Trump’s ‘reciprocal tariffs’ look to be a hoax. Here’s how you can tell

For weeks, Donald Trump has built up “Liberation Day” as a form of payback. The tariffs levied by the United States would be reciprocal, he said: “Whatever they charge us, we charge them.”

But now, after the US president unveiled his suite of so-called reciprocal tariffs, it’s evident that’s not what’s going on at all.

Donald Trump’s “reciprocal tariffs” are calculated by dividing the US’s trade imbalance by its imports from that country.Credit: AP

The chart Trump held up at his White House press conference listed a percentage for each US trading partner, in a column titled “Tariffs charged to the USA.” This figure included “currency manipulation and trade barriers”, such as Australia’s ban on imports of uncooked US beef – an example Trump singled out in his speech.

The US would impose a “reciprocal” tariff on each nation – around half of what that country was accused of charging the US, or in the case of many countries, a flat rate of 10 per cent.

There was no explanation given for how each country’s “tariffs charged to the USA” were calculated. Boffins on the outside quickly worked it out: the number is just the 2024 US trade deficit with that country divided by the US’s imports from that country.

For example, in 2024, the US trade deficit with China was $US295.4 billion ($469 billion). US imports from China were $US438.9 billion. Dividing the deficit by the imports equals 67 per cent, which is the exact figure shown next to “tariffs charged to the USA” on Trump’s chart.

It’s the same for Thailand, Indonesia, the European Union, the Philippines, Israel, Japan and every other country this masthead has checked so far.

The figure has little to do with tariffs or non-tariff trade barriers. It’s simply a reflection of the US’s trade imbalance with that nation.

Countries with which the US has a trade surplus, such as Australia, got hit with a “baseline” rate of 10 per cent. The ban on US beef had no discernible impact.

Alan Cole, a senior economist at the US Tax Foundation think tank, confirmed he had replicated the calculations using census trade data from 2024.

Indeed, the United States Trade Representative (USTR) in effect confirmed this is what it did.

“Reciprocal tariffs are calculated as the tariff rate necessary to balance bilateral trade deficits between the US and each of our trading partners,” it said in a statement. “This calculation assumes that persistent trade deficits are due to a combination of tariff and non-tariff factors that prevent trade from balancing.”

That’s a pretty big, conspiratorial assumption. Maybe, when there’s a trade deficit, it’s just because the US wants more stuff from a country than that country wants from the US.

The USTR went on: “While individually computing the trade deficit effects of tens of thousands of tariff, regulatory, tax and other policies in each country is complex, if not impossible, their combined effects can be proxied by computing the tariff level consistent with driving bilateral trade deficits to zero.”

In other words: they didn’t bother trying to evaluate the significance of these so-called trade barriers and grievances, and assigning a “reciprocal” tariff in return. They just used the trade balance as a proxy.

It could have been done by an AI chatbot. Maybe it was.

Trump loves to accuse the mainstream media of perpetrating “hoax” stories against him, but in this case, the concept of reciprocal tariffs appears to be a hoax of his own.

It’s worth noting that the president’s legal justification for these tariffs is also thin. He is declaring a national emergency on trade deficits using the International Emergency Economic Powers Act and two other laws.

The executive order contends: “Underlying conditions, including a lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and US trading partners’ economic policies that suppress domestic wages and consumption … constitute an unusual and extraordinary threat to the national security and economy of the United States.”

Expect that to be challenged. At the same time as Trump was unveiling his Liberation Day tariffs, four Senate Republicans sided with Democrats in the Senate to pass a bill that would rescind Trump’s earlier emergency declaration regarding the Canadian border, used to justify tariffs on that country.

The four senators crossed the floor, so to speak, despite Trump warning them not to and blasting them as “extremely difficult to deal with and, unbelievably disloyal”.

There’s little prospect of the bill passing the House of Representatives, but it indicates growing frustration within Republican ranks about Trump’s tariff agenda – and the way he’s going about it.

“Tariffs are a terrible mistake,” Rand Paul, a Republican senator from Kentucky, told the chamber. “They don’t work, they will lead to higher prices, they are a tax, and they have historically been bad for our economy.

“But even if this was something that was magic, and it was going to be a pot of gold at the end of the rainbow, I wouldn’t want to live under emergency rule.”

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