- Formula used to calculate the new Tariff of President Donald Trump The announced on Wednesday is based on sharing the US trade deficit by a certain country divided by their total export to the US, and the Memorandum from the Office of the US trade representative admitted that it was a methodology used because it was too “complex, if not impossible” to calculate the full extent of US commercial policies.
Trump’s administration implemented Widespread reciprocal tariffs In countries around the world on Wednesday in an effort to reciprocate against what he said are unjust trade practices that damages US companies and economics as a whole.
Calculate the tariff that has decided to impose countries Looking around the world, the White House used a formula that focused on a trade deficit and overall exports. The formula did not include the estimation of tariff rates for certain products in individual countries, nor do they take into account other trade obstacles that are not tariffs.
Instead, the reciprocal tariff rate applied to each country was: their trade deficit divided by export to the US, divided by two.
If the Earth has a trade excess with the US, or the number due to the formula above was less than 10%, then a lump sum of 10%was applied.
For example, the US has a $ 235.6 billion trade deficit with the European Unic, which exports a total of $ 605.8 billion in the USA based on the White House formula, $ 235.6 divided by $ 605.8 equal to 0.388, which is divided by half of 0.194. This number is rounded up to 0.2, which leads to 20% of the tariff rate.
“The blind application of such a simple formula is so ignored by the shade,” said Dominic Pappalardo, a major strategist with multiple assets in Morningstar Wealth Wealth Ue -Student.
James Surowiecki journalist for the first time pointed out that this is a formula that Trump White House used in X post Posted just over two hours after the tariffs were announced.
When he arrived for a comment, a white house spokesman pointed out Wealth aa statement from the Office of the American Trade Representative explaining the formula.
The office of the US trade representative, who played a big role in Trump’s tariff politics, said it was the formula he used. He also acknowledged the difficulties in calculating reciprocal tariff rates based on a detailed analysis of each country’s trade barriers.
“Although the individual calculation of the effects of the trade deficit of tens of thousands of tariffs, regulatory, tax and other policies in each country is complex, if not impossible, their combined effects can be adopted by counting tariff levels in accordance with bilateral trade deficits on zero,” was read in the store’s office.
“It seems that reciprocal tariffs are fully based on the size of a bilateral trade deficit in Robbi 2024. It is not obvious that anything else made a difference,” Deborah Elms, a trade policy head of Think Tank, Hinrich Foundation, said Wealth earlier.
The use of this methodology to calculate the tariffs that will be imposed on other countries risks them to affect their rates greater than those they currently have for US goods. The countries subject to the highest tariffs were the ones that have the largest trade deficit with the US, not necessarily those with the most trade obstacles. For example, Taiwan, a major American trade partner, is now facing 32% of tariffs on all goods. However, a trade deficit that now has with Taiwan, is partly obliged, a large number of semiconductors and advanced technologies that sells US -in -state released On Thursday, Taiwanese officials said he was basically punished for sale of products that US companies want to buy.
“Moving the Taiwan supply chain back to Taiwan and increasing the demand for information on information and communications in Taiwan, reflecting a huge contribution to Taiwan to the American economy and national security,” said the Taiwanese cabinet.
(The semiconductors are excluded from Trump’s new tariffs.)
This measure is also laid back and does not take into account any preventive efforts that certain countries could take in a balance of the US store “calculation is one recording in time,” Pappalardo said.
For example, Vietnam had promised To further reduce all customs duties on American goods and buy them more in an effort to take away all the tariffs. Instead, the land of Southeast Asia, which is the center of production, struck 45% of tariffs. The US is the largest export market of Vietnam, and the tariff of that size would have removed its ability to sell goods in the country.
The formula of covers that does not take into account the specifics of the trade policy of each country – which is often a series of complex, mutual regulations that include very detailed rules for each economy sector – disturbing global trade by the flow of critical goods countries can only access through its commercial partners. Instead, they create the blockages of the way for other countries to enter the US, which is the world’s largest economy.
“There are strong fundamental and economic reasons for imports of certain goods outside the US,” Pappalardo said. “This formula completely ignores this concept.
These new policies would increase the tariff rate of US prices by almost 10%, which could lean the global economy according to the recession, according to the Fitch Rating Research note.
“The now -now -import tariff rate is now about 22% with 2.5% at the age of 2024. This rate was last seen around 1910,” Fitch wrote in her report. “This is a game exchanger, not only for the US economy, but also for the global economy. Many countries are likely to end up in a recession. Most predictions can be thrown through the door if that tariff rate stays for a long time.”
The implementation of a trade policy based on tariffs, not free trade agreements, was the main campaign he promised to run Trump during last year’s elections. Trump has long watched the role of the US as a net importer as a sign of weakness that represents the unwillingness of other countries to buy US products. Most economists consider the function of the fact that the US is the richest country in the world and therefore can buy more goods than their trade partners, resulting in a trade deficit.
Market They did not respond positively Trump’s announcement of the tariff. S&P 500 fell on Thursday 4%, To redeem Jones slid 3.5%, and Nasdaq The composite dropped 5.3%. The renneal route was quite expected, given that most economists thought that entering the US was bad for the economy for economics. However, the reality of the situation hit Investors hard.
“The previously announced measures have increased the average tariff rate in the US to 11%, which is the highest since the 1940s,” the UE -Poruci wrote, wrote Seem Shah, a major global strategist in an investment company. “Yesterday’s announcement increased the tariff rate at about 24%, which is the highest since 1908, and was significantly more aggressive than the wide market expected.”
During his speech to Rose Garden at the White House on Wednesday, Trump said he was “kind” by just hitting countries with half of the tariffs, which he believed they had imposed the US, since the tariff rates are based only on the calculation of the US trade deficit with the day of the country and do not include other trade barriers, even wrong. The one that will almost certainly have Inclusion of effects For now, as the rest of the world, it is empowered.
“Expectations (are) that the tariffs will harm the American economy more than the rest of the world,” the note of the capital economy was published on Thursday.
This story is originally shown on Fortune.com
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