Trump has released his big tariffs plan and most observers are stunned, not just by the size and scope of the tariffs ,but also by the bizarre reasoning that has been given for the numbers
It is clear from the reasoning given for the sizes of the tariffs that Trump sees things in very simplistic terms. He thinks that the US should have a trade surplus with every other country and that if it has a deficit, that must be because those countries are engaging in unfair trade and should be punished accordingly. That is how he arrived at his tariff numbers.
For each country, the White House looked up its trade in goods deficit for 2024, then divided that by the total value of imports. Trump, to be “kind”, said he would, however, offer a discount, so halved that figure. The calculation was even distilled into a formula.
For example, take the figures for China:
- Goods trade deficit: $291.9bn
- Total goods imports: $438.9bn
- Those figures divided = 0.67, or 67%
- And halved = 34%
The ‘wanting to be kind’ reasoning for halving the original number is rubbish. I suspect that he likely would have gone with the full number but his economic advisors must have gagged at the size of them and so this half-baked rationale of ‘kindness’ has been thought up to make the numbers not so outlandish that they would have cratered the global trade patterns and the stock market.
But the reasons for trade deficits and surpluses are complicated.
Another part of the reason is US goods are too expensive for consumers in developing economies to buy – helping to explain some of the particularly large trade deficits – and new tariffs – for poorer countries.
Adam Tooze, an economic historian at Columbia University in the US, said there were “grotesque” policies for south-east Asian countries, including a 49% Cambodian tariff, and rates of 48% for Laos and 46% for Vietnam.
“This is not because they discriminate viciously against American exports, but because they are relatively poor. The US does not make a lot of goods that are relevant for them to import,” he said.
Vietnam in particular has become part of the global supply chain for major manufacturers, including US tech and clothing companies such as Nike, Intel, and Apple.
Lesotho, the tiny southern African country, one of the poorest in the world, is another odd example, facing a tariff of 50%. Among its main exports to the US are diamonds and clothes – demonstrating how links around the world for rare minerals are important for the US economy, but also how the US sought to boost development in African nations in recent years – with policies to encourage manufacturing by companies including Levi Strauss and Wrangler.
Sri Lanka gets hit with a 44% tariff. The country’s foreign reserves had been so depleted by the previous government’s looting and mismanagement that they can barely import basic necessities, so of course they will have a trade deficit since the US does not export the kinds of things it needs at this time.
What about countries with which the US has a trade surplus, such as with the UK where there was a $12 billion surplus in 2024? Does that surplus imply that the US is engaging in unfair trade with the UK and so does that country get some kind of negative tariff, i.e., the US imposes a tariff on itself to compensate? Nah. That kind of consistency is for wusses.Trump sees things as ‘heads I win, tails you lose’. All those countries with whom the US has a surplus get slapped with a blanket baseline 10% tariff anyway.
This must be particularly awkward for Keir Starmer who has been following the usual practice of UK prime ministers in groveling before the US president, hoping that the so-called ‘special relationship’ would spare them, even offering a state visit to Trump as a bribe. But that ‘special relationship’ only goes one way in favor of the US. However many times that particular truth has been demonstrated, UK governments continue to pathetically believe that they will get special treatment for the US..
Axios has looked at how various sectors of US business have production sites in the rest of the world and which ones will be particularly hard hit and how their stock prices are tumbling as a result. It concludes that it is a ‘bloodbath’.
John Cassidy also examines the plan.
While many countries do have higher tariffs than the United States, the differences aren’t as big as Trump claims, especially for some of America’s allies that he has targeted. “On a trade-weighted basis, the average U.S. tariff is 2.2 percent,” the Washington Post’s Jeff Stein and David J. Lynch noted. “Japan’s is 1.9 percent and the European Union’s is 2.7 percent, slightly higher than the U.S. average, according to the World Trade Organization.”
