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Trump's surprisingly simple tariff math
Axios ^ | April 3, 2025 | Neil Irwin

Posted on 04/03/2025 7:06:12 PM PDT by Miami Rebel

One of the surprises out of Wednesday's big tariffs announcement was that the Trump administration used a surprisingly simplistic approach to calculating these much-hyped reciprocal tariffs.

Why it matters: This was not a finely tuned set of import taxes calibrated to exert pressure on trading partners to adjust specific policies with which the U.S. has grievances.

Rather, it was some simple arithmetic, based on overall trade data, that became the justification for the most sweeping U.S. duties in generations — a trade-weighted 22.5% tariff, per the Yale Budget Lab, up from around 2.4% last year. It implies fewer off-ramps for countries that seek tariff relief, and thus less potential for de-escalation. If tariffs are applied without regard to the details of each country's economic policies and circumstances, what is there to negotiate? State of play: Wednesday, some social media sleuths figured out, and the administration confirmed, that there was a simple formula behind the reason, say, Vietnam was slapped with a 46% tariff while Norway faces 15%.

The formula is to divide the U.S. trade deficit with each country by that country's exports to the U.S. The final reciprocal tariff was then divided by 2, with a minimum of 10% (which applies even to those countries with which the U.S. has a trade surplus). "While individually computing the trade deficit effects of tens of thousands of tariff, regulatory, tax and other policies in each country is complex, if not impossible, their combined effects can be proxied by computing the tariff level consistent with driving bilateral trade deficits to zero," per the U.S. Trade Representative's explainer. Between the lines: This logic implies that any country with which the United States experiences a trade deficit, regardless of the reason, is in some way a bad actor and requires tariffs as payback.

But even if you believe that it's not good for the U.S. to run large, persistent overall trade deficits (which can contribute to financial imbalances and under-investment in key industries), it doesn't imply that there needs to be balanced trade with every individual country. Depending on U.S. consumer demand for a given country's exports, whether it seeks to buy U.S. financial assets, and myriad other factors, even in a world where there is balanced U.S. trade, some countries would be expected to run surpluses and others deficits. Moreover, the 10% minimum tariff — even on countries with which the U.S. runs a surplus — implies that tariffs of more than 4x their previous levels are a new minimum that will apply to the rest of the world, no matter how a given country tries to respond to U.S. concerns. What they're saying: Tobin Marcus and Chutong Zhu of Wolfe Research write in a new note that "since these 'reciprocal' numbers are driven not by actual tariffs but by the simple fact of trade deficits, they will be very challenging to negotiate away, and policy changes may do nothing to alleviate them."

The bottom line: The calculation method used for this round of tariffs implies they won't be negotiated away quickly or easily.


TOPICS: Business/Economy
KEYWORDS: axios; concerntroll; concerntrolling; fakenews; ibtz; nevertrumpers; tariffs; tds; trade; zot
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To: PGR88

That’s not how I read it. I believe that Chile is still facing the 10% baseline tariff.


21 posted on 04/03/2025 8:11:51 PM PDT by Miami Rebel
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To: nopardons

The only emotional response I’ve seen so far is from basically two groups.

1) People/businesses that are dependent on foreign trade, so they’re whining they have to pay more for imports.

2) Democrat partisans that want the economy to crash for political gain.


22 posted on 04/03/2025 8:14:01 PM PDT by unclebankster (Globalism is the last refuge of a scoundrel. )
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To: unclebankster

You forgot some really uneducated and naive FREEPERS! ;^)


23 posted on 04/03/2025 8:16:37 PM PDT by nopardons
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To: Miami Rebel; All
Nobody understands how to use tariffs better than President Trump.

On the other hand, after 4 years of ignoring economic issues during Biden's regime, the media is now suddenly oh so concerned about it.

They have reporters stationed at grocery stores and talking about prices going up.

They are trying their hardest to scare the people and cause panic 🙄

24 posted on 04/03/2025 8:18:35 PM PDT by Pajamajan (Pray for our nation. Never be a slave in a new Socialist America.)
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To: Miami Rebel

Axios = BS.


25 posted on 04/03/2025 8:19:34 PM PDT by Carriage Hill (A society grows great when old men plant trees, in whose shade they know they will never sit.)
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To: Fungi

Rather than attack the website, try mustering some facts.

“Reciprocal tariffs are calculated as the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of our trading partners. This calculation assumes that persistent trade deficits are due to a combination of tariff and non-tariff factors that prevent trade from balancing. Tariffs work through direct reductions of imports....”

A mathematical formula is provided:

The tariffs were calculated using a formula that takes how much a given country sells to the U.S. (exports), subtracts how much that country buys from the U.S. (imports) to calculate the trade deficit, and then divides the trade deficit by that country’s total exports to the U.S., according to experts.

For exaample, in the case of the European Union, the resulting number came out to 0.389, or 39 per cent. This number, according to the White House, represents alleged unfair trading practices.

It was then divided roughly in half to produce the U.S.’s “discounted reciprocal” tariff.


26 posted on 04/03/2025 8:20:02 PM PDT by Miami Rebel
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To: Pajamajan

President Trump has a business degree from a prestigious business school. He has run his own business for decades.

Journalists are people who have no clue about economics and couldn’t pass a 1st year accounting class.

