President Donald Trump’s so-called “reciprocal” tariffs haven’t been well received, especially after the White House explained its math.
“If a 9th grader in high school presented this tariff chart to a teacher in a basic economics class the teacher would laugh and say sit down and work on the assignment,” Wedbush Securities analyst Dan Ives, who oversees technology firm coverage, said in a Thursday note to clients.
When Trump took the stage at the White House Rose Garden on Wednesday evening, he said his tariffs — designed to make trade more fair — would be applied on an individual basis. The U.S., Trump said, made its determinations based on the combined rate of tariffs, non-monetary barriers, “and other forms of cheating,” and plans to charge half of that rate. There’s also a 10% base tariff on almost all countries.
“April, 2, 2025, will forever be remembered as the day American industry was reborn, the day America’s destiny was reclaimed, and the day that we began to make America wealthy again,” Trump said.
The baseline 10% tariff on all countries will go into effect Saturday at 12:01 a.m. ET; the reciprocal levies are scheduled for enactment on April 9 at 12:01 a.m. ET.
The rates announced by the White House initially puzzled economists and other observers. Israel, which just lowered its tariffs on U.S. goods, was slapped with a 17% rate, while the Heard Island and McDonald Islands, which are external territories of Australia and uninhabited, were slapped with 10% duties.
A White House spokesperson claimed, citing the U.S. Trade Representative’s formula, that the administration “literally calculated tariff and non-tariff barriers.” But it appears that the math was much simpler. Essentially, instead of calculating the effect of both tariff and non-tariff barriers, the Trump administration divided each country’s goods trade deficits by imports from that country.
“Put simply, the bigger the nominal trade deficit a country has with the U.S. adjusted for the absolute size of that country’s imports, the bigger the tariff,” Deutsche Bank (DB) analyst George Saravelos said in a note. Deutsche also warned that the dollar “is at risk of a broader confidence crisis.”
Trump’s announced tariffs — including prior duties, such as those impacting steel and aluminum imports — would raise the effective tariff rate of the U.S. to 18.8%, according to Goldman Sachs (GS), which is greater than the bank initially expected. Morgan Stanley’s (MS) math shows an effective tariff rate of 22%, up from 2.4% last year, which could lead to a 5% increase in import prices.