The levies Trump announced on Wednesday are separate from the ones he has already imposed on steel, aluminum, and foreign-made cars and parts. Taken as a whole, his tariffs represent a dramatic expansion from the more narrowly targeted duties he imposed in his first term—some of which the Biden Administration retained—and a final nail in the coffin for the open trading environment that reigned before 2016. According to Olu Sonola, an economist at Fitch Ratings, the average U.S. tariff rate on all imports will be around twenty-two per cent, a rate last seen around 1910. “This is a game changer, not only for the US economy but for the global economy,” Sonola said in a statement. “Many countries will likely end up in a recession.”
…The immediate political challenge for Trump is that, regardless of the prospects of his policies boosting U.S. manufacturing over the long term, in the short term they are likely to inflict pain on two major constituents of the G.O.P. coalition: working-class maga voters and Republicans in business.
While some of Trump’s supporters may cheer him for trying to protect the industries and communities they work in, they will now pay higher prices for everything from clothes and electronics imported from Asia to French wines and Irish whiskey to cars built inside and outside the United States. The tariffs of twenty-five per cent on foreign auto vehicles and parts, which were announced last week, will go into effect on Thursday. Daniel Roeska, an analyst at Bernstein, has estimated that they could raise costs for automakers, who rely on parts made abroad, by sixty-seven hundred dollars per vehicle sold.
Raising tariffs will raise revenues only if the volume of imports remains unchanged, but that is unlikely to be the case. When prices of imports rise due to the tariffs, US businesses will import less and that will reduce revenues, though it might reduce the trade deficits if US exports to other countries remain unchanged, which also seems unlikely. If many countries do end up in recession, then they will buy less from the US.
Furthermore, Trump is only talking about the trade deficit in goods and did not mention the role that services play in which the US has a surplus and is thus susceptible to retaliation.
Tech giants, now at risk of being targeted by trading partners for tariff retaliation, have been running a big trade surplus with the rest of the world — a $705 billion surplus — as opposed to a deficit.
- Meta: $71.2 billion
- Oracle: $45.2 billion
- Amazon: $40.2 billion
- IBM: $31.9 billion
- Microsoft: $31.6 billion
In 2024, the United States exported about $2 trillion in physical goods and imported about $3.27 trillion. At face value, that would translate into a trade deficit of about $1 trillion. But for some time now, the U.S. has been exporting through routers: every time a foreigner streams a movie on Netflix or buys an ad on Facebook, the U.S. is exporting.
“We estimate that the U.S. enjoys a trade surplus of at least $600 billion in digital products,” said Hidalgo. “This is comparable to the total exports of France, which is the seventh-largest exporter in the world,” he added.
U.S. exports in digital advertising & cloud computing alone represent about $260 billion and $184 billion, respectively, according to his data. “Which is larger than the exports of the U.S. in crude or refined petroleum, the biggest export products of the U.S.,” Hidalgo said. “It’s reasonable for world leaders to look at U.S. tech for retaliation. If you are in a war with Russia, you target gas and oil. If you are trying to push around Germany, your target is cars. In the case of the U.S., the big export sector is the web,” he said.
Tech services won’t be the only target of trading partners, according to Jason Miller, assistant professor of logistics in the department of supply chain management at Michigan State University’s Eli Broad College. He expects massive foreign retaliation aimed at U.S. aerospace, machinery, food, beverage, primary metals, electrical equipment, computers & electronic products, energy, and especially, agriculture, and says that other nations have leverage in the fact that it’s been decades since the U.S. has had the ability to produce many of the products that other nations supply.
As with any major change in trade policy, it is hard to predict the knock-on effects since there are so many variables involved. It is going to take a long time for the dust to settle.
Trump has placed his 10% “kind” tariff on the Australian external territories of the Heard and McDonald Islands, which have a human population of exactly zero, and don’t import or export anything.
https://www.smh.com.au/politics/federal/penguins-seals-and-polar-bears-the-tiny-islands-caught-up-in-trump-s-tariffs-20250403-p5lowt.html
The link has a picture of a busy beach day on Heard & McDonald
Only if you want to get specific, pretty easy to predict the general outcome here
I have a theory, and it’s that they are trying to be so ridiculous that “trickle down” looks good again.
the Australian external territories of the Heard and McDonald Islands
Is that where the burger mc fries come from?
