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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: nopardons

Grandchildren too, as a matter of fact.

Having a conniption will not bring back industry, nor will shutting down trade.

Fairness is a very reasonable objective, but the simple formula imposed by the Administration has nothing to do with fairness or removing unfair barriers to US trade. It is a simple equation which weighs only one thing: trade deficits.

Not all deficits are the result of cheating. In many if not most cases they are the result of cheap labor. I have a newsflash for you: American consumers do not want and are not able to pay $50 for a sweatshirt or $3000 for a PC. Just like the buggy whip manufacturers you mentioned, the low-skill milling and assembly jobs of our grandparents are dead and gone. Putting a trade moat around us will sink our economy, not fix it.


41 posted on 04/03/2025 8:57:29 PM PDT by Miami Rebel
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To: nopardons

From President Trump’s April 2 release:

“Using his IEEPA authority, President Trump will impose a 10% tariff on all countries.”

Here are some with zero tariffs on our goods:

Chile
Israel
Singapore
Panama
Vietnam

There are a few more.


42 posted on 04/03/2025 9:03:26 PM PDT by Miami Rebel
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To: Miami Rebel
For someone old enough to have grandchildren, you are woefully ignorant of factual financial, industrial, and tariff history!

Take the cost of something, ANYTHING, manufactured here OR yes, even exported to and sold here, in different eras, Then do a search re what that price is in today's money. You WILL be surprised!

Yes, the USA has allowed many items, as well as jobs, to be outsourced for far too long a time. We weren't decimated by war...our economy was ruined through OUTSOURCING, as well as intellectual THEFT. Then throw in corruption and illegal payoff, and here we are.

It is your children and grandchildren who are stuck with our terrible debts, lack of things made here, and shoddy CRAP!

Is THAT what YOU really want?

Trump has been talking about ALL of this since at least the 1980s and no, he was NOT the only one. And yet, these lone voices of sanity were IGNORED!

And now...ask yourself just how many people were going to buy new foreign made cars, new houses, etc. THIS year! Not really all THAT many, if truth be told.

In past eras, through recessions, depressions ( and there were MANY of these; the depression in the 1890s rivaled the Great Depression, for but one example ), labor strikes, etc., with NO to only two minor "safety nets", people did what they had to do and somehow survived.

Are today's populace all THAT spoiled and STUPID, that they can't or refuse to do what they have to?

Forget "FAIRNESS"; only children whine about something not being "fair"!

Trump is trying to save this nation! Will it hurt some? Probably; but what is the answer...continuing with what is SO damned WRONG now?

With these threats, or whatever you want to call it, Trump has gotten many foreign companies and nations to cave!

WHAT'S WRONG WITH THAT?

What sticks in your craw, vis-a-vis many nations now cutting or removing their tariffs on our goods, companies moving TO America, etc.?

Your problem is that you refuse to see the forest for the trees!

43 posted on 04/03/2025 9:45:42 PM PDT by nopardons
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To: Miami Rebel
I shan't check what you've posted; however, I guess that you've missed the fact that Nam is now going to play nicey nicey with us. Go look it up.

And Nam, China, and other Asian companies use SLAVE LABOR to make things like Nike stuff. Some even use CHILD LABOR!

Perhaps this all is too complicated for you to understand, but you really should try to!

44 posted on 04/03/2025 9:52:08 PM PDT by nopardons
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To: Miami Rebel
I had thought the tariffs that Trump imposed were half that of the tariffs they imposed on our goods. Your post is the second source I've had say that is not the case at all, and it looks like that is true.

I agree with your points. It makes no sense to punish countries just because they export to us but don't happen to buy an equal amount back due to any of a myriad of factors. My understanding was that these were countries with high tariffs against us; if we are putting high tariffs on them first, how are they supposed to "fix" the situation? They can't lower tariffs they don't have. This really will cause an economic depression.

I've always been confident that Trump has good business sense and wouldn't do anything stupid like leftists imagine. But I'm left without comprehension now - is he really on some mad, deranged crusade to hammer countries unfairly with tariffs that will simply shut down international trade and cause a world depression? Or is this source misinformation?

45 posted on 04/04/2025 12:48:26 AM PDT by EnderWiggin1970
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To: Miami Rebel

Miami globalist puss, we don’t care about other countries economies. They can all go f themselves.


46 posted on 04/04/2025 12:51:31 AM PDT by central_va (I won't be reconstructed and I do not give a damn...)
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To: Right_Wing_Madman

Rand Paul outed himself as a globalist Nazi. He needs to be primaried out of office. We are tired of him.


47 posted on 04/04/2025 12:52:56 AM PDT by central_va (I won't be reconstructed and I do not give a damn...)
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To: Alberta's Child
Seems to me that globalist Nazis haven't put much thought into how destructive Free Trade is to the USA.
48 posted on 04/04/2025 12:54:45 AM PDT by central_va (I won't be reconstructed and I do not give a damn...)
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To: Gideon7
Why are we so hasty in wanting to lift tariffs? It took 30 years of poor globalist free trade policy to ruin the economy.
49 posted on 04/04/2025 12:56:07 AM PDT by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel
You are a paid lobbyist/troll. Free advice. The great detailed ‘knowledge’ you reveal in your posts shows that you are a troll. If you want to be successful ease into it. Start slow. Less details. You are revealing yourself as a troll.

