- The “reciprocal tariffs” announced by President Trump on April 2 rely on an equation based on trade deficits, not actual tariffs or taxes charged by other countries. Trump then halved the sum of this equation for “kind” reciprocation.
- Dividing the goods trade deficit by the amount imported by the U.S. results in the tariff percentage Trump applied to many countries on “Liberation Day.”
- The U.S. did not consider international trade in services, only goods. The U.S. is the largest services exporter in the world, and the largest goods importer.
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The idea behind reciprocal tariffs started out as a “very simple” proposition, the president declared in February. But the percentages revealed on “Liberation Day” appeared more complex.
“They charge us a tax or tariff and we charge them the exact same tax or tariff. Very simple,” Trump said from the Oval Office in February.
By April 2, the White House released a different interpretation of the widespread “reciprocal” tariffs the president sought to address.
“For nations that treat us badly, we will calculate the combined rate of all their tariffs, nonmonetary barriers and other forms of cheating,” Trump said on April 2. “Bangladesh is 74%, so you see what’s going on.”
But Bangladesh doesn’t charge the U.S. 74% tariffs.
How to calculate Trump’s ‘tariff’ rates
The White House said the below calculation was used in calculating, for example, the rate for Bangladesh. However, there’s a much simpler equation to get to 74%.
Take the U.S. goods trade deficit between the two countries and divide it by the amount the U.S. imports from that country. That equation alone gives you the listed tariff rate.
For Bangladesh, Census data shows the U.S. took in nearly $6.2 billion more in goods than Bangladesh imported of U.S. goods. Divide that deficit by what the U.S. imports (nearly $8.4 billion), and the result, rounded up, is 74%.
Author James Surowiecki on X appears to be the first to figure out the calculation. It rings true up and down the chart, except for where countries sport the 10% flat rate. Australia is one of those countries with which the U.S. has a trade surplus.
“This is not full reciprocal. This is kind reciprocal. But what we do is we cut it in half,” President Trump declared in his April 2 announcement. “My answer is very simple: If they complain, if you want your tariff rate to be zero, then you build your product right here in America. Because there is no tariff if you build your plant, your product in America.”
For what the U.S. will charge in return, Trump is cutting in half the listed rate.
Speaking more of Bangladesh, manufacturers in the country say Trump’s tariff is a massive blow. Bangladesh thrives on textiles. Its ready-made garment sector is supported by a skilled local workforce and low wages.
“Now we’ve whacked them with a very high tariff to bring back, what, apparel? It’s what I say: Are you going to knit your own knickers?” said Mary Lovely, an international trade economist and senior fellow at the Peterson Institute for International Economics. “I don’t think that’s what Americans are thinking about when the president says he wants to re-industrialize the United States.“
Some trading partners are missing from new tariffs
Some U.S. trade partners are missing from the chart. The White House said the likes of Mexico and Canada were excluded because the U.S. is already imposing separate tariffs.
Treasury Secretary Scott Bessent said Russia’s exclusion is due to sanctions and the fact that the U.S. does very little trade with the nation. Yet 2024 Census data shows a multi-billion dollar trade deficit with Russia, while for other countries, like Serbia, the trade deficit numbers in the hundreds of millions. Serbia is facing a 37% discounted tariff rate.
Notably, the U.S. didn’t calculate trading services in any equation, which would have lessened the sting on the European Union. The U.S. has a service trade surplus with the EU, but the percentage charged only calculates goods.