What are reciprocal tariffs? Reciprocal tariffs might sound like textbook trade jargon, but the ide
What are reciprocal tariffs?
Reciprocal tariffs might sound like textbook trade jargon, but the idea is pretty straightforward: If one country slaps tariffs on your goods, you hit back with the same. Think of it as a tit-for-tat strategy in global trade — a way for governments to say, “If you’re charging our exporters 20%, we’re doing the same to yours.”
The roots of this concept go back to the 1930s, when the US passed the Reciprocal Trade Agreements Act. The goal back then was to break down trade barriers through mutual deals, not trade wars. But fast forward to today, and the term is making a comeback — this time with a bit more edge.
For example, in early 2025, in an effort to address what it perceived as unfair trade practices and a significant trade deficit, the US government, under President Donald Trump, imposed a series of escalating tariffs on Chinese imports. These tariffs began with a 10% baseline and, through successive increases, reached a staggering 145% on a wide range of Chinese goods.
China responded in kind, implementing its own set of reciprocal tariffs. Initially, Beijing imposed a 34% tariff on all US imports, which was later increased to 84% and eventually to 125%, targeting various American products, including agricultural goods and machinery.
So, what does this have to do with crypto? You’ll get there — but first, let’s dig into how these tariffs actually work.
How do reciprocal tariffs work?
While the US has recently adopted a formula based on trade imbalances to determine its tariff rates, other countries, like China, often respond with their own set of tariffs, which may not follow the same calculation method.
How the US calculates its tariffs
In 2025, the US implemented a tariff strategy that calculates rates based on the trade deficit with a particular country. The formula used is:
Tariff rate (%) = (US trade deficit with country / US imports from country) × 100 / 2
Example:
- US imports from China: $438.9 billion
- US exports to China: $147 billion
- Trade deficit: $291.9 billion
- Deficit ratio: ($291.9 billion ÷ $438.9 billion) × 100 ≈ 66.5%
- Tariff rate: 66.5% ÷ 2 ≈ 33.25%
This approach led to the US imposing a 34% tariff on Chinese imports in April 2025. Also, these new tariffs don’t replace old ones — they’re added on top. So, if a product already had a 20% tariff and now gets hit with a 34% reciprocal tariff, importers are suddenly paying 54%. That kind of jump can make foreign goods a lot more expensive, fast.
How China responds
When the US imposes tariffs, China often retaliates by targeting sectors that are politically and economically significant to the United States, particularly those that could influence key voter bases.
Targeted sectors:
- Agriculture: China has frequently targeted US agricultural products, such as soybeans, pork and beef. For instance, in 2018, China imposed a 25% tariff on US soybeans, significantly impacting farmers in states like Iowa, where soybean farming is a major industry.
- Aerospace: In 2025, China suspended imports of Boeing aircraft and halted purchases of aircraft parts from US companies, affecting the US aerospace sector.
Phased implementation
China often implements tariffs in phases, allowing for strategic adjustments and negotiations:
- In early 2025, following US tariff increases, China initially imposed a 34% tariff on all US goods. This was later increased to 84% and eventually to 125% in response to escalating US tariffs.
- China also imposed additional tariffs of 10%-15% on various US agricultural products, including corn, soybeans and wheat, as part of its retaliatory measures.
While the US uses a specific formula to calculate its tariffs, China’s approach is more about strategic retaliation, aiming to create economic and political pressure rather than directly matching tariff rates.
Did you know? Policymakers sometimes choose a slightly higher number to send a stronger political message — especially if they want to appear tough on trade or take a hard line against a specific country. A flat “34%” sounds more decisive and deliberate than “33.25%.”
Economic implications of reciprocal tariffs
Reciprocal tariffs ripple through the global economy in very real ways. When the US and China start trading blows with import taxes, everyone else feels the aftershocks, too.
Global trade slows down
In early 2025, the World Trade Organization had some stark news: Global trade, which was supposed to grow by around 3%, is now barely moving at all — closer to 0.2%. The WTO pointed directly to the US’s aggressive tariff strategy and the domino effect it’s having on other economies. As countries respond with their own barriers, goods just… stop moving. Fewer exports, fewer imports and a whole lot of…
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