US reciprocal tariffs: What could they look like? – Standard Chartered

US will deliver full reciprocal trade analysis on 1 April; it is likely to focus on 20 key economies initially. Tariff differentials are small, and our estimates of non-tariff barriers do not give the US much leverage. Tariffs could be raised significantly by including VAT rates (heavily disputed as a trade barrier). In addition to China and the EU, Argentina, India, Brazil and UK look vulnerable; but concessions are likely to be negotiated, Standard Chartered's Economists Madhur Jha and Ethan Lester note.

Targeting a high number

"The deadline for US investigations to be completed under the Reciprocal Trade Act is 1 April. There is still uncertainty on the scope and implementation of any resulting tariffs. More recent communications, however, suggest that the Trump administration is focusing on the EU and 20 large major and EM economies in its initial investigations on reciprocal tariffs. Tariff rate differentials with the US tend to be highest for EM, but equalising these differentials is unlikely to meet the US objectives of raising revenues or narrowing trade deficits. To make significant progress on either of these objectives, we think the US will look to target key trading partners like China and the EU."

"This is likely to mean a greater focus on imputing a value to non-tariff barriers (NTBs) and on treating VAT as a trade barrier. Imputing a tariff equivalent (ad-valorem equivalent, or AVE) to NTBs is notoriously difficult. However, we attempt a rough estimate using a joint study by the UN Trade and Development (UNCTAD) and the World Bank as a basis. For simplicity, we assume that the US imposes one average tariff rate on all goods from each country."

"Tariff increases based on NTBs are still small, so the US could focus (controversially) on VAT as a trade barrier. In its review of NTBs in the past few years, the US administration has particularly focused on VAT distortions in China, the EU, Türkiye, Argentina and Russia. Taking tariff differentials, NTBs and VAT together, Argentina, India, Türkiye, Russia, Brazil, the EU and the UK are all vulnerable – we see them facing possible reciprocal tariffs of 20%+. However, some of these economies have already made overtures to the US to gain concessions."