When President Donald Trump presented his sweeping global tariffs from the Rose Garden on Wednesday, even the most basic questions were left up in the air. At the top of the list: How did the White House derive the wildly disparate rates listed on the graphic Trump so proudly displayed? As global markets roiled in the aftermath of the announcement, the White House gave an answer about its calculations that was patently ridiculous.
As global markets roiled in the aftermath of the announcement, the White House gave an answer about its calculations that was patently ridiculous.
The simple version is that the White House calculated the tariff rate for each country by putting our trade deficit with a country over the amount of goods we import from that country and dividing. Writer James Surowiecki was among the first to crack the code in a post on X. Here’s how he later explained it in an Inc. post:
By way of example, we have a $17.9 billion trade deficit with Indonesia, and import $28 billion in goods from them. $17.9 billion is 64 percent of $28 billion, and on Trump’s chart that became the “tariff rate” Indonesia supposedly charges us. We have a $66 billion trade deficit with South Korea, and we import $133 billion in goods from them. Sixty-six is 50.3 percent of 133, so South Korea’s “tariff rate” is listed as 50 percent. Similarly, our trade with the U.K. is close to balanced, so the U.K. was listed as having a tariff rate of just 10%.
The U.S. Office of the Trade Representative put out a document on Wednesday night trying to make the formula seem fancy by using Greek symbols but, in the process, confirmed Surowiecki’s hypothesis. (The best part is how in trying to pretend otherwise, the formula includes two variables whose values cancel each other out in the equation.) In doing so, it laid bare just how unnecessary these tariffs really are.
Trump claimed in Wednesday’s announcement that the tariffs are “reciprocal” against nations that “looted, pillaged, raped and plundered” American industry. There was nothing resembling reciprocity in the rates provided, including 20% levy on items imported from the European Union and 97% on items imported from Cambodia. All other countries, including the United Kingdom, are to be subject to a flat 10% import tax.
While the president said that those rates equal half the duties on American exports to those countries, the math doesn’t check out. The executive order putting the new tariffs in place suggests that the difference could be explained away by the “non-tariff barriers” to trade that other countries impose on American goods. And that still didn’t fully jibe with the specific numbers plastered on Trump’s prop on Wednesday afternoon.
While politicians, especially Trump, have railed against trade deficits, there’s nothing inherently bad about them. All a trade deficit means is that one country imports more goods from another country than it exports to that other country. If the United States has a trade deficit with Costa Rica for bananas, it doesn’t mean that America is getting shorted.
This absurd formula's existence reflects a White House that started with a policy that Trump wants and worked backward to a justification for it.
Trump appears to hold the nonsensical idea that there’ll be some great surge in American production based on these tariffs — when there are certain goods that will not and cannot be produced in the United States. For example, coffee and vanilla beans are going to be subject to massive price increases as importers bringing in product from Indonesia and Madagascar are forced to pay an extra 32% and 47%, respectively, for their products. (Does the president think we can grow those crops here?)
I’m going to level with you, readers. I didn’t do great in my undergraduate economics classes. I understood the concepts but never applied myself, instead considering the field in general to be “political science gone wrong with math.” But even I can tell you that none of Trump’s tariffs policy makes any logical sense. There is a total disconnect between the tariffs and the problem that Trump says the tariffs will fix.
As Dean Baker, a senior economist with the Center for Economic and Policy Research, put it on Substack: “Suppose your doctor suddenly insisted that you needed to follow a strict diet and exercise regimen. He said he realized you had a serious problem when he divided your height by your birthday, and it came out way too high. You would probably decide that you need a new doctor.”
This absurd formula's existence reflects a White House that started with a policy that Trump wants and worked backward to a justification for it. We’ve spent months waiting to hear how the administration would administer the global tariff scheme, but the method for doing so was unclear until Wednesday’s news conference. Even more unsettling is that there’s no sign Trump plans to back off these beloved tariffs of his, no matter how much they hurt America’s economy. Math didn’t come into play when he put this tax hike into place. It’s unclear what math — a total wipeout in the midterm elections, maybe? — will force him to back off them.