Trump's "reciprocal tariff" calculation
The essence of Trump tariff calculation: for a given country, it is the value that would bring the US trade deficit with this country to zero . In theory (according to the equation), the tariffs for countries with which the US has trade surpluses (e.g., Netherlands, UK, Australis...) should be negative. However, Trump puts a floor for the reciprocal tariffs: 10%. He also puts a ceiling: 99%. For example, the US tariff for Vietnam needs to be 90.4% to balance the trade according to their calculation. Out of kindness and generosity, Trump imposes a 46% tariff (about half of 90.4%) on Vietnam. x i (exports to Vietnam) = $13.1B m i (imports from Vietnam) = $136.6B ε (elasticity of imports) = -4 φ (passthrough from tariffs to import prices) = 0.25 Trump's tariff calculation has little to do with conventional tariffs. Vietnam's tariffs on US goods are 9.4% on average. This number is not even included in the calculation. Ideally, Trump should use a different term for the perceived ...