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The dumb insidious formula for trump's "reciprocal" tariffs [1]
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Date: 2025-04-03
As we all know, the trump regime announced the much anticipated tariff structure yesterday.
It is a 10% blanket tariff across the board, with much higher "reciprocal" tariffs against many countries.
The reciprocal rate values look bogus; they look nowhere close to actual tariff rates imposed by foreign countries on U.S. goods.
And now we know why.
The reciprocal tariff rate is simply half the trade deficit divided by the total imports from the country, rounded up, with a minimum of 10%. It has no relationship with the actual tariff rates charged by the country on U.S. goods.
E.g., for Vietnam: $123.5b trade surplus, $136.6b imports by U.S.; reciprocal tariff = 123.5 / 136.6 / 2 = 46%.
The "geniuses" at the White House are trying to put a lipstick on this pig by posting this “sophisticated-looking” equation with impressive-looking Greek symbols for the tariff rate supposedly charged by other countries.
Note that the ϵ * φ factor is 1, since they chose ε = 4 and φ = 0.25; hence, the formula reduces to simply the trade deficit divided by imports, which has no relationship with the actual tariff rates charged by the country on U.S. goods.
So, this essentially means that foreign countries should pay the U.S. half of our trade deficit with them. Actually, it will be importers and U.S. consumers who pay the tariffs.
E.g., if they export $10b to us and we only export $2b to them, they (we really) should pay the U.S. govt. half the difference = $4b. It's not half their profits or half their tariffs, it simply half of their export minus import revenues (i.e., the trade deficit). Even if the trade deficit is zero or negative, they (we the people really) are required to pay 10%.
It is mind-boggling and incredibly destructive to the economy and to people’s lives and livelihoods.
Markets this morning are on track to wipe out nearly $2T from US stocks. And a similar amount from retirement and savings accounts. finance.yahoo.com/...
U.S trade deficit in 2024 was $918.4b. So, the trump regime hopes to raise half of that, i.e., $459b, in one year. They have been touting a $600b number, probably because the trade deficit is expected to be even higher in 2025.
Who will pay this amount? Importers in the U.S., who will pass on the costs to consumers.
Who will benefit from $600b worth of extra taxes on U.S. consumers? Why of course the billionaire class, who need their tax cuts increased and extended. And the grift class, which is probably shorting stocks based on insider information.
The gaslighting is now in full force on how this will raise treasury revenues and reduce everyone’s taxes, how economists and educated people are all wrong, why stock will prices will rise again to values never seen, blah blah, while the true benefits will accrue only to the billionaire class. And the grifters.
Let’s make sure the good people of our nation, including trump-voters, understand this.
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