Thu, 03 Apr 2025

Thu, 03 Apr 2025 How were Donald Trump's tariffs calculated?

Analysts have questioned claims that new tariffs are reciprocal and based on those charged against the US.

* The US tariff on imports from most countries, including China and the EU, is calculated by dividing the trade deficit with each country by its total goods imports, then dividing that number by 2.
* This calculation results in a tariff of 34% for China and 20% for the EU.
* However, this approach does not take into account existing tariffs and non-tariff barriers imposed by other countries on US exports.
* Trump has broken away from the formula for countries with which the US runs a trade surplus.
* Over 100 countries are covered by the new tariff regime.
* Economists believe that while the tariffs may reduce bilateral trade deficits between the US and individual countries, they will not reduce the overall deficit between the US and the rest of the world.
* The US' existing overall deficit is driven by how the economy works, with Americans spending and investing more than they earn, leading to a trade deficit regardless of tariffs.
* The formula used to calculate tariffs is "reverse engineered" and lacks economic rationale, according to Thomas Sampson of the London School of Economics.
  >>