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Comment by doener

8 days ago

"This guy cracked the tariff formula: @orthonormalist

It’s simply the nation’s trade deficit with us divided by the nation’s exports to us.

Yes. Really.

Vietnam: Exports 136.6, Imports 13.1 Deficit = 123.5

123.5/136.6 = 90%"

https://x.com/Geiger_Capital/status/1907568233239949431

28 comments

doener

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aurareturn  7 days ago 

  Vietnam: Exports 136.6, Imports 13.1 Deficit = 123.5

Taking Vietnam as an example, keep in mind that the trade deficit calculation only uses physical goods.

Vietnam exports low value physical goods to the US. The US sells high value non-physical services such as Microsoft office, ChatGPT, Netflix, Facebook ads, iOS Appstore fees, iCloud subscriptions, etc to Vietnam. Other services include engineering consultants, US tax auditors, US consulting companies, etc. None of these are factored into the formula.

So a country like Vietnam gets royally screwed by this formula. They are actually buying way more from the US than just the physical goods.

If you're Vietnam, it's very hard to "just take it" as suggested by Treasury Secretary Scott Bessent. The formula is flawed in the first place.

If we truly want fair, the formula should be based on total profit of the goods and services sold. Services have much higher margins than physical goods typically.

croes  7 days ago

Some think AI helped with the formula

https://universeodon.com/@cryptadamist/114271484597938775

  • gruez  7 days ago

    The tariffs might be a bad idea, but this accusation is ridiculous. For a simple methodology like this, it's trivial to prompt engineer a LLM to produce the same response. It doesn't mean that that's how the administration came up with the policy, any more than a LLM getting the same (correct) solution as a student on an assignment means the student used a LLM on that assignment.

    • Spivak  7 days ago

      I think the accusation carries more weight than you're implying because while correct answers are all similar having two students give eerily similar wrong answers is often used as evidence for cheating.

      The fact that this announcement is, to put it generously, weird, and not how anyone in the real world actually implements tariffs points to this administration going with the formula from some undergrad econ textbook or econ blog they found and applying it to a spreadsheet. Maybe they got it from an LLM, maybe they didn't, but what matters is the college sophomore level of consideration of the individual tariffs.

      6 replies →

  • mateus1  7 days ago

    The takeaway from the X-poster being "it's good that they're using LLMs" is hilarious. Why praise the method if the end result is so bad?

mrb  7 days ago

Holy cow! I had to check for myself: there are even more data points on trade balance for all countries at https://www.census.gov/foreign-trade/balance/index.html (whereas @orthonormalist used a partial list from wikipedia) and the percentages I calculate line up exactly with the Trump's full list of "Tariffs Charged to the USA" percentages (https://x.com/RapidResponse47/status/1907541343250878752) !!

Specifically they used 2024 trade balance figures. Example: take a random country, like Botswana, and the country's page at https://www.census.gov/foreign-trade/balance/c7930.html shows a 2024 trade balance of 104.3 (exports) and 405.1 (imports) so 1-104.3/405.1 = 0.74 which matches the "74%" "tariffs charged to the USA" claimed by Trump...

Rarely you get handed such blatant evidence that someone produced bullshit numbers and/or doesn't understand where the numbers come from !

  • mrb  7 days ago

    Edit: someone said it doesn't work for Japan but it does. Every country I checked by hand matches the figures exactly... For Japan the figures are from https://www.census.gov/foreign-trade/balance/c5880.html and their 2024 trade balance is: 79,740.8 (exports) and 148,208.6 (imports) so 1-79740/148208 = 0.46 which matches the 46% "Tariffs charged to the USA " from the table shown by Trump...

fedeb95  7 days ago

thanks for the information. In light of this, it seems pretty silly: economy on a world scale isn't a line, it's more like a ring (country A has a deficit with country B, which has a deficit with country ... N which has a deficit with country A) at best. Isn't it like saying everyone should trade everything at the same price with everyone?

TrackerFF  7 days ago

...and every country USA has a positive trade with, will get slapped with the 10% tariff. Every country on the table Trump posted, that have received the 10% tariff, the US have a positive trade with.

No winners in this one.