What's in Trump's new order on reciprocal US tariffs?

By David Lawder

WASHINGTON (Reuters) - President Donald Trump on Thursday moved to tear up decades-old low U.S. tariff rates, raising them to match those of other countries and counteract other barriers to American goods to try to shrink a U.S. goods trade deficit that topped $1.2 trillion last year.

The effort could lead to higher tariffs for major trading partners by early April and spark negotiations with dozens of countries aimed at lowering their tariffs and trade barriers.

Here are the key elements of Trump's latest memorandum on "Reciprocal Trade and Tariffs".

TARIFF MATCHING

Trump ordered the Commerce Department and the U.S. Trade Representative's office, in consultation with the Treasury, the Department of Homeland Security to recalculate U.S. tariff rates for each country, product by product.

It stands to be a massive undertaking, aiming rapidly to examine more than 17,000 import tariff product codes, potentially for each of the 186 countries that now enjoy Most-Favored Nation trading status with the U.S.

For example, Brazil charges an 18% tariff on U.S. ethanol, while the U.S. allows Brazilian ethanol in largely duty free, according to the American Biofuels Association. Under Trump's plans, the U.S. rate could be raised to match Brazil's or the Brazilian rate could be lowered to the U.S. level.

The European Union collects a 10% tariff on vehicle imports, four times the U.S. passenger car tariff rate of 2.5%, although the U.S. tariff on highly profitable pickup trucks is 25%.

A White House official said that countries with large U.S. trade surpluses or especially "egregious" cases could be targeted first. China, Mexico, Vietnam, Ireland and Germany had the five largest goods trade surpluses with the U.S., according to the U.S. Census Bureau.

India's tariff rates are the highest among the top 15 U.S. trading partners, according to the World Trade Organization, with a simple average 17% rate for all products compared to 3.3% for the U.S.

NON-TARIFF BARRIER CALCULATIONS

Trump's order also calls for agencies to calculate the cost of non-tariff barriers such as regulations that shut out U.S. goods; taxes he calls "unfair," such as the European Union's Value Added Tax; and the activities of state-owned firms in China that enjoy subsidies from Beijing.

These costs will also be incorporated into new, higher tariff rates, and a White House official said these barriers were more significant than standard tariffs.

The memo defines a non-tariff barrier as "any government-imposed measure or policy or non-monetary barrier that restricts, prevents, or impedes international trade in goods, including import policies, sanitary and phytosanitary measures, technical barriers to trade, government procurement, export subsidies, lack of intellectual property protection, digital trade barriers, and government-tolerated anticompetitive conduct of state-owned or private firms."

The White House official also said foreign exchange rates also would be considered in the tariff calculations, because currencies that are undervalued against the dollar help to push up the U.S. trade deficit by making U.S. exports more expensive.

TARIFF TIMELINE

Commerce secretary nominee Howard Lutnick said Trump will be ready to move on the new tariffs by April 1, when the Commerce Department, USTR and the U.S. Treasury submit a series of reports on revamping U.S. trade policies to Trump.

Trump's order calls on the Office of Management and Budget to report within 180 days on all fiscal impacts of the tariff actions on the finances of the federal government.

The White House official said that Trump would not have to wait for that report to begin imposing tariffs, taking weeks not months, as the administration will examine tariffs on a country-specific basis, and there is a lot of existing data that will speed the process.

(Reporting by David Lawder, Andrea Shalal and Jeff Mason, writing by David Lawder; Editing by Dan Burns)