Name: Trump’s Tariff Math Explained
Uploaded: 2025-04-07T06:30:06.000Z
Duration: 6 min 4 s
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President Donald Trump has unveiled a sweeping new tariff policy targeting most U.S. trading partners.

Adverbs of degree

The plan will set at least a 10 percent tariff on nearly every country in the world.

Some countries will be hit harder than others.

President Trump and the White House shared a series of charts on social media showing the tariff rates they say other countries impose on the U.S. and how the U.S. will reciprocate.

I think that when when when we figured out that that was a little puzzling.

Because, you know, what we have confirmed now is the way they got to those rates.

It looks kind of complicated, but it's actually rather simple.

The administration took the trade deficit and divided it by the imports from that country to the United States and then assumed that that number, that rate that they got was all the ways that they're ripping us off, whether it's currencies or taxes or tariffs.

To a lot of trade experts, Kelly, it's gibberish.

And I called up these trade experts and I said, have you ever heard of this?

Do you know anybody who's ever used this formula to determine the trade burden or onus or whatever?

A White House official told reporters on April 2nd, these tariffs are customized to each country and the numbers have been calculated by the Council of Economic Advisers using very, very well established methodologies from the international trade economic literature, as well as policy practice.

The model they use is based on the concept that the trade deficit that we have with any given country is the sum of all the unfair trade practices, the sum of all cheating.

We were all trying to figure out, you know, is this based on value added taxes?

It doesn't line up with any known applied trade trade policies.

It took people who weren't actually steeped in this day to day to say, hey, hey, this is just correlated with trade balances.

The White House is naming all of these policies they're supposedly reciprocating against.

Those show up in no form or fashion in that formula at all.

It's simply just looking at bilateral trade balances in goods, which has nothing to do overall with trade policy.

The administration calculated each country's tariff rate using this formula.

The tariff rate equals the U.S. trade deficit with that country, divided by the U.S. imports from that country.

For example, the U.S. claims that China charges a tariff of 67 percent.

The U.S. ran a goods trade deficit of $295.4 billion with China in 2024, while imported goods were worth $438.9 billion.

When you divide $295.4 billion by $438.9 billion, the result is 67 percent, just like the graphic the administration posted.

Chronic trade deficits are no longer merely an economic problem.

They're a national emergency that threatens our security and our very way of life.

For nations that treat us badly, we will calculate the combined rate of all their tariffs, non-monetary barriers and other forms of cheating.

But we will charge them approximately half of what they are and have been charging us.

The idea was essentially that any type of trade deficit that the U.S. economy would have with any trading partner would be perceived as essentially an unfair advantage that the U.S. would be given to another economy.

And that's why they use the trade deficit relative to imports from that economy as the basis for these reciprocal tariffs.

When you're just focused on trade deficits vis-a-vis trading partners and you're trying to bring these trade deficits down to zero, you're essentially starting a trade conflict that is very similar to what we call as economists a beggar thy neighbor type of policy, because every other economy is going to want to react in the same fashion and thus impose its own tariffs.

And so what that leads to is an environment where the general cost of doing trade globally increases, inflation dynamics are reignited, and that leads to demand destruction globally.

So we end up in a world that experiences higher inflation and lower growth.

And that type of policy is detrimental to U.S. economic activity, but also global economic activity.

President Trump has made it clear his goal is to bring manufacturing back to the U.S., but that could be a slow process.

This is just the latest episode in a years long era of supply chain volatility that we have seen drive major firms to already shorten and diversify supply chains to the United States.

We expect the tariffs to continue accelerating that trend.

That being said, this uncertainty in trade policy, along with other areas, is driving a lot of other major corporates to pause investment decisions, pause leasing decisions because of the uncertainty involved.

Economists warn that a trade war could have serious implications for the U.S. and the global economy.

The tariffs will create a tax burden on the U.S. economy and it will be shared by workers and by business owners.

You know, some companies may be able to pass their tariff costs on to retail prices.

It reduces their revenues, their profits, which means they might have to cut hiring.

They might have to cut returns to shareholders.

So in either way, whether the cost is passed forward or passed backward, it's American workers and American business owners who bear that burden.

We're now going back to an era where essentially each country would be forced, in a sense, to produce more domestically, even if that leads to heightened inefficiencies and a higher cost of trade globally.

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Trump’s Tariff Math Explained

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