Reciprocal tariffs explained: Impact on your business

Updated on July 23, 2025, at 11:15 a.m. ET. We’re updating this blog post as new information becomes available. Avalara Cross-Border can help your business adapt to the changing dynamics of cross-border duties and tariffs. Contact us to get started.

Reciprocal tariffs originally announced on “Liberation Day” for a host of countries were scheduled to increase July 9, 2025. But on July 7, President Donald J. Trump delayed the effective date to August 1, 2025. Countries have a bit more time to strike a deal with the United States, should they want to.

President Trump is sending letters to countries facing higher tariffs. The tariff letters provide the rate of duty that will come into effect August 1 and explain that the tariffs “may be modified, upward or downward, depending on our relationship with your Country.”

The letters released as of today, July 14, increase reciprocal tariffs for five countries, lower tariffs for 12 countries, and leave tariffs unchanged for five countries. They also warn that retaliatory tariffs could be imposed should a country raise tariffs on the United States.

• Reciprocal tariffs on dozens of countries were set to increase July 9, 2025. However, on July 7, the White House extended the current 10% modified reciprocal tariffs until August 1, 2025.
• President Trump is sending letters to countries facing tariff increases. The letters announce the rate of duty that will apply to the country starting August 1 and allow for increasing or lowering that tariff.
• The White House was expecting to strike 90 trade deals during the 90-day hiatus from the higher tariffs (April 9–July 9), but deals have been slow in coming. 

If a tariff is a tax on goods imported from other countries, what is a reciprocal tariff?

Reciprocal means “consisting of or functioning as a return in kind” or “mutually corresponding.” So, a reciprocal tariff is a tariff on a country that matches the tariff imposed by that country. Should Country A impose a 14% tariff on Country B, Country B’s reciprocal tariff for Country A would be 14% or the equivalent.

Reciprocal tariffs are designed to combat unfair trade practices and fix trade imbalances.

In February 2025, President Trump announced the coming of a “Fair and Reciprocal Plan” to “counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner.”

In addition to existing tariffs on U.S. goods, the plan considered such factors as value-added tax (VAT), nontariff barriers, and other practices judged to impose “any unfair limitation on market access or any structural impediment to fair competition with the market economy of the United States.”

The White House unveiled its reciprocal tariff plan on April 2, 2025, during a “Liberation Day” Rose Garden event. The plan established:

• An additional 10% ad valorem rate of duty on all imports from all trading partners starting April 5, 2025
• Higher rates of duty for trading partners listed in Annex 1, starting April 9, 2025

The baseline 10% tariff on all countries took effect as planned on April 5. However, on April 9, President Trump suspended the higher country-specific reciprocal tariffs for all nations except China, Canada, and Mexico.

The 90-day pause was to end July 9, 2025, but on July 7, President Trump delayed implementation of the country-specific reciprocal tariffs until August 1. On July 8, U.S. Customs and Border Protection (CBP) published guidance on extending the modified reciprocal tariff rates.

President Trump imposed a 10% tariff on virtually all countries effective April 5, 2025. Canada, Mexico, and China are the only exceptions; different tariff policies apply to them.

Dozens of countries will be subject to higher rates of duty starting August 1, 2025 — or at least that’s the plan announced July 7. Whether tariffs will actually increase on that date remains to be seen.

The White House seems open to dealmaking. President Trump started sending letters to his counterparts in other countries on July 7; the Trump tariff letters announce the rate of duty that will take effect starting August 1 but leave the door open to adjusting the tariff. (See a sample tariff letter.)

Countries subject to higher reciprocal tariff rates are listed below, with the tariffs announced in April and the adjusted rates announced by letter sent July 7 and July 9 or later. We’ll update this list as more adjusted rates are announced.

A 25% product currently applies to many products of Canada and Mexico. Energy and potash are subject to a 10% tariff, and products covered under the United States-Mexico-Canada Agreement (USMCA) are duty free. 

Effective August 1, 2025, the 25% Canada tariff will jump to 35% and the 25% Mexico tariff will increase to 30%, according to letters shared on Truth Social on July 10 and 12. 

Transshipping is the practice of sending goods from one country to another country before shipping them to the final port of destination, or transferring cargo from one vessel to another while en route. It’s a way to sidestep tariffs imposed on the country of origin.

The Trump tariff letters specify that “goods transshipped to evade a higher tariff will be subject to that higher tariff.”

Ordinarily, this would mean the higher tariff on the country of origin would apply, rather than the lower tariff on the country the goods passed through. But that may not be what President Trump means. “Vietnam will pay the United States a 20% tariff on any and all goods sent into our territory,” he wrote on Truth Social on July 2, “and a 40% tariff on any transshipping.”

The “40% on transshipping,” Commerce Secretary Howard Lutnick later explained on X, means “if another country sells their content through products exported by Vietnam to us, they’ll get hit with a 40% tariff.”

So, there are questions about what this transshipping tariff means and how it will be enforced.

Tariffs have been in flux since February 1, when President Trump revealed his intention to impose new tariffs on China, Canada, and Mexico. New tariffs for many countries and specific products have been announced, implemented, paused, increased, and decreased, often within a matter of hours. We’ve been tracking tariff changes in this blog post.

This is a challenging environment for businesses, both for planning and compliance. When we don’t know what trade policies tomorrow will bring, it’s difficult to forecast future costs and revenue or rework supply chains.

Fortunately, technology can help businesses reduce the burden of international compliance. Avalara Cross-Border automates tariff code classification, which is key to determining tariff rates, and delivers real-time calculation of customs duties and import taxes. We stay on top of regulatory changes worldwide, so our customers can focus on other aspects of their business.

To learn how Avalara can help you comply with international tax requirements, contact us today.

What are reciprocal tariffs? 

Reciprocal tariffs are a tit for tat: They’re tariffs on imports that match the tariffs imposed by the country of export. Countries impose reciprocal tariffs to improve trade barriers and imbalances.

What’s the difference between reciprocal and retaliatory tariffs?

A reciprocal tariff matches another country’s tariff to balance trade between the two countries. A retaliatory tariff is a tax on imports from a country to punish that country for certain actions, such as setting high tariffs of its own or dumping.

What is dumping in international trade?

In trade, dumping means exporting goods to another country at a price lower than the actual cost of production or the domestic price in the country of import.