Jordan and the US: Tackling the 20 per cent reciprocal tariffs

On April 2, 2025, US President Donald Trump declared "American Liberation Day," alongside an announcement of a $5 trillion investment set to enter the US economy this year. The US manufacturing sector has lost 6 million direct jobs since 1997, and approximately 90,000 plants have closed since the implementation of the NAFTA agreement. In response to these challenges, President Trump introduced a reciprocal tariff policy, imposing additional taxes on imports with a baseline of 10 per cent worldwide.

Unlike traditional tariff structures that rely on explicit customs duties, value-added taxes, or non-monetary barriers, Trump’s reciprocal tariffs were calculated solely based on the US trade deficit with each country. The new tariffs are levied in addition to existing taxes and tariffs. As a result, tariffs on key trade partners include: China (34 per cent), the European Union (20 per cent), Japan (24 per cent), Vietnam (46 per cent), Taiwan (32 per cent), South Korea (25 per cent), and India (26 per cent). These seven territories alone account for 51 per cent of US imports, which totalled $4.11 trillion in 2024.

For Jordan, the impact of these tariffs has been significant. In 2024, Jordan's exports to the US totalled $3.11 billion, just 0.075 per cent of the US's total imports. However, Jordan has been hit with reciprocal tariffs of 20 per cent, placing it among the top ten most affected economies globally. Notably, Jordan’s exports to the US account for 25 per cent of its total exports and contribute directly to 6 per cent of its economy. The countries most affected by US tariffs relative to the share of US exports in their GDP include Vietnam (29 per cent), Cambodia (27 per cent), Nicaragua (24 per cent), Guyana (23 per cent), Taiwan (15 per cent), Thailand (12 per cent), Malaysia (12 per cent), South Korea (7 per cent), Switzerland (7 per cent), Jordan (6 per cent), and Venezuela (6 per cent).

Historically, Jordan has enjoyed a qualified industrial zones (QIZ) agreement with the US since 1996, following the Wadi Araba Treaty. However, this agreement had limitations. At the end of 2000, just before US President Bill Clinton left office, Jordan signed a free trade agreement (FTA) with the US, which allowed Jordan to export goods tax-free and provided the garment industry with quota-free access to the US market. This agreement sparked a rise in trade between the two countries, growing from a few hundred million dollars in 2000 to $5 billion by 2024.

The reciprocal tariffs imposed on Jordan were calculated by dividing the trade deficit between the US and Jordan by the total value of imports from Jordan to the US, then dividing that result by two. In 2024, Jordan’s trade deficit with the US was $1.24 billion, and the US imported $3.11 billion from Jordan. Dividing $1.24 billion by $3.11 billion gives a ratio of 0.398, which, when divided by two, results in an additional 20 per cent tariff on Jordanian goods.

But how Jordan’s exports exceeded US exports? Prior to the COVID-19 pandemic, the trade balance between the US and Jordan was relatively balanced, with the US even having a surplus of $234 million in 2017. However, the pandemic caused major structural shifts in the global economy, particularly in the US, which saw hyperinflation due to aggressive expansionary monetary policies, such as zero interest rates and quantitative easing. The US manufacturing and services sectors were also paralyzed for longer periods than those in other regions, leading to rising prices and new opportunities for exporters worldwide, including Jordan.

One of the biggest beneficiaries of this shift was Jordan’s jewelery manufacturing sector. Before the pandemic, exports in this sector were negligible, but by 2023, Jordan’s jewelery exports had skyrocketed, reaching $815 million. This sector, which includes natural or cultured pearls, precious or semi-precious stones, and metals, contributed significantly to the trade deficit between Jordan and the US and influenced the 20 per cent reciprocal tariff.

If we hypothetically exclude jewelery exports from Jordan’s total exports, the impact of the reciprocal tariff could be reduced. Jewelery, which can be considered a form of currency, might be partially recorded as fabrication costs under the current account of the balance of payments and under the capital account for the larger number of precious stones and metals. Accordingly, this will reduce the trade balance significantly. By eliminating jewelery exports from Jordan’s 2023 export total of $2.88 billion, the revised export value would be approximately $2.065 billion, with imports remaining at $1.65 billion. Using the same tariff calculation method, the resulting tariff would drop to 10 per cent.

The dominant sector for Jordan's exports to the US is the garment industry, which accounts for nearly $2 billion in exports. However, the apparel and clothing sector is a low-value-added industry, and it doesn’t fall within the US administration's targeted sectors, such as automobiles, semiconductors, steel, and aluminum. As a labor-intensive, narrow-margin sector, Jordan’s garment industry is unlikely to be prioritized in US trade policy, especially under President Trump’s focus on high-value industries.

While Jordan has a successful economic partnership with the US, the new tariffs are taking a toll. Jordan’s exports account for 25 per cent of its total exports, but only 0.075 per cent of US imports. To alleviate the impact, Jordan should work to renegotiate the reciprocal tariff calculation, particularly by reducing the weight assigned to jewelery and the garment sector. The government should act quickly and strategically to bring the tariff rate down to the 10 per cent baseline, but achieving a zero-tariff rate would be a significant success for Jordanian manufacturers, especially if Jordan can leverage the negotiation by offering incentives, such as reducing special sales taxes on American cars.

Fares Hammoudeh is chairman of Zarqa Chamber of Industry