President Donald Trump’s massive tariffs announced on dozens of nations Wednesday were pitched as “reciprocal,” matching what other countries charge the United States dollar for dollar, even taking into account non-tariff barriers like value-added taxes and other such measures.
But the actual calculation the Trump administration seems to have used appears as though it is not reciprocal at all.
Matching countries’ tariffs dollar for dollar is an incredibly difficult task, involving pouring over each country’s tariff schedule and matching a complex array of products, each of which take different charges for different variants.
Instead, the Trump administration seems to have used quite a simple calculation: the country’s trade deficit divided by its exports to the United States times 1/2. That’s it. The calculation was first suggested by journalist James Surowiecki in a post on X and backed up by Wall Street analysts.
For example, America’s trade deficit with China in 2024 was $295.4 billion, and the United States imported $439.9 billion worth of Chinese goods. That means China’s trade surplus with the United States was 67% of the value of its exports — a value the Trump administration labeled as “tariff charged to USA.”
But it was no such thing. “While these new tariff measures have been framed as ‘reciprocal’ tariffs, it turns out the policy is actually one of surplus targeting,” noted Mike O’Rourke, chief marketing strategist at Jones Trading in a note to investors Wednesday.
“There does not appear to have been any tariffs used in the calculation of the rate. The Trump administration is specifically targeting nations with large trade surpluses with the United States relative to their exports to the United States,” he added. The simple calculation used by the Trump administration could have broad implications for countries America depends on for goods — and the global companies that supply them.
“Knowing how these rates were calculated highlights that they are generally going to be most severe on the nations that US companies rely heavily upon in their supply chain,” O’Rourke said. “It is hard to imagine how these tariffs would not wreak havoc upon the profit margins of major multinational corporations.” An expected hike in vehicle prices would hit American consumers so fast and hard that even better-off clients would not be able to keep up with the spike, a Pennsylvania car dealership owner told CNN.
President Donald Trump said the US would impose 25% tariff on all foreign automobiles in what he called “horrendous imbalances” that have impacted the country’s “industrial base” and put national security at risk.
It’s Trump’s move to bring more auto manufacturing back to America, but local car dealers are warning against a price hike. The tariff announcement has also caused unease among allies who export cars to the US, including Japan and South Korea. David Kelleher, president of David Auto Group, said a $30,000 car may become $37,500, meaning that his clients could be asked to fork out $175 more per month.
“Our customers … are middle class people. They just can’t afford that kind of bump,” Kelleher said.
Source: Here