Simple Calculation Using USTR's Trade Deficit and Import Volume
Claiming 'Zero' Bilateral Trade Deficit
Trump Administration's Economic Ignorance and Obsession
"Even if you believe in protectionist economics, it does not make sense." (Lawrence Larry Summers, former U.S. Secretary of the Treasury)
"Trump's tariff policy formula looks like the result of asking an AI model like ChatGPT to create a tariff policy." (Paul Krugman, Distinguished Professor at the City University of New York)
Criticism is pouring in over the reciprocal tariff calculation method of the Donald Trump administration. The formula for country-specific reciprocal tariff rates released by the U.S. Trade Representative (USTR) is an artificial figure created by simply calculating the trade deficit and import volume, and lacks convincing grounds.
Summers, former Treasury Secretary and former president of Harvard University, pointed out on June 3 (local time) on his X (formerly Twitter) that the ‘economics’ deriving reciprocal tariffs without using tariff data "is like explaining biology with creationism or astronomy with astrology." He also publicly targeted Trump officials, saying, "If my administration had pursued policies that were not based on serious analysis or were harmful, I would have resigned in protest."
According to the reciprocal tariff formula released by USTR the day before, the trade deficit (export volume minus import volume) with the relevant country last year is simply divided by the import volume. Contrary to previous explanations that tariffs would be set by comprehensively examining non-tariff barriers such as subsidies in addition to tariff rates, the tariff rate was calculated only using a figure that can gauge the level of the trade deficit. Applying this formula, countries like Vietnam and Cambodia, which export large amounts of manufactured goods to the U.S. but import only small amounts from the U.S., would be subject to punitive taxes of 46% and 49%, respectively.
Paul Krugman, Distinguished Professor at the City University of New York and 2008 Nobel Laureate in Economics, also criticized the reciprocal tariff calculation method released by USTR, saying, "The USTR memo looks like a student who hasn’t read the book writing a boastful answer on an exam." In his article titled "Will Extreme Stupidity Kill the World Economy?" Krugman pointed out, "This is not normal policy but should be seen as a 'display of dominance' to overwhelm and subjugate others."
Thomas Sampson, Associate Professor at the London School of Economics, said this formula "is merely a tool to conceal Trump’s misplaced obsession with bilateral trade imbalances and has no economic basis for tariffs."
Regarding USTR’s claim that this formula can reduce bilateral trade deficits to zero, critics said this idea itself reveals the Trump administration’s obsession and is economically ignorant. This is because there are always items that a country cannot produce or cultivate on its own. Oleksandr Shepotilo, an econometrician at Aston University in Birmingham, harshly criticized, saying, "This is detached from the reality of trade economics," and "The claim that this formula provides tariff levels that can reduce bilateral trade deficits to zero is an insane objective (nsane objective)."
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