US President Donald Trump’s massive tariffs announced on dozens of nations yesterday were pitched as “reciprocal,” matching what other countries charge the US dollar for dollar, even taking into account non-tariff barriers like value-added taxes and other such measures.
But the actual calculation the Trump administration used is not reciprocal at all.
Matching countries’ tariffs dollar for dollar is an incredibly difficult task, involving poring over each country’s tariff schedule and matching a complex array of products, each of which has a different charge for any variants.
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Instead, the Trump administration used quite a simple calculation: the country’s trade deficit divided by its exports to the US times 0.5. That’s it.
The calculation was first suggested by journalist James Surowiecki in a post on X and backed up by Wall Street analysts. The Trump administration later confirmed that was the calculation it used.
For example, America’s trade deficit with China in 2024 was US$295.4 billion ($467.18 billion), and the US imported US$439.9 billion ($695.71 billion) worth of Chinese goods.
That means China’s trade surplus with the United States was 67 per cent of the value of its exports – a value the Trump administration labelled as “tariff charged to USA”.
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But it was no such thing.
“While these new tariff measures have been framed as ‘reciprocal’ tariffs, it turns out the policy is actually one of surplus targeting,” noted Mike O’Rourke, chief marketing strategist at Jones Trading, in a note to investors yesterday.
“There does not appear to have been any tariffs used in the calculation of the rate.
The Trump administration is specifically targeting nations with large trade surpluses with the United States relative to their exports to the United States,” he added.
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The simple calculation used by the Trump administration could have broad implications for countries America depends on for goods – and the global companies that supply them.
“Knowing how these rates were calculated highlights that they are generally going to be most severe on the nations that US companies rely heavily upon in their supply chain,” O’Rourke said.
“It is hard to imagine how these tariffs would not wreak havoc upon the profit margins of major multinational corporations.”
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