This is an interesting take on the traiff by Dr. Joeri Schasfoort.
That is one possibility -- but it would need Trump or someone in his team to be able to do the math -- which as we know is the domain of nerdish beta males. A more plausible explanation is The Trump formula is apparently what you get if you ask ChatGPT and other AI models to make tariff policy: from https://paulkrugman.substack.com/p/will-careless-stupidity-kill-the
I’m genuinely starting to wonder if someone or some group behind Trump is actually trying to engineer a financial crash… There’s been some funny movements in the gold price over the last week or so.
I was thinking about all this in the shower this morning, and one thing that occurred to me is that, if you want to have any chance of persuading people of changing their views around the subject, you absolutely must avoid this “actually, I think you’ll find it’s a lot more complicated than that” sort of framing. The fact that Trump’s framing here is absurdly simple is a benefit, and if you want to counter it, you need to use a framing which is at least as simple, but which ideally has the advantage of being closer to the truth. Fortunately, such a framing is readily available, and hinted at up there in amongst that wall of 10 dollar words:
Donald Trump wants to stop Americans buying stuff from places like China, Cambodia, and Vietnam, and the only way he can do that is by making Americans as poor as the Chinese, the Cambodians, and the Vietnamese.
The reason American imports more from the rest of the world than it exports is that America is very rich, and most of the rest of the world is very poor.
The rich buy more from the poor than the poor buy from the rich because the rich have money to spend, and the things the poor sell are cheap, whilst the poor do not have money to spend, and the things the rich sell are expensive.
The only way -- the only way -- to stop Americans buying more from the rest of the world than they sell to it is to make Americans poorer, until they’re as poor as the people in the rest of the world.
Obviously this is an over-simplification, and for many of us, there are strong arguments in favour of trying to equalise these gross inequalities between nations, but if you want to have a hope in hell of getting through to a Trump voter, you need (a) an argument that can be summed up in a dozen or so words, mostly of one syllable, and (b) to appeal to their base instincts and sense of American exceptionalism.
Donald Trump wants to make you poor.
They will have a hard time spinning this as a benefit for America.
Maybe this is why a Republican congressman quoted Nazi minister of propaganda Joseph Göbbels.
Because naturally he did.
.https://youtube.com/watch?v=l7Ho6xZKuMI
The quote is at the two-minute mark.
Elect a cretin, expect cretinousness. And expectations are being surpassed right and left…
One wonders how this is going to play out. Two points come to mind:
-- strangely enough and contrary to any “pillaging” claim, the US have had a sizzlin’ economic performace in this last decade. Ten-twelve years ago, the EU and the US were more or less equivalent in GDP, but today the US have 80% more! So instead of being happy they do their level best to sabotage the situation, because logic, right?
-- it may come to pass that the rest of the world simply goes on with free trade and leaves the US in a corner of its own, as a novel Hidden Kingdom of MAGA. China will rise as the new hegemonic power and the American Century will be a distant memory, brought to its end by internal contradictions and sheer stupidity.
We shall see what we shall see, here’s just hoping that any recession stays in the US and does not spill out too much.
A hypothesis worth considering is that Trump is a closet revolutionary Marxist, intent on bringing on the Final Crisis of Capitalism.
…
But then, after consideration, it should be rejected, in the face of the abundant evidence that Trump is an ignorant idiot inhabiting a fantasy world he now has the power to impose on everyone else.
For completeness, I should mention another hypothesis attributing a degree of rationality to Trump: that the aim is to force any business that depends on imports to beg him for an exemption, allowing him to impose on those businesses whatever conditions he wishes, to enhance his power and further his project of ending democracy and the rule of law in the USA once and for all. On the whole I’m sceptical about this, both because of the abundant evidence referred to @10, and because there must be a possibility that sufficient businesses and Republican politicos will decide he just has to go before he completely destroys the economy.