Not a match.


27 posted on 04/03/2025 8:22:15 PM PDT by Texas resident ( We finally have an American President again)
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To: Miami Rebel

Axios- They are beyond extreme far-left.


28 posted on 04/03/2025 8:26:23 PM PDT by FlingWingFlyer (First covid case confirmed in America. 01/19/2021. Biden inaugurated 01/20/2021. Coinkydink?)
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To: Miami Rebel

Hopefully these numbers are meant to just be a starting point for negotiations. Each of the countries who think it’s unfair should make their case and be dealt with fairly as they make their case fairly and honestly.

A lot of countries have all sorts of red tape that makes it hard for American products to have a chance. It’s a waste of time to get into long lengthy debates with such countries who want to keep playing those games. Just keep it simple & straightforward.

For some countries who are striving to be good global citizens & treat their people right - we should be charitable.


29 posted on 04/03/2025 8:26:35 PM PDT by Degaston
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To: nopardons

You forgot some really uneducated and naive FREEPERS! ;^)

*********************

Lol

“That’s a Given during the Trump Era.”😀


30 posted on 04/03/2025 8:29:59 PM PDT by unclebankster (Globalism is the last refuge of a scoundrel. )
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To: unclebankster

Sadly all too true! :-(


31 posted on 04/03/2025 8:33:00 PM PDT by nopardons
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To: unclebankster

“People/businesses that are dependent on foreign trade, so they’re whining they have to pay more for imports.”

I have a local client in the screw and fastener business. This afternoon he told me he’s asked his Chinese suppliers to hold back any orders they haven’t completed. He is expecting an order delivered in the next week for which he’ll now owe $75,000-$100,000 unbudgeted. Unlike commercial transactions, for tariffs there is not credit and no delay beyond 48 hours. He’ll need to pay cash.

There are no domestic manufacturers who can substitute going forward.

He has a small payroll, somewhere around 25-30, but if the new and unexpected tariff expense sticks he will have to either pass on the cost to customers or lay off some workers.

When you call business owners “whiners,” I think you don’t understand that they are the lifeblood of communities. They are collateral damage in this trade war and they will not be alone in sharing the burden.


32 posted on 04/03/2025 8:33:18 PM PDT by Miami Rebel
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To: Pajamajan

Sadly the damned FEAR PORN does work on the stupids, who know NO factual history of ANYTHING.


33 posted on 04/03/2025 8:34:55 PM PDT by nopardons
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To: Degaston

There is no orderly way to carry on over 100 negotiations at once.

As I’ve said elsewhere on this topic, it would have made a hell of a lot more sense to train fire on our primary trade adversary, China. When we brought the Chinese to heel, there’d be tremendous momentum for others to capitulate.


34 posted on 04/03/2025 8:36:56 PM PDT by Miami Rebel
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To: Miami Rebel

Any country that has tariffs slapped on the U.S.A.’s butt needs tariffs slapped on theirs. I don’t care what the protesting, obnoxious and ignorant U.S. resident “protesters” say. America First. The Days of America the Suckers are over.


35 posted on 04/03/2025 8:38:57 PM PDT by FlingWingFlyer (First covid case confirmed in America. 01/19/2021. Biden inaugurated 01/20/2021. Coinkydink?)
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To: Miami Rebel
Oh boo freaking hoo.

Tell it to the now dead buggy whip makers, etc.!

Will some people feel pain, due to this, through out the world?

YES!

Has this nation been taken GREAT advantage of by other nations, especially since WW II?

HELL YES!

Should this crap been fixed long ago?

That goes without saying!

Should we just continue to ignore it all and pay through the nose, with a dwindling economy?

ABSOLUTELY NOT!

Do YOU have children?

36 posted on 04/03/2025 8:42:21 PM PDT by nopardons
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To: FlingWingFlyer

OK, but we’re now slapping tariffs on countries with no tariffs on our goods.


37 posted on 04/03/2025 8:43:08 PM PDT by Miami Rebel
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To: Gideon7
I wish that Trump had made that clearer in his announcement.

In addition to Trump's speech, here is the paper the White House published yesterday:

Fact Sheet: President Donald J. Trump Declares National Emergency to Increase our Competitive Edge, Protect our Sovereignty, and Strengthen our National and Economic Security

I think these are the two key excerpts:

"President Trump will impose an individualized reciprocal higher tariff on the countries with which the United States has the largest trade deficits. All other countries will continue to be subject to the original 10% tariff baseline. This will take effect April 9, 2025 at 12:01 a.m. EDT."

"These tariffs will remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated."

38 posted on 04/03/2025 8:48:08 PM PDT by Right_Wing_Madman
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To: Miami Rebel

Post a list of these.


39 posted on 04/03/2025 8:51:47 PM PDT by nopardons
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To: Miami Rebel

I think you don’t understand that they are the lifeblood of communities.

************

I understand.

I’m a manufacturer and your buddy is a big reason nobody has any domestic suppliers. They neglected their domestic supply chains because it was too expensive, so naturally domestic manufacturing withered on the vine.

BTW in the last two years I lost 80% of my business with one distributor to producers in Vietnam.


40 posted on 04/03/2025 8:52:13 PM PDT by unclebankster (Globalism is the last refuge of a scoundrel. )
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