Reciprocal Tariffs to Be “Very Lenient” But Car & Parts Tariff Added

We are one week away from “Liberation Day.” That’s what the Trump Administration calls April 2nd, when reciprocal tariffs go into effect. The reciprocal tariff strategy from the Trump Administration is straightforward and easy to understand; however, shippers aren’t so sure what to expect. That’s because while the idea is simple – raise tariffs so U.S. tariffs and duties to match the duties and tariffs other countries charge us – the execution of it and retaliations to the tariff hikes are a mystery wrapped in an enigma.

Some countries have already opened negotiations and offered to lower tariffs and duties while others have jumped straight to retaliatory tariffs, which are met by retaliatory tariffs from the Trump Administration, which has seen a combination of results in escalation and backing down.

One of the things that creates uncertainty around the reciprocal tariffs is that most people have no clue what other countries charge on U.S. goods in tariff and duty fees. And since many of these fees are so much higher than the fees the U.S. government assesses on goods from those countries, there could be enormous cost jumps on importing goods from these other countries. When the point of importing goods is often for the lower costs of those goods, hiking the price tag on the imports is a significant problem for shippers. But, as we talked about in Tuesday’s post, President Trump could be giving “a lot” of countries breaks on reciprocal tariffs next week, rather than hiking tariffs the full amount of what those countries charge on U.S. goods.

No one knows exactly what countries will get such breaks or how good those breaks will be (though today’s post contains positive news on that note). The uncertainty leaves many shippers anxious. How countries are reacting and will react to President Trump’s tariffs probably factors into the tariff hikes with which they’ll be hit. Happily, the Trump Administration chose a good time for imposing tariff hikes. There’s a natural lull in shipping this time of year. That, as well as other factors, have freight rates lower right now than they ever hit at any time last year. Low freight rates could balance out or even outweigh reciprocal tariffs for shippers importing in the next few weeks. But it will take seeing what those tariff hikes are first to truly know on any given shipment.

The Trump Administration is assessing each country individually, but there are also sweeping tariffs. We’ve talked about the 25% steel and aluminum tariffs quite a bit in Universal Cargo’s blog, but President Trump just announced another such sweeping tariff on cars and auto parts, which we’ll get into below. Everyone knows President Trump is and will be going after China hard with tariffs, and there’s the announcement we mentioned in Tuesday’s blog about Trump imposing a 25% tariff on goods from any country that buys oil or gas from Venezuela.

But what will President Trump do tariff-wise on each country, especially as many countries much larger tariffs and duties on U.S. goods than the U.S. charges on theirs likely plays a role in the trade deficits the U.S. has with so many countries? Well, President Trump thinks you may be surprised.

People Will Be Surprised By Reciprocal Tariff Leniency

Speaking to reporters in the Oval Office yesterday, President Trump spoke of leniency and not charging many countries as much as they charge the U.S. Andrew Moran reported in the Epoch Times:

When asked about the April 2 reciprocal tariffs, Trump noted that they will be “very lenient.”

“I think people are going to be very surprised,” the president said.

“It’ll be, in many cases, less than the tariff that they’ve been charging us for decades.”

That won’t alleviate all anxiety from shippers between now and next week, but that should be a positive sign for those who are afraid of sweeping, crushing tariffs.

25% Tariffs on Imported Cars and Auto Parts

On the other hand, when it comes to sweeping tariffs, here’s one for shippers. Trump also said yesterday he would be imposing a 25% tariff on imported cars and auto parts in order to increase domestic automotive manufacturing.

Moran also reported on these automotive tariffs in his Epoch Times article:

“This will continue to spur growth like you haven’t seen,” the president said. “I think our automobile business will flourish like it’s never flourished before.”

Trump said the auto tariffs will go into effect on April 2, the same day that the United States will impose broad reciprocal tariffs on its trading partners. The president has dubbed the date America’s “Liberation Day.”

The Trump administration projects that the auto tariffs will generate more than $100 billion in annual revenues, according to White House staff secretary Will Scharf.

To ensure that vehicles are made in the United States and auto parts are not manufactured overseas, there will be “very strong policing,” Trump said.

These auto tariffs are going to lead to cars being made in one location, he said. According to the Canadian Vehicle Manufacturers’ Association, auto parts may cross national borders as many as eight times before final assembly.

Conclusion

The wait is almost over for the reciprocal tariffs to drop. They hit Wednesday, so you can pretty much guarantee our post next Thursday will be covering them.

Once the reciprocal tariffs hit, the fallout will begin. Other countries will have three options. One: accept them and move on. Two: respond with retaliatory tariffs. Three: negotiate.

It’s expected there will be a great deal of options two and three from countries. The wiser move is likely option three. Retaliatory tariffs will likely only garner bigger tariff hikes from President Trump, escalating into full trade war while waiting for someone to bend. President Trump has proven himself to be unafraid of unleashing bigger and bigger tariffs in the past.

President Trump is also a very good negotiator. Those who go to the negotiation table will likely find deals to be had, but not without concessions in the interest of the U.S. Yes, at Universal Cargo, we’ll be watching the fallout from the reciprocal tariffs closely.

The Trump Administration is looking for increased domestic manufacturing, decreased trade deficits, and increased tariff revenue. Some of that is already starting to take place, so shippers should not expect the administration to let up on its tariff strategies. That means shippers will likely need to do cost assessments to consider strategy changes to adapt. But next week, shippers should have more data to work with for those purposes.