There is quite a lot of evidence that he did this last time around -- see, for example Politically connected corporations received more exemptions from US tariffs on Chinese imports, study finds.
However, this latest round of tariffs does seem to be operating on a whole other level of complete stupidity…
Dunc writes:
When I heard the usual suspects crowing over how this would bring industry back to the USA, here’s what I was wondering: Trump is either deporting (or putting pressure on immigrants to self-deport) the people who traditionally take the worst, lowest-paying jobs.
Additionally, the traditional industries that paid a living wage--e.g. steel, furniture-making, even textiles and clothing-making in some cases--largely disappeared 50 years ago. The people who were trained to do the work are all retirement age or dead. The equipment and factories are long-gone. We no longer have the infrastructure (which would cost massive amounts of money to acquire) nor the workers needed for these. We could hire bottom-level workers, but they’re fleeing or being deported.
Making sense of these tariffs is hard for several reasons.
The reasons and the tariffs change by the day.
The reasons they give also don’t make any sense.
One of Trump’s goals on the way to his New American Golden Age is to eliminate the personal income tax. The income tax will be replaced by tariff revenue, which is actually a sales tax.
The grade school level math doesn’t add up.
Personal income taxes for fiscal year 2023 were 2.2. trillion USD.
The overall tariff rate is now 24% on 3.3 trillion USD of goods imported.
So they would raise at most .77 trillion USD.
You can’t replace $2.2 trillion in personal income taxes with 770 billion in tariff taxes.
That $770 billion in tariffs isn’t going to happen either for a variety of reasons.
With high tariffs, our imports are going to drop by a lot.
That is actually the given idea supposedly, replace imports with made in America goods and services.
There are also a lot of ways to evade tariffs, reroute through low tariff countries and move manufacturing from high tariff countries to low tariff countries.
There will also be a lot of exemptions based on bribes and political connections plus stuff we really need to import anyway such as rare earths and cobalt.
So the actual number for tariff revenue is likely to be at most $400 to $500 billion.
Which isn’t going to replace the $2.2 trillion in personal income taxes either.
The Trump New Golden Age will be a disaster for old people.
.1. They desperately want to abolish Social Security, a very successful and wildly popular program because it works and has a lot of money to steal.
40% of retired Americans rely solely on Social Security for their income.
.2. Social Security has already been privatized any way.
Over half the population have 401(k)s and IRAs.
These are usually heavily invested in the stock markets.
Which Trump has managed to crash right now.
There go your 401(K) and IRA retirement plans.
In the new Trump Golden Age, old retired people won’t have any Social Security checks and their retirement accounts won’t have a lot of money either.
Ironically older voters preferentially voted for the GOP and Trump.
For once, Dems and other opposition figures here and abroad are using simple and useful framing for these tariffs. I’ve heard things like “tariffs are a tax on Americans/your groceries/workers” and “tariffs are to going to make you poor”. Best one that seems to resonate most is “tariffs are going to make your life/everything you buy expensive”. Dems can message about being financially responsible and actually be truthful about it (look up how the economy does better under Dem presidents or under Dem-led states). They can completely defang the only issue that the GOP pretends to be better at.
Maybe the Trump family and friends will be quietly accepting gym-bags full of used bills in return for preferential tariff carve-outs. Maybe he’s demonstrating he has the financial death-ray and Don Jr is going to show up at company HQs and sneer “nice little company you have here, it’s be a shame if you get a tariff…”
I’m interested in the guess that some, or all, in the Trump regime are actually trying to crash the economy. Has anybody noticed any short selling going on recently? “Just asking.”
Gangsternomics.
A workmate has observed that, at a stroke, Trump is doing more for the environment than the last five presidents combined (counting himself). Think of all the container ships, freight aircraft, trains and trucks that will stop burning fuel as a direct result of the massive drop in international trade. We’ll hit those global warming targets yet!
