Given Trump's notorious disregard for the truth, it isn't surprising that yesterday when he revealed his so-called "reciprocal tariffs" on goods imported to the United States from other countries, massive lies were used to support his massive and economically destructive tariffs -- which amount to a gigantic tax increase on the American people.
Trump used the charts below to illustrate his tariff plan. The column just to the right of a country's name is titled "Tariffs Charged to the U.S.A. Including Currency Manipulation and Trade Barriers." That's a total lie, as I'll describe below. That column has nothing to do with tariffs charged to the United States, nor does it have anything to do with currency manipulation and trade barriers.
The column in yellow is titled "U.S.A. Discounted Reciprocal Tariffs." That's another lie, since the discount is from the figure in the other column, which as I just said has nothing to do with tariffs, so there's no way the yellow column can contain discounted reciprocal tariffs.
Today CNN had a segment about how the Trump tariffs were actually calculated, using Vietnam as an example. The calculation is absurdly simple. Indeed, childishly simple, given the tremendous economic pain these falsely calculated reciprocal tariffs will cause the world.
(1) In 2024 Vietnam exported $136.6 billion in goods to the United States, and Vietnam imported $13.1 billion in goods from the United States.
(2) So the trade deficit between Vietnam and the United States was $123.5 billion, the difference between the $136.6 billion of Vietnamese goods bought by the United States and the $13.1 billion of United States goods bought by Vietnam.
(3) The Trump administration divided $123.5 billion (the trade deficit) by $136.6 billion (the value of Vietnamese goods bought by the United States). That figure is .90, or 90%.
I first learned of this absurdly simple calculation from a post on X last night.
This proves that what Trump was saying at yesterday's Rose Garden reveal of the tariff amounts was a lie. Using Vietnam as an example, it is completely false that this country has a 90% tariff on United Stats imports.
Actually, Vietnam's tariff rate was 9.4% in 2023. So the Trump administration was off by a factor of almost 10. Instead of charging Vietnam the "discounted" rate of 46% on its exports to the United States, a truly reciprocal rate would have been 9.4%, or 10% to round up.
Trump kept saying that the existence of a trade deficit with another country means that the United States is being ripped off. That's ridiculous. International trade generally benefits both countries, the exporter and the importer.
We Americans benefit from goods (like shoes and clothing) made in Vietnam and sold here. Because Vietnamese workers are paid a low wage by our standards, we are able to save money on our purchases. Vietnam benefits by being able to employ their citizens at factory jobs that pay a decent wage by their standards. It's a win-win.
The main reason Vietnam imports few goods from the United States is that their citizens can't afford the expensive stuff that we make here. So the trade deficit isn't a conspiracy by Vietnam to rip us off. It's a result of Vietnam and the United States having very different economies, with the U.S. being much richer.
Trump is completely wrong in basing his tariffs on an assumption that the United States should have an equal value of imports and exports with another country, or there's something wrong. Today I heard an economist liken this false assumption to a store owner being upset that they are paying more money to their hair stylist than the hair stylist is buying from their store.
That isn't the way an economy works. Money circulates in complex fashions. Trade deficits arise for all sorts of reasons. It may well be that some countries should reduce their tariffs on imports from the United States. But like I've said, the way the Trump administration calculates the tariffs they're imposing on other countries has nothing to do with how large the tariffs those countries have.
A Washington Post story, "Economists say the way Trump calculated tariffs makes no sense," says:
Economists say the crude formula the White House used to calculate what it’s calling “reciprocal tariffs” is too simplistic to achieve its goal of wiping out U.S. trade deficits — and, for that matter, they say that goal doesn’t make sense, either.
...President Donald Trump’s tariff plan, announced Wednesday, would impose a 10 percent baseline tariff on all imports from virtually all countries — plus an additional punitive import tax tailored for each of about 60 countries.
The math used to come up with those rates is what experts are lampooning.
A formula released by the U.S. trade representative ties those punitive taxes to the United States’ bilateral trade deficit in goods with each country — in other words, how much more the U.S. imports from those countries than it exports to them. The calculation finds the ratio between the U.S. trade deficit with a country and that country’s total exports to the U.S. It then divides the ratio in half to produce what the administration called a “discounted reciprocal tariff.”
Economists criticized the formula for its assumption that persistent trade deficits are a reflection of allegedly unfair trade practices by U.S. trading partners. They point out that the math apparently leaves out services — which make up the bulk of the U.S. economy and an important proportion of its exports — from calculations of trade deficits, which has the effect of making U.S. trade relationships look more one-sided.
They also say there’s nothing “reciprocal” about the punitive tax rates because they’re disconnected from any actual barriers countries impose on U.S. imports.
“They’ve got an indefensible foundation to an indefensible policy,” said Douglas Holtz-Eakin, president of the conservative American Action Forum.
President Trump publicly announced his plan to apply sweeping tariffs several times throughout his 2024 presidential campaign. #DemocracyMatters
Posted by: sant64 | April 04, 2025 at 08:33 AM