Are Trump’s tariff rates made up? Here’s how they have been calculated

After days of uncertainty and speculation, US President Donald Trump announced his promised reciprocal trade tariffs on nearly all countries on Thursday. However, the numbers he used to decide how badly countries should be punished fail a basic smell test. There is little connection between what countries actually impose on US imports and what Trump has accused them of imposing.

The rates have been calculated using a simple formula for a very different metric unrelated to tariff rates, rather than a careful analysis of the complex nature of tariffs, trade and non-trade barriers and currency movements.

The US has derived the tariff rates imposed by other countries by dividing the value of the trade deficit by the value of imports from that country, according to the website of the US Trade Representative. For example, the US’ trade deficit with India in 2024 was worth $45.66 billion, and the country imported goods worth $87.42 billion, which brings that number to 0.52, or 52% ‘tariff rate’ as calculated by the Trump administration.

The ‘reciprocal’ tariff then is half of that, or 27%, on Indian goods.

Before the US gave official clarity on the matter, the theory was first floated by James Surowiecki, a financial writer, on X (previously Twitter). A Mint analysis of official trade data of the US for 2024 confirmed this for every single non-European country with which the US runs a trade deficit. For all countries with which the US has a trade surplus, the White House has slapped a general 10% tariff.

Individual members of the European Union have been excused from the ‘tariff’ based on this method; the EU faces a general tariff based on the assumption that it imposes a 39% tariff on US goods.

Interestingly, Russia, for which the figure would be 83%, is not part of the list.

This is not the only case where the numbers don't add up. The tariffs first mentioned in the White House charts that Trump presented in his press conference, which match the numbers Mint arrived at, do not fully tally with the official document released later. According to Bloomberg, for at least 14 economies, including India, the official document gives a tariff rate higher by one percentage point (i.e., for India, the tariff to be imposed by the US is 27%, going by this).

To be sure, a tariff is a tax rate that countries impose on each other on their goods as a way to discourage them from entering or to promote their own domestic manufacturing. It can vary for each product. The correct way to determine the tariff rate imposed by a country would be an average based on the tariff on each individual product, adjusted for the value of imports of that product. This would be the ‘weighted average tariff rate’.

According to an analysis of data from the World Integrated Trade Solutions (WITS), the weighted average tariff rate imposed by India on US products was only 9.6% in 2023, although higher than the 2.6% imposed by the US on Indian products.

The calculation used by the White House gives some interesting results. Take the African country of Lesotho or the French territory of Saint Pierre and Miquelon, for instance. The US claims these small countries impose a 99% tariff on the world’s largest economy. But in reality, the US has negligible trade with these countries; it just so happens that it’s driven mostly by imports.

For a country to which the US exports as much as it imports from there, this ratio would be zero, even if the imports are very high. That's an impossible situation, since countries cannot produce everything on their own (More on this here). If the US does not export anything to a country, this ratio would be 100%, irrespective of how little the imports are. What's clear is this is a figure derived from simple trade numbers, and have nothing to do with tariff rates.

Even economists are perplexed at how this has been calculated. “Trump seems to have used the respective trade deficit of each country with the US as the basis for reciprocal tariff calculations, rather than the actual level of tariffs imposed by each country,” said Madhavi Arora, chief economist at Emkay Global Financial Services.

Surowiecki wrote in his tweet: “Just figured out where these fake tariff rates come from. They didn't actually calculate tariff rates + non-tariff barriers, as they say they did. Instead, for every country, they just took our trade deficit with that country and divided it by the country's exports to us.”

The Trump administration has imposed a “discounted” additional reciprocal tariff rate of 27% on India, which is half of the tariff the White House claimed India imposes on the US. Trump had previously said that each country’s tariff rate would be a combined one for tariffs, non-monetary barriers and other forms of barriers such as currency movements.

While several of the factors that the Trump administration mentioned are difficult to quantify, the White House officials have not given details of how the tariff rates were calculated but said they were done by the Council of Economic Advisers using well-established methodologies.

Also Read: In charts: How Trump’s reciprocal tariff plans could impact India

The tariffs imposed by the US will come into effect from 9 April and will remain in effect “until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated”, the White House said.

Some goods, however, have been exempted from reciprocal tariffs such as steel/aluminium articles and autos/auto parts already subject to increased tariffs, pharmaceuticals, semiconductors, lumber articles, and energy and other certain minerals that are not available in the US, among others. The exemption of pharmaceutical products is likely to help India retain its export market share in the US.