President Donald Trump’s plan to hit imports from foreign countries with sweeping reciprocal tariffs could nearly double U.S. inflation if fully imposed, a study said, intensifying a recent resurgence in consumer price increases.

“My view is it would mean a real shock to the American economy,” said Gary Hufbauer, an economist and senior fellow at the Peterson Institute for International Economics. “Quite a bit of inflation.”

That’s a worst-case scenario that may be substantially mitigated. The Trump administration has acknowledged the fees at least partly serve as a negotiating tactic aimed at prodding foreign countries to lower their import charges on the U.S. A White House official also said countries that have the largest trade deficits with the U.S. will be examined first.

And American retailers and manufacturers likely would absorb at least some of the duties instead of passing them along to consumers through higher prices, economists said.

Still, the tariffs would be so far-reaching – intended to match foreign taxes, subsidies and other trade barriers – that imposing even a significant portion of them could notably boost consumer prices, especially if tacked onto the flurry of other import levies Trump has announced.

Need a break? Play the USA TODAY Daily Crossword Puzzle.

"U.S. reciprocal tariffs will be a big deal," Capital Economics titled a note to clients on Friday.

What is meant by reciprocal tariffs?

Under the plan, the government would slap imports with fees intended to match the tariffs and value added taxes (which are like sales taxes) that U.S. trading partners impose on American exports to their countries. That’s significant because value added taxes (VAT) are generally much higher than tariffs.

“Whatever another country charges, we’re charging them,” Trump said at a news conference Thursday.

Accounting for the VATs in U.S. duties would be unusual because the taxes are generally considered non-discriminatory as they hit both imports and domestically produced goods in other countries, Capital Economics and Goldman Sachs wrote in research notes.

The U.S. doesn’t impose a VAT; instead, states charge sales taxes but they’re not paid by importers.

Any reciprocal tariffs the U.S. levies also would be designed to offset government subsidies of domestic industries by U.S. trading partners, regulations and other red tape that make it tougher for American exporters to sell their goods overseas, according to a White House memorandum. It’s not clear how those costs would translate to U.S. tariffs, said Deutsche Bank economist Justin Weidner.

The Trump memorandum instructs U.S. trade officials to “to investigate the harm to the United States from any non-reciprocal trade arrangements” and submit a report “detailing proposed remedies”  and an assessment of fiscal impacts within six months.

The strategy is intended to level a playing field that Trump says has long been tilted toward U.S. trading partners.

What countries have tariffs on the United States?

The European Union, for example, places a 10% tariff on imported cars, compared to the 2.5% tariff the U.S. puts on its auto imports, according to the White House. India slaps a 100% tariff on U.S. motorcycles, versus a 2.4% American levy on motorcycles from India. And the U.S. has a 2.5% fee for ethanol imports, compared to the 18% Brazil adds to U.S. ethanol shipments.

The U.S. goods trade gap topped $1 trillion last year, the White House said.

All told, the average trade-weighted tariff (which adjusts for quantities shipped) charged by the 15 largest U.S. trading partners is 6.7%, compared to the roughly 2.6% average the U.S. imposes, according to Paul Ashworth, chief North American Economist at Capital Economics. After tossing in VATs, American imports would be socked with a total tariff of 29% if they’re from India, 28% from Brazil, 25% from the European Union, 23% from Mexico and 19% from Canada, Ashworth wrote in a research note.

How do tariffs impact inflation?

The average tariff on all U.S. imports would rise from less than 3% to about 20%, Ashworth estimated. That, he said, would add about 2 percentage points to inflation later this year. Overall inflation was 2.6% in December, according to the Federal Reserve’s preferred measure.

Deutsche Bank’s Weidner figures U.S. companies on average would pass along about half the cost of tariffs in consumer prices, absorbing the rest, based on what he believes would be the most likely scenario.

That would soften the inflation impact but still mean a hefty 1% bump in annual consumer price increases to 3.6%.

Is inflation really going down?

Inflation has fallen from a 40-year high of 7.2% in mid-2022 as pandemic-related product shortages and consumer demand surges eased but it has stayed elevated recently, leading the Fed to pause its market-friendly interest rate cuts. Concerns about a tariff-related inflation spike could prompt the Fed to keep rates higher for longer.

Reciprocal tariffs would pose a distinctive challenge for U.S. businesses. With other types of tariffs, companies often could skirt the fees by switching their goods imports from countries such as China that are hit by high U.S. duties to other Asian nations.

“If it’s the entire world” that’s burdened with large tariffs, “it becomes a lot harder to avoid,” Weidner said.

Another hurdle would be the complexity of figuring out the tariffs on 5,000 different products for each of the nearly 200 countries that trade with the U.S.

“That would be very complicated,” said Hufbauer, who served as a high-level trade official in former President Jimmy Carter's administration. He noted it would be far simpler if the U.S. imposed a tariff based on the average rate a foreign country charges the U.S. That also would significantly reduce the size of the fees, Goldman Sachs said.

Reciprocal tariffs would be the latest in a spate of import charges Trump has announced in his first few weeks in office.

He has slapped levies of 10% on China and announced 25% fees on steel and aluminum imports. He unveiled 25% tariffs on all shipments from Canada and Mexico but delayed them until early March while the two countries try to meet Trump’s demand to clamp down on the flow into the U.S. of illegal drugs and immigrants who lack permanent legal status.

If put in place, all those tariffs alone would add more than a percentage point to inflation, Weidner said.

Since tariffs represent a one-time addition to the price level, many economists believe inflation would return to its previous downward trend the following year. But that wouldn’t necessarily be the case if the higher prices have ripple effects, raising inflation expectations and causing workers to demand higher wages and other businesses to raise prices, Weidner said.

Ashworth, however, doesn’t think tariffs would curtail U.S. economic growth by reducing consumers’ purchasing power. Rather, he believes the tariffs will be offset by Trump-led tax cuts.

Contributing: Francesca Chambers; Reuters