Are Trump's 'Rate' claims set up? Here is how they were calculated

Copyright © HT Digital Streams Limit all rights reserved. Economics Trump administration did not provide details on how the tariff rates were calculated. (AP) Summary The tariff rates accusing the White House countries of being imposed on US goods do not pick up. The figures flew through Trump match with another relationship derived from trade data, which does not match what rates actually mean. After days of uncertainty and speculation, US President Donald Trump announced his promised reciprocal trading tariffs on almost all countries on Thursday. The numbers he used to decide how badly countries should be punished fail a basic recent test. There is little connection between what countries actually impose on US imports and what Trump has accused them of. It fueled speculation that the rates were calculated using a simple formula rather than a careful analysis of the complex nature of rates, trade and non-trade barriers and currency movements. The US seems to have derived the tariff rates imposed by other countries by dividing the value of the trade deficit by dividing the value of imports from that country. For example, US trading deficit with India in 2024 was worth $ 45.66 billion, and the country imported goods worth $ 87.42 billion, bringing the number to 0.52 or 52% ‘tariff rate’ as calculated by the Trump administration. The ‘reciprocal’ rate is then half of it, or 26%, on Indian goods. The theory was first flowed by James Surowiecki, a financial writer, on X (formerly Twitter). A Munt analysis of US official trade data confirms this theory for every non-European country with which the US has a trade deficiency. For all countries with which the US has a trade surplus, the White House has slapped a general rate of 10%. Individual members of the European Union were excused from the ‘tariff’ based on this method; The EU has a general tariff based on the assumption that it imposes a 39% rate on US goods. Russia, for which the figure would be 83%, is not part of the list. To be sure, a tariff is a tax rate that countries impose on their goods as a way to discourage them from entering their own domestic manufacturing or promoting their own domestic manufacturing. It can vary for each product. The right way to determine the tariff rate imposed by a country would be on average based on the tariff on each individual product, adapted to the value of importing that product. This would be the ‘weighted average tariff rate’. According to an analysis of data from the World Integrated Trade Solutions (Wits), the weighted average tariff rate imposed by India on US products was only 9.6% in 2023, although higher than the 2.6% imposed by the US on Indian products. The calculation used by the White House produces some interesting results. Take, for example, the African country Lesotho or the French area of ​​Saint Pierre and Miquelon. The US claims that these small countries impose a 99% tariff on the world’s largest economy. But in reality, the US has negligible trade with these countries; It just happens that it is mostly driven by imports. Even economists are confused about how it was calculated. “Trump appears to use the various trading deficit of each country with the US as the basis for reciprocal tariff calculations, rather than the actual level of rates imposed by each country,” said Madhavi Arora, chief economist at Emkay Global Financial Services. Surowiecki wrote in his tweet: “I just figured out where these fake tariff rates came from. They didn’t actually calculate tariff rates + non-tariff barriers, as they say they did. The Trump administration imposed a ‘discounted’ reciprocal rates of 26% on India, which is half the tariff that the White House claims that India is imposing the US. Trump has previously said that each country’s tariff rate would be joint for rates, non-monetary barriers and other forms of barriers such as currency movements. Although several of the factors mentioned by the Trump administration are difficult to quantify, the White House officials did not give details of how the tariff rates were calculated, but said they were done by the Council of Economic Advisors using established methodologies. Also read: In maps: How Trump’s reciprocal tariff plans can affect India, the tariffs imposed by the US will come into effect from April 9 and will remain in effect “until President Trump determines that the threat posed by the trade deficit and underlying non -resiponation is satisfied, resolved or noted,” the White House said. However, some goods are exempt from reciprocal rates such as steel/aluminum articles and cars/car parts that have already been increased, among other things, to increased rates, pharmaceuticals, semiconductors, wood articles and energy and other certain minerals that are not available in the US. The release of pharmaceutical products is likely to help India retain its export market share in the US. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #wone Factors #In Maps Mint Specials