Think Tank Criticizes Reciprocal Tariff Idea

A free-market think tank based at George Mason University has published a critique of the U.S. Reciprocal Trade Act, an idea that President Donald Trump is expected to feature in the State of the Union address Feb. 5. The bill (see 1901240017) would give the president the ability to raise the tariff on any item to match that of another country's tariff on the same item. As the Mercatus Center's paper notes, doing such hikes would not be legal in the world trading system's rules regarding Most Favored Nation status. The top U.S. trading partners -- outside of Mexico and Canada, since NAFTA means most goods are duty-free -- are Brazil, China, the European Union, India and Japan. If Trump hiked rates with each of them to match those countries' tariffs, it would increase the average U.S. duty from 2.1 percent to 5.4 percent, author Daniel Griswold said. It would raise duties on 45 percent of imports from those countries. In order to make it work, there would need to be almost 10 times as many duty lines, and it would "exponentially complicate the US tariff code."