Trump Issues New Reciprocal Tariffs
In a move meant to encourage domestic production, the president’s executive order features a 10% baseline tax, expected to take effect April 9.
Yesterday afternoon, as reported by AP,1 US President Donald Trump announced that he will be enacting reciprocal tariffs on countries that are running trade surpluses with the United States—which is when the value of its exports exceeds the value of its imports. In other words, these are the nations in which the US has the largest trade deficits. Among them is a 34% tax on imports from China and 20% on the European Union.
He was able to levy these tariffs by declaring a national economic emergency, making the decision without Congress under the 1977 International Emergency Powers Act.
For those not included on that list, there will be a flat 10% tax on imports, which will go into effect April 5; the higher premiums would be effective April 9. However, autos were among some of the products excluded from these tariffs (already have a 25% tax going into effect), and Trump plans to implement a tariff on pharmaceuticals at a later date.
With the potential for pharmaceuticals to be taxed forthcoming, the magnitude of Canadian trade tariffs on the US drug market were recently analyzed by the University of Toronto and published in JAMA by assessing sales, volume, generic status, and patent protection at the drug product level, utilizing FDA’s Orange Book.2,3
Specifically, this focused on drugs with final production in Canada, a subset of $6.75 billion in pharmaceuticals exported from Canada to the US, which includes 411 ready-for-use medications. Among the 3,099 unique drugs, 173 (5.6%) contained at least one product produced in Canada and 52 (1.7%) relied on Canada for at least 50% of the supply,with 28 of those having no alternative supplier.
The moves to enact these tariffs, said Trump, are intended to encourage domestic manufacturing.
“Today, manufacturing represents just 11% of US gross domestic product, yet it accounts for 35% of American productivity growth and 60% of our exports,” noted the president’s executive order.4,5 “Importantly, US manufacturing is the main engine of innovation in the United States, responsible for 55% of all patents and 70% of all research and development spending.”
Meanwhile, trading partners Canada and Mexico would be exempt from the rise in rates (aside from the existing tariffs in place, such as the 25% tax on steel and aluminum imports) while they work to limit the smuggling of fentanyl and illegal immigration. United States-Mexico-Canada Agreement (USMCA)-compliant products would also be excluded from the tariffs.
References
1. Boak J. Trump announces sweeping new tariffs to promote US manufacturing, risking inflation and trade wars. AP. April 3, 2025. Accessed April 3, 2025. https://apnews.com/article/trump-tariffs-liberation-day-2a031b3c16120a5672a6ddd01da09933
2. Tadrous M, Chaudhry S, Panhuysen J, Konstantinidis I, Suda KJ. Trade Tariffs on Canadian Pharmaceuticals—Implications for US Drug Supply and Costs. JAMA. Published online March 31, 2025. doi:10.1001/jama.2025.4583
3. US Food and Drug Administration. Orange Book: approved drug products with therapeutic equivalence evaluations. Accessed March 11, 2025. https://www.accessdata.fda.gov/scripts/cder/ob/index.cfm
4. Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficit. The White House. April 2, 2025. Accessed April 3, 2025. https://apnews.com/article/trump-tariffs-liberation-day-2a031b3c16120a5672a6ddd01da09933
5. Fact Sheet: President Donald J. Trump Declares National Emergency to Increase our Competitive Edge, Protect our Sovereignty, and Strengthen our National and Economic Security. The White House. April 2, 2025. Accessed April 3, 2025. https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-declares-national-emergency-to-increase-our-competitive-edge-protect-our-sovereignty-and-strengthen-our-national-and-economic-security/
