Trump's tariffs expose flawed maths behind US trade policy
The Donald Trump administration imposed tariffs on numerous countries, including European Union states. The rates vary, and the White House explained it was guided by the tariff levels in the respective countries. However, commentators have noted that a simple formula appeared to be decisive, which had nothing to do with customs duties.
What do you need to know?
- The Donald Trump administration imposed tariffs on numerous countries, claiming it wants to "punish" those with a trade surplus in their relations with the US.
- The White House attributed the rate levels to the tariffs of other countries. The issue is that the specified amounts are not accurate.
- There is evidence to suggest that Trump's team invented the rates by relating them to the trade surplus to the import value.
US President Donald Trump announced tariffs on various countries, stating that he wishes to protect the American market and producers in this manner.
The tariff rates vary. For example, China faces a rate of 34%; the European Union, 20%; Japan, 23%; India, 26%. The hardest hit were Cambodia (49%) and the Territorial Collectivity of Saint Pierre and Miquelon (50%).
Trump's formula
The Trump administration justifies its decisions by stating that all these countries impose tariffs on American goods themselves. The issue is that the rates, according to the White House, imposed by these countries do not reflect reality. For instance, according to Trump, EU tariffs on US products are 39%, which is simply not the case.
So, what logic were the Americans following? As journalist James Surowiecki notes, it appears the alleged tariff rates other countries supposedly impose on US goods are simply... the quotient of the United States' trade deficit with the import value from those countries to the USA.
For example, the US trade deficit with the EU in 2024 is over $235 billion (approximately £179 billion). Americans imported goods worth over $605 billion (£462 billion) from EU countries. The surplus thus constitutes over 38% of the import, which is almost the 39% declared by the White House.
However, the US also imposed rates on countries with which they have a trade surplus, like Australia. These countries were "hit" with 10% rates.
James Surowiecki expressed disbelief that the Trump administration would calculate the tariff rate by dividing the trade deficit by imports and then set actual tariffs by arbitrarily halving that figure—a method he characterized as both misleading and irrational.
