UBS Research analyzed the potential impact of President Trump's proposed reciprocal tariffs, which would impose tariffs on imported goods at the same rate that other countries apply to U.S. exports. While the concept of reciprocity exists in trade agreements, it has not typically been applied at the individual product level.
The study examined tariffs across 12,500 product lines and 200 trade partners, finding that reciprocal tariffs would increase the U.S. weighted average import tariff by 1.65 percentage points, with developed markets seeing a smaller impact of 0.8 percentage points and emerging markets a larger one of 2.2 percentage points. The countries most affected would be India, Argentina, Indonesia, Thailand, Saudi Arabia, Brazil, and Turkey, with Vietnam and Thailand facing the highest GDP risk due to their trade exposure to the U.S.
From a global perspective, reciprocal tariffs would be significantly less damaging than a blanket global tariff. A hypothetical 10 percent blanket U.S. tariff could lower global GDP by one percentage point, while reciprocal tariffs would have only about one-fifth of that impact.
The analysis found no clear evidence that the U.S. is uniquely disadvantaged by current tariff structures. While U.S. agricultural exports face higher foreign tariffs, about five percentage points higher than U.S. import tariffs on agricultural goods, the U.S. also protects textiles disproportionately, with a four percentage point advantage in its own favor.
UBS estimates that reciprocal tariffs would generate between 18 and 32 billion dollars in annual revenue, equivalent to 0.1 percent of U.S. GDP. Given the modest revenue impact and complex cost-benefit considerations, the study suggests that the U.S. might ultimately pursue a different combination of tariffs, as Trump has hinted at further tariff actions beyond reciprocity.
The findings indicate that reciprocal tariffs would primarily affect emerging markets, raise limited revenue, and might not be the most effective trade strategy.