Comment by Karupan
8 days ago
Genuine questions: why are they calling it “reciprocal”? Is the US just matching the tariffs set by the other countries?
Also, this announcement has wiped out any plans of buying tech products this year, plus a holiday to the US and Canada later in the year. Good thing too, as the entire globe is probably staring down the barrel of a recession.
Someone calculated the formula used. They divided the trade deficit of each country by total trade of each country and assumed that was all a tariff.
So for example Indonesia and the US traded $28 billion. The US has a 17.9 billion trade deficit with Indonesia. 17.9/28 =0.639, or 64%, which is assumed to be all caused by tariffs. So they divide by two and impose 32%.
Anyway no the US isn't matching tariffs they're dramatically exceeding them.
Thanks for pointing this out. As a follow up, if the US has a trade surplus, they seem to just slap 10% in both columns.
That's a bit of a messed up way to calculate things.
I also think the US deficits are hugely overstated because much of what the US produces is intellectual capital rather than physical goods and the profits are made to appear in foreign subsidiaries for tax reasons. Like if I buy Microsoft stuff in the UK, Microsoft make out it was made in Ireland for tax purposes, but really the value is created in and owned by the US. The US company both wrote the software and owns Microsoft Ireland. So much of the perceived unfairness Trump is having a go at isn't real.
You raise an excellent point that US corporate tax evasion is exaggerating the trade deficit. However, from the perspective of winning US elections, I think it does not change the issue that the trade deficit falls more on de-industrializing Midwestern states, and the corporations you are referring to are concentrated in Northeastern and Western states.
Secondly, if Microsoft or Apple makes the profit appear in Ireland, it cannot move that money back to the domestic US, right? So as long as the money sits overseas, it would not count towards US trade and thus the deficit calculation is fair.
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That's a great point. I checked into this, and if and when the profits are repatriated they indeed only show up in the capital account, not the current account.
However, in practice even if not repatriated those exports show up in the us economy. Profits raise the share price, which allows stock grants at higher values, effectively a wage as one example.
I wonder how big an effect this phenomenon you highlight has. Must be a fairly large overstatement of the US trade deficit.
If the US has a trade deficit, doesn't that mean the US is trading make-believe pieces of paper for real goods.
Like, if I scribble on a piece of paper and then trade you the piece of paper for an incredibly engineered brand new laptop, is that bad for me? Is this a sign of my weakness?
I know economics can be complicated, and probably "it depends", but why is a trade deficit bad? Why does the Trump administration want to eliminate trade deficits?
It's just spin. The new duties are purely punitive.
It's like the blaming in a playground fight; who started first? For context: https://nitter.net/KushDesai47/status/1907618136444067901
Because when the blowback comes, people will be looking to cast blame for starting this whole trade war, and when that time comes Trump will point to the word "reciprocal" and say "we didn't start this, we were only reciprocating".
> Is the US just matching the tariffs set by the other countries?
No. Trump claims that the new tariffs are a 50% discount on what those countries tariff US goods at. (Even if that's questionable - is VAT a tariff?)
If he's correct, or anywhere close, this is a "tough love" strategy to force negotiations. We'll see how it goes. It also plays to his base - why should we tariff any less than they do us? And they have a point, it's the principle of the thing.
> If he's correct
He's not.
According to [1], the White House claims Vietnam has a 90% tariff rate.
According to [2], 90.4% is the ratio of Vietnam's trade deficit with the US -- they have a deficit of $123.5B on $136.6B of exports.
The same math holds true for other countries, e.g. Japan's claimed 46% tariff rate is their deficit of $68.5B on $148.2B of exports. The EU's claimed 39% tariff rate is their deficit of $235.6B on $605.8B of exports.
Who knows, maaaaybe it just so happens that these countries magically have tariff rates that match the ratio of their trade deficits.
Or maybe, the reason Vietnam doesn't buy a lot of US stuff is because they're poor. The reason they sell the US a bunch of stuff is because their labour is cheap to Americans. (They do have tariffs, but they're nowhere near 90%: [3].)
America's government is not trustworthy. Assuming that what they say is truthful is a poor use of time.
[1]: https://x.com/WhiteHouse/status/1907533090559324204/photo/1
[2]: https://ustr.gov/countries-regions/southeast-asia-pacific/vi...
[3]: https://www.investmentmonitor.ai/news/vietnam-gives-us-tax-b...
It's so quaint to me that people actually believe his rhetoric. How long do you think people will put up with high prices before they turn on him?
If high prices are inevitable, what’s their endgame? Are they actually incompetent or are people too pessimistic about what they’re attempting to do?
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> If he's correct
Trump is not in the business of being _correct_, or indeed caring about correctness as a concept.
And no, these are, obviously, not the actual tariffs, don’t be silly.