We had a wave of EV lobbyist/trolls over the last 5 years or so. They made the same mistake as you.

50 posted on 04/04/2025 1:02:29 AM PDT by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel

Waaaaaaaa! Have you considered that BlueSky site?


51 posted on 04/04/2025 5:33:00 AM PDT by trebb (So many fools - so little time...)
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To: Miami Rebel

A country that imports very little from us, because either (1) things they could buy from us are too expensive for them with our much higher labor costs than theirs - so they buy from elsewhere, or (2) we do not make many things they need to import from us, should not be considered “a problem” for us.

Is it worse for New York that it buys produce from California (that it has a trade deficit with California). No. California has year-round advantages for growing produce that New York cannot duplicate and trying to would make growing lots of produce in New York very expensive, compared to what California produce costs. Should New York “tax” produce from California, to “stimulate” a “competitive” New York state produce industry? Why? Just to please the idea of rectifying a “trade deficit”, at what would be great expense for the people of New York? If New York was insane, yes, otherwise no.

That is why a good many of Trump’s tariffs on many individual countries make no sense at all. In some cases they will do nothing for any U.S. company and will simply decrease imports from a country who will sell their meager goods somewhere else.

Having a “trade deficit” with tiny Lesotho is not a material negative for the U.S. or anyone in the U.S., and even if Lesotho lowered tariffs on U.S. goods to zero, we would still have a trade deficit with them and just because of that deficit Trump would still be imposing a needless tariff on what meager goods we get from them (less than $500 million in 2024).


52 posted on 04/04/2025 5:34:51 AM PDT by Wuli
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To: nopardons

“This article is utter CRAP, written by anti-Trump/lefty imbeciles.”

Yep and a lot of FR imbeciles have gone bonkers over it - the Dem scare campaigns are working on the weak minded.


53 posted on 04/04/2025 5:35:28 AM PDT by trebb (So many fools - so little time...)
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To: Miami Rebel
Agree, I think poor countries should have no tariffs placed on them, and they should be able to place as high tariffs as the 'market' will bear on us.

For the reasons you state. And because they are pitifully poor and we are not.

No tariffs on poor countries is the best form of aid we can give them.

Other, industrialized, wealthy, countries: Different story indeed. We should increase tariffs on them, not to instigate a trade war but to restore some kind of fair balance.

But if you look at it, what Trump is doing is not really that malicious. He is just introducing some sign of life into our negotiations with other countries vis a vis trade.

It is overdue, and it will help us re-industrialize. It also is not so drastic as the press would have us all (worldwide) believe.

It's a tactic, but Trump can't just come out and say that; if he did, it wouldn't be a tactic.

He did the next best thing to revealing his strategy by having the Sec of the Treasury come out yesterday on the WH lawn and say, "Don't retaliate!", meaning, we will mitigate, soften, retreat, give way.

The market? It's as it has always been: half market forces, half emotional forces.

Regardless, it will work out fine.

54 posted on 04/04/2025 5:37:35 AM PDT by caddie (We all need to become Trump and become Captain Obvious too.)
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To: Miami Rebel

He imposed a 10% tariff on Singapore, which has no tariffs on US goods. Makes me wonder about the process.


55 posted on 04/04/2025 5:45:11 AM PDT by ShadowAce (Linux - The Ultimate Windows Service Pack )
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To: caddie
I think poor countries should have no tariffs placed on them, and they should be able to place as high tariffs as the 'market' will bear on us.

Define "poor" in this context.

56 posted on 04/04/2025 5:47:47 AM PDT by ShadowAce (Linux - The Ultimate Windows Service Pack )
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To: ShadowAce

I don’t think it’s a stretch to label countries whose average annual income is below $1,000 “poor.”


57 posted on 04/04/2025 6:29:45 AM PDT by Miami Rebel
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To: Miami Rebel
OK--so if it rises in the future to, say, $1,010, we then re-impose tariffs? They are now above your "poor" line.

My point is it will be very difficult to define a line, and then impose policy based on that line.

58 posted on 04/04/2025 6:37:29 AM PDT by ShadowAce (Linux - The Ultimate Windows Service Pack )
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To: Miami Rebel
OK, but we’re now slapping tariffs on countries with no tariffs on our goods.

This is BS. The entire article is BS. You are posting propaganda.

Trump is simply reciprocating tariffs on any country that has put tariffs on us. And the tariffs Trump is putting on other countries is only 50% of the tariffs that those countries are putting on us.

Look at the simple list and do the simple math.

59 posted on 04/04/2025 6:52:30 AM PDT by FreeReign
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To: EnderWiggin1970
I had thought the tariffs that Trump imposed were half that of the tariffs they imposed on our goods. Your post is the second source I've had say that is not the case at all, and it looks like that is true.

Two sources pushing propaganda and you fall for it.

60 posted on 04/04/2025 6:57:03 AM PDT by FreeReign
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