What is a Reciprocal Tariff and How is it Calculated? How it affects us.

Introduction

Reciprocal tariffs have become a significant topic in global trade discussions, especially with recent policy changes. These tariffs aim to create a balanced trading environment by matching the import duties imposed by other countries. Let's explore what reciprocal tariffs are, how they are calculated, and their impact on our trade.

Understanding Reciprocal Tariffs

A reciprocal tariff is a trade policy tool where one country imposes an import duty that mirrors the tariff rates applied by another country on its exports[1]. The primary goal is to promote fair trade by ensuring that no country benefits disproportionately from lower import fees while maintaining high tariffs on incoming goods[1].

Calculation of Reciprocal Tariffs

Reciprocal tariffs are calculated based on the trade deficit between two countries. The formula considers various factors, including existing tariffs, non-tariff barriers, and trade imbalances[2]. Here's a simplified version of the calculation:

1. Identify Trade Deficit: Determine the trade deficit between the two countries.

2. Assess Existing Tariffs: Evaluate the current tariff rates imposed by the trading partner.

3. Calculate Reciprocal Rate: Adjust the tariff rate to balance the trade deficit, ensuring it reflects the barriers faced by domestic exports[2].

Conclusion : What does this all mean ( Keep in mind everything maybe changing on daily bass for he next 2-3 weeks )

Part 1 schedule :

Tariff Implementation Schedule:

• Shipments Loaded Before 12:01 a.m. EDT on April 5, 2025:

  • Subject only to existing duties.​

• Shipments Loaded Between 12:01 a.m. EDT on April 5, 2025, and 12:01 a.m. EDT on April 9, 2025:

  • Existing duties plus an additional 10% tariff under the new IEEPA provisions.​

• Shipments Loaded On or After 12:01 a.m. EDT on April 9, 2025:

  Part 2

  • Existing duties plus country-specific additional tariffs as outlined in Annex I of the order. For example:​

• Taiwan: Additional 32% tariff.

• China: Additional 34% tariff, increasing to 54% with fentanyl-related duties.

• Vietnam: Additional 46% tariff.

• Japan: Additional 24% tariff.

• South Korea: Additional 25% tariff.

• India: Additional 26% tariff.

• Thailand: Additional 36% tariff.

• European Union: Additional 20% tariff.

  Calculation:

  For example: Taiwan

Base tariff for coated goods 7.5 % + 32% = 39.5%

Uncoated goods: 15.5% +32% = 47.5%

If Taiwan respond to 0% tariff request, There is still a base tariff of : existing duty + 10% replacing the 32%

( This is based on current rule and subject to change and negotiation )

For China: ( This is where it gets interesting )

Coated tariff : 7.5% + 25% tariff + 20% + 34% = 86.5% as an example, The 25 + 20 is already resolved in current pricing . So the additional 34% and the possibility of Venezuela oil may add additional 25%

We will be providing actual price differences shortly to our value clients individually.

Any questions , please feel free to reach out to us. Key reminder everything above may change week to week.