The Trump administration’s approach to calculating tariffs has drawn criticism for its lack of reciprocity. Instead of matching tariffs on a dollar-for-dollar basis, which involves detailed analysis of each country’s tariffs and products, the administration opted for a simpler formula. This method involved dividing the trade deficit by a country’s exports to the US, then multiplying by 0.5, a calculation initially suggested by journalist James Surowiecki and later endorsed by Wall Street analysts.
For instance, the United States had a trade deficit of approximately US$295.4 billion with China in 2024, against US$439.9 billion worth of imports from China. The Trump administration interpreted this as China having a “tariff charged to the USA” that amounted to 67% of the value of its exports.
However, this methodology has been labelled misleading by experts, who argue that while the tariffs were presented as ‘reciprocal’, they actually targeted countries with significant trade surpluses relative to their exports to the US. Mike O’Rourke, a chief market strategist, pointed out that the calculations did not use any actual tariff rates, suggesting that the policy intended to address surplus issues rather than establish a balanced tariff system.
The simplicity of this calculation raises concerns about its potential consequences. O’Rourke indicated that these tariffs could disproportionately affect nations that are integral to the US supply chain, potentially disrupting the profit margins of major multinational corporations reliant on these countries for goods. The implications of such an approach could significantly reshape international trade dynamics, impacting not just the targeted countries, but also American companies and the broader global economy.