I can only hope Australian leadership sees the obvious mental illness at the heart of US governance, and takes steps to disentangle our nations.
The point of these tariffs, according to the Sensible Right, is to force the re-establishment of primary manufacturing in the States. Back in the ‘30s you were pretty much self-sufficient and unbeholden to other countries (I know I know, I’m not the one making this argument) and everyone had a job. We need to go back to then! Every man had the dignity of providing for his family! Everyone was employed or they starved!
So it’s good that those furriners are being deported, they’re taking all the jobs Noble Americans should be doing, the shoe-shining and vegetable-picking and house-cleaning. America will once again become a self-contained powerhouse with no dependence on external supply chains! No need for the woke welfare state that weakens us all!
The Sensible Right believe this with all their hearts. Trump doesn’t, not for a second, but they do. It goes hand in hand with the destruction of the government. There are too many fetters on businesses! Such regulation! How can America be great when you’re not allowed to pollute at will or kill your employees?
I know people who think like this. I had a flaming argument with one of them yesterday, he believes with utmost sincerity that we need to go back to the 30s when it was, somehow, a halcyon time for business and employees. Yes, he’s very wealthy. Mum and dad were ENT surgeons, he went to Sandhurst. He’s a self-made man you know.
@ 20 Holms
Albanese is fully aware of the “obvious mental illness”, but it’s not that simple.
https://www.theguardian.com/us-news/2025/apr/03/donald-trump-tariffs-antarctica-uninhabited-heard-mcdonald-islands
Australia is dependent on the US for defence.
Defence against whom? I guess the idea is that China might swoop down and seize Darwin, but that doesn’t look like a short-term prospect. Ditto Indonesia. Ditto Japan. Are you maybe worried about attack by New Zealand? Papua New Guinea? East Timor?
In fact, I’d say the country most likely to invade Australia in the next few decades is… the USA.
Australia hasn’t been attacked since World War II; since then, our only military exposure has been because we joined them in an attack on a third party. And even then, we might not have been attacked in WWII at all had we not sided with our allies to help them; Japan had given no sign then of wanting our land. On the other hand, it is our involvement with American expeditionary forces and spying efforts that are likely to generate animosity towards us. Disentangling ourselves from them to some extent -- at minimum, ceasing to join them in pointless military ventures -- is likely to increase our safety.
@KG
Defence against the USA obviously
#21, badland, wrote,
Back in the 1930’s? In the middle of the Great Depression where the economies of countries all over the world was stuck in a liquidity trap, extended and made worse by the Smoot-Hawley tariffs? A period when unemployment was at around the highest it has ever been, world-wide? That 1930’s? Wow. The person you were arguing with needs to learn a little history.
If they were aiming for the 1950’s, after Bretton-Woods, they might have an argument. And, in fact, that’s what the video K. Swamy linked to at comment #5 suggested. That the Trump economic advisors are looking to revive Bretton Woods with a few modifications, like other nations paying the US for protection. The underlying idea, if the video is correct, would be for the USA to eventually remove tariffs on countries/economic regions which are allies and do not threaten US manufacturing while retaining them on nations who are seen as economic rivals. So Canada, the UK, and Australia would quickly drop back into a low, or no, tariff category while the EU may take longer and China may always have high tariffs. As the video points out, this is probably not a plan which would be possible in our modern world. Countries like Canada, Mexico, and Australia already have strong trade agreements with places like China and the EU, and would more likely abandon the US to it’s isolationism than join the US in closing off their own access to cheap labor and growing markets.
Having working in automotive engineering and worked closely with our manufacturing plants, I will say that less and less people are needed at the plant than they were in the 1930’s or 1950’s. There is still a disconnect between design and manufacturing, where designs are not always easily assembled by automated equipment. I think we have reached close to the limit where a person assembling the fiddly-bit is cheaper (from a time and scrap perspective) than a robot doing the same task. But there are fewer fiddly-bits of assembly these days. Most of the people at our plants are setting up the equipment to run, or moving parts from one station to another. Even if manufacturing did return to the USA, the number of jobs created by doing so would be a small fraction of the jobs needed in the 1950’s.
