Economists sharply attacked Trump’s formula to calculate the « reciprocal » duties
Economists are sharply criticized the formula used by the White House to calculate what it calls « reciprocal tariffs ». According to them, it is too simplistic to achieve its goal of eliminating the US trade deficit. Well, they also say that this goal also makes no sense.
The administration defends its approach as a necessary step towards the disintegration of a system that, according to officials, is unfair to US workers and manufacturers.
How are the rates of the announced duties calculated, which should come into force on April 9?
In addition to a base duty of 10 percent on all imports from almost all countries, there is a higher penalty rate on imports adapted to each of them.
Exchange in the United States went through the worst day of 2020 because of fears of duties recession
The formula, published by the Sales Representative, the Minister of Foreign Trade of the United States, connects these criminal duties to the bilateral trade deficit of the United States with goods. In other words, the focus is on how much more the United States is importing from these countries than they export to them. The calculation establishes the ratio between the US trade deficit with a country and the overall export of that country to the United States. The ratio is then split in half to obtain what the administration called « reciprocally reduced duty ».
- In the case of China, for example, with a $ 279 billion commercial deficit divided by $ 427 billion – 65%exports of Chinese goods to the United States. The Trump rate announced is 67%. The same thing happens in many more punished countries. The announced ratios have nothing to do with reciprocity – with the real duties with which US imports have been taxed in these countries. In China, according to the World Trade Organization, it is an average of 7.5%and in the EU average 5.2%.
- Vietnam and Cambodia face huge additional duties of 46% and 49% respectively due to their large trade deficits with the United States (90% and 98%). They have recently arisen partly because companies have moved their production in these countries when the US government said they did not want them to produce goods in China. The European Union, with a more modest trade deficit, faces a 20 % duty.
Meanwhile, countries with no trade deficit with the United States will only pay the flat 10 % tax imposed on all goods. Countries with trade surplus that the White House has placed in this club include the UK (-17%deficiency), Brazil (-17%) and Singapore (-7%). According to the logic of the formula used, they should even have a negative duty, ie. The United States is paid for maintaining such trade.
Much of business and associations are not optimistic about « reciprocal » duties
Economists also criticized the formula for claiming that it reflected the constant commercial deficits due to suspected dishonest commercial practices by the US commercial partners. They point out that the services are obviously omitted – which make up the majority of the US economy and an important part of its exports – from trade deficit calculations, which makes the US trade relations look more unilateral.
| « They have laid an unprotected basis for an unprotected policy, » said Douglas Holtz-Ikin, president of the Conservative American Action Forum, quoted by the Washington Post. |
The administration says this approach takes into account the duties, as well as the so -called non -tariff barriers, which include regulatory restrictions or currency manipulations.
The problem, the economists say, is that commercial imbalances can be due to many factors that have nothing to do with trade barriers or unfair practices.
- Bananas and coffee, for example, cannot be grown on a large scale in the US and must be imported. This increases the US trade deficit with any country that produces many of these products.
- Another example: although the US has a trade deficit with Canada, it is not due to trade restrictions, but partly to Canadian exports of a heavy oil variety, because refineries in the United States are particularly good at refining it.
On Thursday morning, the Minister of Commerce Howard Nalik defended the formula, demanding that the Council of Economic Advisers of the White House and its ministry have a large team of economists who have studied the issue of duties and non -tariff barriers to come up with the administration methodology.
« It’s a rearrangement of world trade and it’s really thoughtful, » he said on CNBC.
:format(webp)/s3/static.nrc.nl/bvhw/files/2025/04/data130576345-1a4424.jpg "Radboud University board wants to break ties with Israeli universities")
