How Should You Calculate a Reciprocal Tariff Anyway?
The critics have a point, but they also miss the point.
President Trump’s announcement last week of new “reciprocal” tariffs sent global markets into a frenzy and set off a chorus of condemnation from establishment economists. One former Treasury official wrote in the New York Times that the administration had “got it all wrong.” Another critique from the American Enterprise Institute bluntly declared that the formula “makes no economic sense.”
So, is the criticism fair? To some extent, yes.
The formula used by the Office of the U.S. Trade Representative (USTR) to calculate reciprocal tariffs is deceptively simple. It takes the U.S. trade deficit with a country, divides it by U.S. imports from that country,
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