Could manufacturing be moved back to the US? Sure. But to do so what needs to happen is to make it financially attractive. Start by eliminating property taxes on unfinished goods. That would create a huge incentive to keep more inventory locally, which would have follow-on effects of wanting to get those parts locally as well. Just that would boost US industry. Of course, one you eliminate property taxes on unfinished goods, that’s a huge drop in tax revenue at all levels of government. That would have to be recovered somehow. Like maybe taxing the rich more, or closing the loop-holes which enable some companies to pay zero taxes. Which means that we need a revolution in order to make it happen, because those who are currently in power will not even consider it.
@Holms: “[Since WW II, Australia’s] only military exposure has been because we joined them [the US] in an attack on a third party”
But not only the US. Australia joined with the British during the Malayan Emergency, and provided testing grounds for the development of the UK’s nuclear weapons. And at least technically, Australia’s involvement in the Korean War was at the behest of the UN, rather than the US.
And I’m not sure how you’d define Australia’s involvement RAMSI (Regional Assistance Mission to Solomon Islands), which was a combined police and military effort at the request of the Solomon Islands government that the US had nothing to do with. Or the Peace Monitoring Group in Bougainville province in Papua New Guinea.
But most of Australia’s other military engagements since WWII have been together with the US.
Where is Mano?
@ ^
Um… California dude.
Flex: yes. Obviously. And not a thing you wrote negates a thing I said about how these people think.
Silentbob: you’re barely worth the eyeroll you engender.
The point of these tariffs, according to the Sensible Right, is to force the re-establishment of primary manufacturing in the States.
We’re already subsidizing the hell out of defense companies. The problem is that capitalists exported the bottom of our industrial base in the 70s and 80s. In some cases, capitalists even exported tooling and expertise, e.g., creating a south korean domestic jet engine building capability. Scroll your memory back and you may remember discussions of how China required financial partnership and technology transfer as part of the deal for Apple to build iPhones with their cheap labor.
I can’t see this as anything but capitalists realizing they made a short-term profit and want to avoid the long-term consequences of their decisions. What they don’t/won’t understand is that it’s now too late. US manufacturing businesses starting up today will be tooling up with german, chinese, and korean CNC machines, running heavy smelters and furnaces from china, programmed robots from shenzen, software from siemens, and electricity from Canada. I’m waiting for some chinese company to build a steel plant that is tele-operated by AIs and controllers in shenzen, while american labor sweeps the floors at 38 hr/wk minimum wage no benefits.
All the jobs capitalists keep talking about creating are mostly shitty jobs mowing rich people’s lawns and waxing their cars or showing them your genitals. Capitalism did in fact consume itself in the race to the bottom.
@31, badland; I may be an outlier, but I prefer conversations where we exchange ideas and build on them rather than telling each other that their ideas are crap and only my idea is correct. I’m willing to believe that your idea may be worth considering, and even, as unlikely as it may seem, to be shown that I’m wrong (did I just hear a horse-laugh?).
@32, Marcus; years ago I came to a (probably erroneous) conclusion that if civilization is going to survive everyone will work in the tourist industry. When all manufacturing is completely automated; when the designs most people want are cataloged and downloadable; when cleaning, maintenance, and repair is done by robots; what will people do? A lot of them will probably travel, and when they are not travelling they will be showing other people around. I will be mowing the lawn around the historic courthouse while my wife serves tea to tour groups inside (Marcus will be making sharp things for tourists to buy as souvenirs, but he enjoys making sharp things so that’s okay). Then, on our vacation time, we’ll go someplace else. It will be the old joke about how the poor support themselves by taking in each others washing, but for real.
This was my comment #2, so I’ll be moving on now…. I suspect everyone else has already.