The concept of reciprocal tariffs started in the 19th century. In 1860, Britain and France signed the Cobden-Chevalier Treaty, which reduced tariffs. Later, in the 1930s, the United States introduced the Smoot-Hawley Tariff Act.
Donald Trump’s Reciprocal Tariff on India
Former U.S. President Donald Trump announced a big decision regarding India. While addressing a joint session of the U.S. Congress, he said that India charges over 100% tariff on American products, so the U.S. will do the same from April 2. This means that Indian products will face reciprocal tariffs in the U.S.
During his 1 hour and 44-minute speech, Trump mentioned that he achieved in 43 days what other governments could not do in 4 or 8 years.
What is a Reciprocal Tariff?
The word “reciprocal” means “tit for tat” or “retaliatory”. A reciprocal tariff is a tax or trade restriction imposed by one country on another in response to similar taxes or restrictions from that country.
For example, if Country A imposes a 100% tax on goods from Country B, then Country B can also impose the same 100% tax on Country A’s goods. The main goal is to maintain balance in trade.
Purpose of Reciprocal Tariffs
- Balance in Trade – Ensures that no country imposes unfairly high tariffs.
- Protection of Local Industries – Makes imported goods expensive, benefiting domestic manufacturers.
- Trade Negotiations – Countries use it to encourage fair trade and reduce high tariffs.
Disadvantages of Reciprocal Tariffs
- Trade War – If both countries keep increasing tariffs, it can lead to a trade war.
- Higher Prices – Imported goods become expensive, affecting consumers.
- Disrupts Supply Chains – Trade restrictions can impact global trade and supply chains.
History of Reciprocal Tariffs
The concept began in the 19th century. In 1860, Britain and France reduced tariffs under the Cobden-Chevalier Treaty. In the 1930s, the U.S. introduced the Smoot-Hawley Tariff Act, which led to a global trade decline and worsened the Great Depression.
More recently, the Trump administration imposed tariffs on China, the European Union, and other countries. In response, these countries also imposed tariffs on American products.
