Markets Scrutinize Trump Administration's Tariff Calculation, Raising Global Concerns
Global markets are now intensely analyzing how the U.S. administration arrived at the figures behind the sweeping import tariffs announced on Wednesday, which triggered a significant downturn in financial markets and prompted worldwide apprehension.
The administration shared charts via social media, detailing purported tariff rates imposed by other countries on the U.S., including elements labeled as "Currency Manipulation and Trade Barriers."
An accompanying column displayed the new U.S. tariff rates applied to each country and the European Union.
These new U.S. rates are, in many instances, significantly lower than the figures the administration claimed other countries "charged" the U.S. CNBC could not independently verify the administration's data.
Market observers quickly attempted to decipher the calculation method, leading to confusing conclusions. Many, including journalist and author James Surowiecki, suggested the U.S. appeared to have divided the trade deficit by import values from each country to determine tariff rates.
This approach deviates from standard tariff calculations, implying the U.S. only considered the trade deficit in goods, excluding services.
For example, the U.S. asserted China's tariff rate at 67%. U.S. trade deficit with China in 2024 was $295.4 billion, while imported goods totaled $438.9 billion. Dividing $295.4 billion by $438.9 billion yields approximately 67%. Similar calculations aligned with Vietnam.
“The formula focuses on trade imbalances, rather than reciprocal tariffs defined by tariff levels or non-tariff distortions. This makes it challenging for Asian nations, especially poorer ones, to meet U.S. demands for short-term tariff reductions, as the benchmark emphasizes purchasing more U.S. goods than exporting to the U.S.,” stated Trinh Nguyen, senior economist of emerging Asia at Natixis.
"Given the higher cost of U.S. goods and lower purchasing power in targeted countries, this approach is suboptimal. Vietnam, for instance, has the fourth largest trade surplus with the U.S. and already reduced tariffs before this announcement, without receiving any concessions,” Nguyen added.
The U.S. also appeared to have implemented a 10% levy on regions with which it maintained a trade surplus.
- "Absolutely nothing good coming out" of tariff announcement: economist Rosenberg
The Office of the U.S. Trade Representative outlined its methodology on its website, which aligned somewhat with initial analyses, with minor discrepancies.
“While computing the trade deficit effects of numerous tariffs, regulatory, tax, and other policies in each country individually is complex, if not impossible, their combined impact can be approximated by calculating the tariff level necessary to eliminate bilateral trade deficits. If trade deficits persist due to tariff and non-tariff policies and underlying factors, the offsetting tariff rate is considered reciprocal and fair,” the website stated.
The U.S.T.R. also included estimates for import price elasticity and the impact of higher tariffs on import prices.
- A screenshot from the U.S.T.R. website detailing the methodology and formula.
Some analysts acknowledged the methodology could provide the U.S. government with more flexibility in negotiations.
“The opacity surrounding the tariff figures may offer flexibility in deal-making, but it could jeopardize U.S. credibility,” said Rob Subbaraman, head of global macro research at Nomura.
تعليقات
إرسال تعليق