Understanding Trump’s New Tariffs: Calculation and Implications
On April 2, 2025, U.S. President Donald Trump announced sweeping tariffs on imports during an event at the White House’s Rose Garden. This move triggered a significant drop in global financial markets and raised international concerns regarding trade dynamics.
Details of the Tariff Announcement
The White House shared charts on social media outlining the new tariff rates on various countries, claiming these rates reflect the tariffs that other nations impose on U.S. goods. Specifically, they mentioned that the figures took into account “Currency Manipulation and Trade Barriers.” An accompanying column detailed the adjusted rates applicable to imports from those nations, including the European Union.
Analyzing the Proposed Tariff Rates
Initial responses from market analysts indicated that the tariff rates presented by the Trump administration were often around half of the actual tariffs that the claimed nations imposed. Notably, CNBC was unable to independently verify the administration’s assertions regarding these tariffs.
Efforts to decode the methodology behind the reported figures have yielded ambiguous outcomes. Notably, journalist James Surowiecki suggested that the United States appeared to have derived these rates by dividing the trade deficit by the total imports from individual countries, a method that does not traditionally align with standard tariff calculations.
Example: The U.S.-China Tariff Calculation
Taking the U.S.-China trade relationship as an example, the administration indicated a 67% tariff on China, while the reality shows a trade deficit of $295.4 billion against $438.9 billion in imports. The division of these figures yields the cited rate. Similar calculations apply to other countries, such as Vietnam.
Implications of the Methodology
Experts like Trinh Nguyen, a senior economist at Natixis, argue that this approach focuses on trade deficits rather than reciprocal tariff levels, complicating negotiations. Countries that currently have trade surpluses with the U.S. might find it difficult to comply with demands for tariff reductions based on this newly imposed structure.
“Given that U.S. goods are comparatively more expensive, it becomes challenging for nations, particularly those in Asia, to lower tariffs, especially when they already maintain low rates ahead of such announcements,” Nguyen noted. Vietnam, for instance, has a notable trade surplus and has already implemented some tariff reductions in anticipation of negotiations.
The U.S. Trade Representative’s Explanation
The Office of the U.S. Trade Representative (USTR) elaborated on their methodology, indicating that calculating the effects of numerous trade policies was complex. They proposed a model where tariff levels are adjusted to potentially balance bilateral trade deficits. The USTR emphasized that ongoing trade deficits may stem from various tariff and non-tariff policies.
Market Reactions and Future Considerations
Some analysts believe that the lack of clarity surrounding how the tariff rates were determined might provide the U.S. with some flexibility in trade negotiations. However, this ambiguity could undermine the credibility of the U.S. in international trade discussions.
Rob Subbaraman, global macro research head at Nomura, expressed concern that although the opaqueness of tariff numbers might allow for more negotiating room, it could also damage the U.S.’s position in global trade.
As the situation develops, the broader economic implications of these tariffs remain a significant concern for businesses and trade relationships worldwide.
— Reporting by Kevin Breuninger of CNBC contributed to this article.