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.
The fact is that our tariffs aren't reciprocating those of our trading partners. Instead, they are calculated by a simple measure in which any country, even those that allow are products free entry, are penalized if they run a trade surplus versus us. (In some cases like the UK, we're subjecting them to 10% tariffs even when WE have a surplus.)
What happens with poor countries? Well, take Lesotho. Per capita income was $878 last year. What do we import from Lesotho? Textiles and diamonds. Because the average Lesothan is very poor, he's not buying much in the way of US goods nor can he.
Last year we bought $228 million of goods from Lesotho but sold them only $7 million worth. Because of this imbalance we are now levying a tariff of 50%.
Nothing Lesotho can do will change its inability to buy US goods. The only real impact of punitive tariffs will be to kill textile sales from there (which will probably go somewhere else) and jack up the price of diamonds to US buyers.
Tariffing Lesothan diamonds won't spur exports of American goods but will only serve to make diamonds more expensive to American businesses and shoppers.
The point is that the draconian way in which the White House created its tariff table will in many if not most cases fail to stimulate exports while also failing to encourage domestic replacements to imported goods.
We hear a lot about unfairness, and there certainly is a lot of that, but this shotgun approach WHICH DOES NOTHING TO ASSESS UNFAIR TRADE PRACTICES is going to take an unnecessary toll on US consumers.
It’s clear to me that the Trump team didn’t put a lot of thought into any details of trade policy. That wasn’t driven by laziness or incompetence. It was done this way because they expect every one of these tariffs to be negotiated downward individually on a case-by-case basis.
When I looked at the list of tariffs the WH released, the algorithm seemed to b to levy a tariff against countries who tariffed us. How much? Our tariff was at least 10%, going up to half of the tariff that country had on us.
Remember: the tariffs are reciprocal. The US will lift its tariffs on Vietnam and Israel when they lift their tariffs on the US.
I wish that Trump had made that clearer in his announcement.
Truth from a rabid leftist website? NONSENSE. ‘Nuff said.
I agree. I also thought it was likely that keeping it simple keeps the whole policy from being “fact checked” to a great degree, but the MSM and leftists. It is easy to understand, and mostly presented in a way that seems “fair”.
But I think that much of it will be negotiated on individual bases with the various countries, and probably will have many changes (to our benefit) by 6 months out. JMHO
America has lost its once very strong manufacturing status, jobs have been outsourced, and NONE of this has helped the American populace!
NONSENSE!
Where did you find that 92% rate? (I’ve seen it or 90% elsewhere, but without a source.)
I saw the following on Vietnamplus.vn:
On March 31, the Vietnamese Government issued Decree No. 73/2025, amending preferential tax rates on several key imports. Among the notable changes, taxes on goods such as automobiles, wood products, ethanol, frozen chicken thighs, pistachios, almonds, fresh apples, cherries, and raisins have been significantly reduced.
Import taxes on automobiles, for instance, have dropped from 64% to 50% and 45% to 32%, while ethanol taxes have been cut from 10% to 5%. Frozen chicken thighs now carry a 15% tax (down from 20%), and popular items like pistachios, almonds, fresh apples, and cherries have seen reductions from 8–15% to just 5%.
The most striking move, however, is the slash of import taxes on wood and wooden products, including coat hangers, chairs, and furniture, from 20–25% to a uniform 0%.
The decree took effect immediately on March 31.
“....the article is ill conceived and badly written; not to mention the fact that we have been tariffed to death since the end of WW II, with NO push back at all from us.”
I keep hearing and reading emotional statements like yours without anything to back them up. If you truly believe the article is “ill conceived,” are you disputing that the new tariffs are based on anything more substantial than trade deficits? Because trade deficits aren’t necessarily the result of unfair restrictions on US exports.
Then they just should have said that, instead of obfuscating and claiming they were reciprocal when they weren’t . Looks like a clown show when you get caught fudging.
There are a lot of gaps in this article. I wonder if that's done on purpose. My BS meter is pinging about this article.
I thought we are just applying the same rates of tariffs on goods and then dividing it by two.
First of all, I, as well as many others here, who disagree with all of this FEAR PORN/outright drivel, know and understand FACTUAL financial history! We also understand Trump's methods of deal making.
I very easily can give you a written lecture on the history of American tariffs, depressions, bank closures, recessions, strikes, market fluctuations since Colonial times to the present. But I doubt that you'd even bother reading 1% of it.
Your reply to me, makes it very clear that you don't know what you're talking about AND that it is YOU who are EMOTIONAL!
This article is utter CRAP, written by anti-Trump/lefty imbeciles.
Not to mention consulting "stakeholders."
Always have to include them.
In addition to reciprocal tariffs merely “matching” duties charged on American products, it appears Trump is also respecting the free trade agreements made with about 20 Nations - including Mexico and Canada.
For example, the Trump Administration has already exempted goods from Mexico and Canada that meet USMCA origin criteria. For example, frozen mangoes grown, processed and packed in Mexico are still duty-free into the USA.
Due to complex origin rules (for example automobiles with 1000s of parts) - those products are subject to the 25% penalties imposed for border security, fentanyl, etc...
Because of those exemptions, its expected that a country like Chile, which has a 20 year free-trade agreement with the USA, and allows American products into Chile at 0% duty - will continue to enjoy its duty-free status into the USA.
Ya gonna be alright Honey😱😂
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