As we previewed on Tuesday, yesterday Trump unveiled the latest salvo in the global trade war - one which called the "Big One" (even if the market's reaction has so far been more to the Big None), when the president ordered his staff to develop a “Fair and Reciprocal Plan” for trade, which would 1) match other countries’ tariffs; 2) taxes; and 3) non-tariff barriers (regulatory requirements, subsidies and exchange rate policies). Although no hard deadline set, the memo implies the plan would come between April – August.
While we detailed the broad strokes of the plan previously, below we summarize from a note by Goldman chief political economist Alec Phillips, recapping Trump's plan:
The initial scope of the reciprocal plan is broad, with the memo not only taking into account tariffs, but also taxes and non-tariff barriers to trade (something which we said would be a critical distinction). Recently, Goldman had estimated that while a reciprocal plan focusing only on tariff differentials would raise US effective tariff rate by only 1-2%, a plan that included VAT could add 10%+ to the US average effective tariff rate, and one including other non-tariff barriers could raise it even further. An analysis by Deutsche Bank found the same
