Remind me, how did the US work out the tariff numbers?published at 12:00 British Summer Time
Image source, ReutersIf you scan across Donald Trump’s tariff chart, you’ll see that the value in the second column equals roughly half of the number in the first column for most countries. There’s a reason for that.
The two columns represent:
- Tariffs that countries supposedly charge the US
- Tariffs the US will impose on other countries
Initially, it was assumed that the figures were based on existing tariffs plus other trade barriers (like regulations and licensing rules) which make trade harder.
But, the White House has now published its official methodology, and it turns out there is a simple equation behind it
The calculations are based on a country’s goods trade deficit with the US. In other words, how much more the US imports than it exports. This number is then divided by the total value of imports from that country.
Let’s use China as an example: The US buys more goods from China than it sells to them – there is a goods deficit of $295bn and the total amount of goods it buys from China is $440bn.
Then, we find the percentage difference between those two numbers, which = 67% – that’s the number which appears in the first column of Trump’s chart.
And to work out column two – the tariff the US wishes to impose – you simply divide that number by two.
So in China’s case, the result is 34, and there you have the tariff.
