How Trump's import tariff formula works

The Administration of President Donald Trump introduced a new approach to calculate tariffs through a formula that is primarily based on existing trade balances, which often represented a trade deficit for the United States.  The central goal of this methodology is to reduce these trade deficits that the United States maintains, in addition to equalizing the import duty rates that other countries have with the United States.  In a statement released by the United States Trade Representative (USTR) on Wednesday night, it was detailed how the tariffs would be calculated. The formula begins by dividing a country's trade surplus with the United States by its total exports, using data from the U.S. Census Bureau for 2024. Then, that figure is divided by two to produce a "discounted rate". For example, China, which had a trade surplus with the United States of 295 billion dollars over a total of 438 billion dollars in exports in 2024, has a ratio of 68%. Applying Trump's formula, a tariff rate of 34% is obtained.

Japan, South Korea, and the European Unionthose with more balanced trade balances, faced a fixed rate of 10%.the proposed methodology would achieve Trump's goalthe combined effects could approximate the goalhe displayed a table with rates based on the tariffs charged to the United StatesTrump had ordered a broad analysis of non-reciprocal trade relations with all of the United States' trading partnershe referred to non-reciprocal trade relationsthe price elasticity of import demand and the elasticity of import prices in relation to tariffs.