Key Highlights
-
What are Reciprocal Tariffs?
Reciprocal Tariffs are trade restrictions imposed by one country on imports from another nation, aimed at mirroring the tariffs that the exporting country imposes on similar goods.
Specific to the U.S., the move aims to rectify perceived non-reciprocal trade practices that may have contributed to substantial trade deficits. By doing so, the U.S. anticipates reducing its trade deficit, growing its economy, and improving trade relationships with its partners.
-
How Reciprocal Tariffs work
Typically, tariffs are computed based on a percentage of a product’s value. For example, a 24% tariff levied on a USD100.00 (MYR430.00) Malaysian product would mean an additional USD24.00 charge.
In this regard, a U.S. company importing Malaysian goods must pay the tariff to the U.S. government. Subsequently, the U.S. company can then choose to pass on some or all of the cost to customers.
However, depending on the trading terms or Incoterms, the tariff may be borne by the Malaysian exporter. Consequently, the earnings of Malaysian exporters and the volume of exports may be adversely impacted by such tariffs.
Access our full commentary below to explore how the U.S. Reciprocal Tariffs may impact your business operations.