In April 2025, President Donald Trump imposed a significant 10% tariff on most goods imported into the United States from various countries, with some nations facing even higher rates branded as “worst offenders.” The introduction of these tariffs raised questions regarding their calculation methods, prompting extensive investigation into the reasoning behind them by outlets such as BBC Verify. The method of calculating tariffs turned out to be less complicated than many initially anticipated, comprising a straightforward mathematical approach rather than solely relying on existing tariff frameworks or trade barriers.
The process began when Trump showcased a large cardboard chart during a speech at the White House, suggesting that these tariff rates were determined through a combination of the existing tariffs and additional trade regulations. However, the White House later published a formula, which suggested a specific calculation method. The essence of the approach required one to take the trade deficit that the United States carries with a country, divide it by the total amount of goods imported from that country, and then divide that result by two. This mathematical equation serves as the foundation for the tariff rates, where a trade deficit occurs when imports exceed exports.
For instance, the United States has a trade deficit of $295 billion with China, but the overall imports from China amount to $440 billion. Performing the calculation: 295 divided by 440 gives approximately 67%. After halving that figure, the resulting tariff rate on China becomes 34%. Similarly, applying the same formula to the European Union results in a lower tariff of 20%. This approach garnered mixed opinions from economists and trade experts regarding its fairness and effectiveness.
Further examination of the tariffs revealed a critical insight: they were not entirely reciprocal. Reciprocal tariffs generally depend on what countries charge the US in terms of existing tariffs, including non-tariff barriers such as domestic regulations that elevate costs for US companies. The official guidelines from the White House indicated that this reciprocal calculation was not consistently applied across all countries impacted by the tariffs. Instead, the rates were explicitly aimed at eliminating the US’s goods trade deficit with each country.
Notably, Trump implemented tariffs even on countries from which the US does not have a trade deficit, exemplified by the UK’s situation where a 10% tariff was still enforced despite a balanced trade relationship. This unilateral decision led to tariffs affecting over 100 countries in the new tariff regime.
The rationale behind these tariffs, primarily championed by Trump as a move to rectify what he views as an unfair global trade system, aims to protect American jobs and revive manufacturing. Trump has consistently argued that foreign markets artificially lower prices through cheap goods that hurt American companies and subsequently contribute to soaring unemployment rates. The tariffs, in his view, are tools to support domestic production by making imported goods more expensive, thus encouraging consumers to purchase locally produced products.
Economists with varying perspectives have weighed in on how effective this strategy might be. While it is plausible that these tariffs could decrease the bilateral trade deficits between the US and certain nations, the consensus among experts suggests that they will not shrink the overall trade deficit the US maintains with the rest of the world. As cited by Professor Jonathan Portes from King’s College, the overall US trade deficit cannot be solely attributed to trade barriers and tariffs, but is deeply entrenched in the nature of the American economy itself. High consumption levels, where Americans often spend more than they earn, perpetuate this situation.
Moreover, some trade deficits arise from legitimate economic reasoning rather than tariffs or trade malpractices. For instance, sourcing food from nations where production is cheaper or more efficient can be a strategic economic choice. Furthermore, Thomas Sampson from the London School of Economics expressed skepticism regarding the logic of the calculation method. He asserted that the formula was engineered to justify tariffs against nations with which the US has a trade deficit, lacking any robust economic basis, and posing potential downside risks to the global economy.
In summary, the calculation of Donald Trump’s tariffs reflects a combinatory approach that examines trade deficits, yet it raises fair questions relating to economic reasoning and broader implications on international trade dynamics.