Reciprocal tariffs is a concept you’ll need to familiarize yourself with. Despite Trump’s press conference last week being a confusing mess, lacking clarity on geographies, products, and specific tariff/VAT rates targeted in this tit-for-tat approach, the aim seems crystal clear: Trump wants a global response, and it could very well lead to globally lower tariffs and VAT rates.

At face value, countries like India, Brazil, and other large emerging markets (EM) appear at risk of facing large US retaliatory tariffs. However, if we factor in domestic VAT rates, China, the UK, and the EU may also struggle. The spread between the standard VAT rates and the average US sales tax rate could be a key focus (see the table below). But it’s not all bad.

Looking at the total tariffs and VAT spread between these countries and the US, China may find itself in a favorable position. It could regain pricing power relative to countries like India and even the EU. Japan, on the other hand, appears mostly shielded from the worst effects (barring the steel tariffs). With its lower average tariffs and just a 10% VAT rate, Japan is in a relatively stronger position.

Europe—particularly the UK—may need to respond by bringing tariffs and VAT rates down sharply. The same goes for India. But remember, the 10% has already been applied to China, making them a much less obvious target for the round in April.

Chart of the week: The data behind the reciprocal tariffs