How did the Trump Administration come up with these tariff rates? Why would a nation like Madagascar, for example, with a small economy, be hit with a 47% tariff? Reciprocal tariffs were determined based on America’s trade deficit with other nations. They took each nation’s trade surplus with the US by total exports and divided that number by two, proclaiming we are asking them for half of what they have been charging the United States.
The assumption behind this method is that a trade surplus means one country is “taking advantage” of the other. However, trade imbalances do not function in such a cut-and-dry manner. The US runs trade deficits with some countries while running surpluses with others. The global economy is interconnected, and imposing arbitrary tariffs based on a deficit does not reflect the broader picture.
For example, China may have a surplus with the US,…
