Trump Tariffs Backfire

This is why Trump’s tariffs will fail, while backfiring hard on the US economy

Donald Trump has imposed high tariffs on countries around the world, falsely claiming they are “reciprocal”. Trump’s deeply contradictory policies will likely backfire, hurt the US economy, fuel inflation, and fail to reindustrialize. But rich elites will benefit from tax cuts.

n his first term as president of the United States, Donald Trump launched a trade war against China. In his second term, he has expanded that trade war to many countries around the world.

In a ceremony outside the White House on April 2, which the US president dubbed “Liberation Day”, Trump announced sweeping new tariffs on dozens of countries, including high taxes on imports from top US trading partners: 54% on China, 46% on Vietnam, 25% on South Korea, 24% on Japan, and 20% on the European Union.

Trump falsely claimed that these tariffs were “reciprocal”, but they were actually unilateral. The White House calculated its duty rate on each nation not based on the tariffs it charges on US goods, but rather according to the trade deficit that the United States has with that nation.

It is not surprising necessarily that Trump has expanded US tariffs. During his presidential campaign in 2024, he told supporters at a rally, “The word tariff is the most beautiful word in the dictionary, more beautiful than love, more beautiful than respect”.

However, what was surprising about the tariffs that Trump announced on April 2 was how massive and broad they were. They will have an enormous impact not only on the US, but on the global economy, and could potentially even cause a recession.

All countries on Earth will face a minimum tariff of 10%. Additional duties will be levied depending on how big a country’s trade surplus is with the US.

The completely contradictory and inaccurate way in which the Trump administration tried to justify this trade war on much of the planet was a reflection of the half-baked and ill-conceived strategy that the White House has proposed to supposedly revive manufacturing in the United States, reduce the chronic trade deficit, and create a new international financial order.

In reality, Trump’s tariff tactics are likely to backfire significantly, fueling high rates of inflation and failing to reindustrialize the US, while incentivizing countries around the world to accelerate their search for alternatives to the United States and the dollar system.

The Trump White House doesn’t understand its own tariff formula

To begin, it must be emphasized that the Trump administration’s claim that US tariffs are “reciprocal” is patently untrue.

The financial journalist James Surowiecki emphasized that the White House “didn’t actually calculate tariff rates + non-tariff barriers, as they say they did. Instead, for every country, they just took our trade deficit with that country and divided it by the country’s exports to us”. He called the methodology “extraordinary nonsense”.

In response, White House Deputy Press Secretary Kush Desai criticized Surowiecki and wrote, “No we literally calculated tariff and non tariff barriers”. (This is false, and it earned a community note correcting it on Twitter.)

Desai linked to an official statement that was published on the website of the Office of the US Trade Representative (USTR), explaining how the tariff rates were determined. This note argued that “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”, and instead posited that “their combined effects can be proxied by computing the tariff level consistent with driving bilateral trade deficits to zero”.

The USTR then published the formula that it used to determine the tariff rate. Although it employed Greek letters that made the mathematics look complicated, it was in fact very simple: (exports – imports) / imports x 0.5.

When the formula was applied, the tariff rate that the White House announced on all countries could be easily determined and plotted in a straight line:

In other words, the White House spokesperson was wrong and the journalist Surowiecki was correct: the Trump administration’s tariff rates were not based on the tariffs that other countries charge the US, but rather on the trade balance that the US has with other countries.

That is to say, by definition, they are not “reciprocal”; they are unilateral, and aggressive.

What this scandal also showed is that White House spokesmen don’t understand the simple formula that was used to determine Trump’s tariff rate.

Even more absurdly, the statement published by the US Trade Representative cited an academic article that it clearly didn’t read, because it detailed how international trade has been good for US consumers by significantly reducing the costs of goods.

In January, when Trump threatened 25% tariffs on the United States’ neighbors and top two trading partners, Mexico and Canada, the Wall Street Journal editorial board dubbed it “the dumbest trade war in history”. Trump has now expanded that dumbest of trade wars to most of the world.

54% tariffs on China, 46% tariffs on Vietnam, high duties on other top US trading partners

Following “Liberation Day”, top exporters to the US will face very high tariffs.

Trump hit China with tariffs of 54% (34% plus the 20% that was already applied). China is the number one exporter to the US, selling it $438.9 billion in goods in 2024. Top Chinese exports include phones, computers, electric batteries, machine parts, toys, and textiles.

The US president likewise targeted Vietnam with a staggering 46% tariff. Vietnam is the sixth-biggest exporter to the US, selling it $136.6 billion in goods in 2024. Top Vietnamese exports include computers, phones, furniture, semiconductors, machine parts, microphones, and textiles.

Most of the electronics imported into the US come from Asian economies that have been seriously impacted by Trump.

40.7% of US imports of computers are from the Chinese mainland, along with 27.5% from Mexico (which faces potential tariffs of 25%). Another 15% come from Taiwan (which was hit with a US tariff of 32%). An additional 9.42% are from Vietnam.

South Korea, the number seven exporter to the US, will endure a 25% tariff.

Japan, the fourth-biggest exporter to the US, will take on a 24% tariff.

Germany is the number five exporter to the US, and will face a tariff of 20%, which is the rate that Trump chose for the European Union as a whole.

51.8% of US imports of electric batteries come from mainland China, plus 16.6% from South Korea, 6.5% from Japan, 5.39% from Mexico, 5.17% from Germany, and 2.72% from Vietnam.