LDN - Business

Trump's tariffs aren't strictly reciprocal. Here's how he calculated them

[April 04, 2025] By WILL WEISSERT

WASHINGTON (AP) — President Donald Trump promised tariffs that would raise U.S. import taxes high enough to mirror what others assess as trade penalties on American goods.

What he's actually imposing is based on far more complicated math.

Here's a look at how the White House got its numbers:

Why do the new tariff rates often differ by country?

The Trump administration has declared an “economic emergency” to bypass Congress and impose a 10% tariff on nearly all countries and territories. It has set even higher levies for about 60 nations that it says are the “worst” offenders.

The 10% global tariffs take effect at 12:01 a.m. Saturday. The higher tariffs set for specific countries are due to kick in at one minute past midnight on April 9.

Among the so-called worst offenders is China, which Trump argues protect its producers through “malicious” trade practices in addition to tariffs. Those efforts include actions such as imposing value added taxes on all goods, dumping overproduced products on markets to artificially deflate prices, or manipulating currency.

To determine how much higher those nations' rates should be, the White House says it calculated the size of each country’s trade imbalance on goods with the United States and divided that by how much America imports from that nation.

It then took half that percentage and made it the new tariff rate.

Why not just charge reciprocal rates?

The White House says its calculations kept new tariffs from going even higher for many countries and demonstrate that Trump is being “kind” to global trading partners.

The administration maintains that creating a baseline levy with few exemptions is necessary to keep China and others from skirting the new tariffs by manufacturing goods and then shipping them to Vietnam, Cambodia, Mexico or elsewhere to then be sent to the U.S.

That’s why the White House list of tariffed locations includes obscure places like the Heard and McDonald Islands, which are uninhabited. They are 2,550 miles (4,100 kilometers) from the coast of mainland Australia, which claims them as a territory.

Is every country affected?

No. Canada and Mexico are excluded because they already are facing 25% taxes on most imported goods that Trump announced last month, in an attempt to force both to crack down on fentanyl smuggling into the U.S.

The White House originally said all others would be affected by at least the 10% tariff. But administration officials clarified on Thursday that countries already subject to stiff U.S. sanctions — for example, Russia due to its invasion of Ukraine, as well as Iran, North Korea, Cuba, Belarus and Venezuela — will not face the new, 10% global base tariff.

Officials said that is because sanctions and other existing barriers mean the U.S. has so little trade with those places that deficits are minimal.

Why is Trump doing this?

The president has spent months insisting America was at its wealthiest at the end of the Gilded Age in the late 1800s and early 1900s, when it imposed high tariffs as the key means of generating revenue for the federal government.

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Cars are lined up before being loaded onto ships in the port at BLG Autoterminal Bremerhaven, Germany, Tuesday, April 1, 2025. (Sina Schuldt/dpa via AP)

Trump even suggested Wednesday that the U.S. moving away from higher tariffs and toward a federal income tax in 1913 helped trigger the Great Depression of the 1930s — a claim that economists and historians roundly reject.

A more contemporary explanation might be found in Project 2025, a comprehensive blueprint compiled by leading conservatives about how to shrink the federal workforce and push Washington further to the right. It spelled out how Trump might impose high tariffs around the globe, giving his administration more room to negotiate lower levies with trading partners in exchange for U.S. priorities.

White House officials insist the new tariffs are more about closing trade deficits, stimulating U.S. manufacturing and generating government revenue than eventually negotiating new trading deals.

But Trump has shown he is willing to back off on threats of tariffs in exchange for offers of concessions. His administration has said the president is always ready to make deals, a sign the new tariffs may prove to be more a bargaining chip than permanent policy.

Flying to Florida aboard Air Force One on Thursday, Trump said of making possible deals to reduce tariffs imposed around the world going forward, “Every country’s called us.”

“We put ourselves in the driver’s seat," he said. "If we would have asked some of these countries, or most of these countries, to do us a favor, they would have said, No. Now they’ll do anything for us.”

Why does US trade imbalances matter?

American trade policy created a U.S. trade imbalance worth $1.2 trillion last year, a gap that some experts believe should be addressed in order to ensure the country's long-term economic strength.

But many economists say the trade imbalances that Trump is looking to correct are based on more than countries just using high tariffs or protectionist trade practices to boost their own exports. Basing the White House's tariff math solely on trade deficits, for instance, fails to take into account U.S. consumer demand.

Americans relish buying BMWs assembled in Germany, as well as French wine and coffee beans from Guatemala, and their spending can fuel trade imbalances regardless of the tax and tariff policies of the countries producing those goods.

That means any attempt to close U.S. trade gaps by tariffs will likely mean increasing the cost of imported goods that Americans are buying, which in turn could hurt the economy because of increased inflationary pressures.

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Associated Press writers Josh Boak and Zeke Miller contributed to this report.

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