[Source/Observer Network, Xiong Chaoyi] U.S. President Trump invoked the so-called "reciprocal tariffs," indiscriminately imposing tariffs on major global economies, leading to new fluctuations in the world political and economic situation.
On April 3rd local time, a report by the Financial Times mentioned that trade economists looked down upon the crude method used by the Trump administration to calculate the rates of reciprocal tariffs. Analysts pointed out that this calculation method has serious economic flaws and will not achieve the predetermined goal of reducing bilateral trade deficits to zero.
The New York Times reported that when Trump announced the tariff list on the afternoon of April 2nd local time, he repeatedly emphasized that each country's tariff was "reciprocal," reflecting the trade barriers set by their own countries for American goods, but did not disclose the underlying rate calculation method.
Late that evening, the Office of the United States Trade Representative released what appeared to be a complex formula, but essentially it used the United States' commodity trade deficit with various countries as a substitute indicator for its so-called "unfair trade practices," then divided this by the total amount of goods exported from that country to the United States, and finally took half of this value to determine the final tariff rate. If there was a trade surplus of the United States with that country, the country would bear a "minimum benchmark tariff" of 10%.
Economic professionals from many countries around the world criticized Trump, calling him an "economic illiterate." They argued that these tariffs imposed by Trump had no economic rationality, and tariffs would not change the logic behind America's trade deficit. The formula used by the Office of the United States Trade Representative seemed "impressive," but in reality, it deviated from the realities of trade economics. Some people believed that those who would suffer most from these tariffs would be poorer countries and American consumers, which was both foolish and destructive.
Local time on April 2nd, 2025, at the White House, Trump held a report on foreign trade barriers while giving a speech. Visual China.
The New York Times mentioned that Trump previously claimed that the tariff rates for various countries would be a comprehensive rate of "all tariffs, non-monetary barriers, and other 'fraudulent means.'" Especially these non-monetary barriers, including a large number of difficult-to-measure legal and other policies, were viewed by Trump as the primary reason for the huge trade deficit generated by the United States.
However, James Surowiecki, an American financial writer, posted on social media that he found that the announced tariff rates were not derived in this way but were simply calculated by dividing the United States' trade deficit with various countries by the total amount of exports from those countries to the United States. Of course, since Trump claimed himself to be "well-intentioned," the final tariff rate was obtained by halving the result.
In an earlier press conference, a White House official stated that these data were calculated using mature methods by the White House Council of Economic Advisers (CEA). The official added that this calculation model was based on the concept that the trade deficit between the United States and any country was the sum total of all "unfair trade practices" and "frauds" by that country.
Later, the Office of the United States Trade Representative clarified the calculation method on its website, although it used some mathematical symbols that might be difficult for ordinary people to understand. However, The New York Times found after sorting through it that this seemingly mysterious formula was essentially still based on the United States' trade deficit with foreign countries, divided by the total amount of exports from those countries to the United States.
The calculation formula published by the Office of the United States Trade Representative (Note: After the so-called accounting, the two coefficients ε and φ were given values of 4 and 0.25 respectively, so their product was 1, and the formula could be simplified to express as, the comprehensive tax rate = US export volume - US import volume / US import volume.) Office of the United States Trade Representative website.
According to this calculation method, Vietnam and Cambodia were respectively levied tariffs of 46% and 49%, as they exported large quantities of finished products to the United States but imported very little from it. By contrast, Britain only faced a "minimum benchmark tariff" of 10%, because last year the United States had a trade surplus with Britain.
The Financial Times cited economists as saying that the calculation method used by the Office of the United States Trade Representative had serious economic flaws and would not successfully achieve its proclaimed goal of reducing bilateral trade deficits to zero. They added that although the White House claimed "tariffs are effective," trade balances are driven by a series of economic factors rather than just tariffs alone.
Thomas Sampson, associate professor of economics at the London School of Economics, said that this formula was merely a "fig leaf" for Trump's mistaken obsession with bilateral trade imbalances and emphasized that imposing these tariffs had no economic rationality.
In a broader sense, Sampson believed that tariffs would not eliminate the potential macroeconomic drivers of the U.S. trade deficit. "As long as the U.S. does not have enough savings to finance its own investments, it must borrow from other regions of the world, which requires the U.S. to run a trade deficit. Tariffs will not change this logic."
The calculation method used by the Office of the United States Trade Representative clearly ignored previous commitments made by the Trump administration — that reciprocal tariffs would be based on a comprehensive assessment of bilateral trade relations (including taxation, regulation, and other non-tariff barriers).
George Saravelos, head of foreign exchange research at Deutsche Bank, pointed out that this approach of simply adding high tariffs based on the scale of nominal trade deficits was highly mechanistic and could lead to "endless haggling" between various countries and the U.S. government over the coming months.
Economists also criticized Trump's fixation on reducing bilateral trade deficits to zero, calling it an "economically illiterate" idea, as there are always certain goods that cannot be produced domestically due to natural conditions or economic feasibility. For example, bananas cannot be grown in the U.S. itself.
Oleksandr Shepotylo, a计量 economist at Aston University in the UK, recently modeled the impact of a global trade war. He said that using economic formulas gave the documents from the Office of the United States Trade Representative the appearance of being related to economic theory, but in reality, they deviated from the realities of trade economics.
"The formula... will give you a tariff level to reduce bilateral trade deficits to zero, which is a crazy goal. There is no economic reason to maintain trade balance with all countries." He said: "So in this sense, this policy is very unorthodox and cannot be defended at all."
John Springford, a trade economist at the Centre for European Reform (CER), added that the result of the tariffs would not eliminate trade deficits but cause pain to poorer countries and American consumers.
"This plan will only target poorer countries with significant trade surpluses with the U.S., rather than eliminating the trade deficits the U.S. has with them. The export shares of these countries will simply be transferred to other poor countries producing T-shirts and electronics." Springford said.
"It will also harm American consumers because the pass-through rate of tariffs is higher than what the U.S. Trade Representative claims, and dollar appreciation often offsets these effects by damaging American exports. In short, this is both foolish and destructive." Springford added.
Innes McFee of Oxford Economics Consultancy Institute also agreed: "Tariffs are not a good way to reduce any country's trade deficit. What they achieve is a real impact on the income of American consumers."
Barret Kupelian, chief economist of PricewaterhouseCoopers, attempted to explain the policy logic of the Trump administration. He stated that the formula merely reflected Trump's intention to expand the U.S. manufacturing base and reduce reliance on imported finished products.
He raised the question: "Is Trump making a deal or making a transformation—Is he really prepared to endure the pain of this transition period, or is he merely using it as a negotiating lever to extract concessions from trading partners?"
This article is an exclusive contribution by the Observer Network and unauthorized reproduction is prohibited.
Original source: https://www.toutiao.com/article/7489104689754079780/
Disclaimer: This article solely represents the views of the author. Welcome to express your attitude by clicking the "thumbs up/thumbs down" buttons below.