economic advisor, Kevin Hassett, stated that progress on reciprocal tariffs is being made amidst discussions with other countries since Wednesday morning. "You might see announcements about progress or guidelines on the matters he is considering after exchanging views with foreigners today and yesterday," he said.

White House Press Secretary Karoline Leavitt believes that the announcement of reciprocal tariffs will be made before Indian Prime Minister Narendra Modi's visit to Washington DC, on Thursday (February 13, 2025). Trump also complained that India has high BMI which hinders US imports.

"I'm confident that will happen before the prime minister's visit tomorrow. I'll let the president work out the details on reciprocal tariffs, but this is something he feels strongly about," Leavitt said, as reported by NBC News.

US House Speaker Mike Johnson said Trump is considering exemptions from reciprocal tariffs for the pharmaceutical and auto industries.

William Reinsch, a senior researcher at the Center for Strategic and International Studies, believes that drafting reciprocal tariffs will be difficult. The White House can set a fixed tariff of 10 percent or 20 percent that is easy to implement. There is also a more complicated approach, namely by adjusting tariffs separately based on each country's BMI.

Reinsch added that implementing reciprocal tariffs would hand over control of the U.S. tariff schedule to other countries, and follow the rates set by other countries. This could lead to counterproductive results.

“For example, if Colombia has a high tariff on coffee to protect its industry, we will have a high tariff on Colombian coffee to match their tariff, even though we don’t grow coffee. The only person who loses is the U.S. consumer,” Reinsch said.

Damon Pike, an economist at accounting firm BDO International, notes that each of the 186 members of the World Customs Organization has a different BMI. “It’s almost like a counterfeit mind project,” he says.

If Trump signs the reciprocal tariff order, he would fulfill a promise to raise taxes on most imports. He intends to return the U.S. to the 1890s when the BMI was the government's main source of revenue. He says tariffs could provide a source of revenue that could offset his plans to cut income taxes.

Analysts at Goldman Sachs said the reciprocal tariff order is unlikely to be Trump’s final decision on the BMI. “Even if President Trump were to view reciprocal tariffs as an alternative, we are only in the fourth week of a four-year presidential term and more tariff announcements are likely,” they wrote.

Trump acknowledges that raising the BMI could cause financial hardship, such as inflation and disruption to economic growth. But he is also considering separate tariffs on cars, semiconductors and pharmaceuticals.

Ahead of the White House's reciprocal tariff announcement, US household consumption took a hit. According to CNN, the Bureau of Labor Statistics through the Consumer Price Index (CPI), recorded that inflation increased to 0.5 percent on a monthly basis in January 2025 or the highest since August 2023. Inflation also shot up 3 percent on an annual basis in January 2025.

“It’s unclear whether the January CPI will make the Trump administration reconsider moving forward with some of its proposed tariffs. Tariffs can still be used as a bargaining chip to extract concessions from other countries, but the political outlook for putting downward pressure on consumer prices through tariffs would not be good for the administration,” wrote Ryan Sweet, chief U.S. economist at Oxford Economics.

Michael Zezas, a strategist at Morgan Stanley, wrote that the “rates trajectory” will shape what happens to growth, inflation, interest rates and Federal Reserve policy this year.

“This is a major shift from the era of globalization, when companies cut costs by looking abroad for low-cost labor and raw materials. This transition will likely take years, creating challenges for some and huge opportunities for others,” Zezas said.

The imposition of additional BMI could disrupt supply chains and raise product prices. The Census Bureau reports that total U.S. imports will reach $4.1 trillion in 2024. A trade war that shakes the global economy and repositions the U.S. with allies and competitors could also occur.

“You can’t change the supply chain overnight, with the amount and speed of change, even if you try to stay ahead, can you stay ahead?” said David Young, an executive at the Conference Board, a global business group.

Executives from companies including supermarket chain Ahold Delhaize and Siemens Energy have warned that tariffs will lead to higher product prices because they have to cover the extra BMI.

Trump trade adviser Peter Navarro downplayed the negative impact of the BMI. He told CNBC that the BMI during Trump's first term did not cause inflation to spike. Countries that rely on exports often lower prices to avoid losing market share.

But if inflation remains high and jobs don’t grow, lawmakers will easily attack Trump, saying he is helping the ultra-rich at the expense of the middle class.

"No matter what your view is, costs are going to go up for consumers. I will work with my colleagues to end this mess, lower costs and get rid of these billionaires," Senate Democratic leader Chuck Schumer of New York said earlier this month. (AP/Reuters)