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​The Made-Up Nonsense of the Trump Tariff Calculations

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Category : research
Published Date : 04/07/2025
Overly simple formula hits poor countries hardest

I had a look at the Trump tariff formula. You may have assumed it was a complex calculation based on evaluating tariff and non-tariff barriers to trade – a difficult endeavor no doubt. If you assumed that, you would be wrong.

The actual calculation is quite simply the dollar trade deficit divided by the value of exports to the US. Nearly all of the highest tariff countries are quite poor and are primarily export nations that provide affordable goods to the developed world and jobs and revenue to the developing world. Adam Smith 101, comparative advantage.

As always, feedback welcome.

In order to give the calculation a patina of economic gravitas, the formula is peppered with Greek letters and complex economic terms such as elasticity. The additional Greeks actually cancel each other out and don't impact the calculation at all.
​

Take Bangladesh for example. The US has imposed a 37% tariff based on a 74% trade deficit. It’s obvious that Bangladesh would be a net deficit country as the average income in Bangladesh is very low (e.g. garment workers earn less than $1 hour in Bangladesh) and so it is natural that they will leverage their lower labor costs to produce goods to export to the world. In fact, Bangladesh’s ready-made garment sector has been a critical factor elevating Bangladesh from amongst the poorest countries in the world. In 2024 Bangladesh exported over $7B in textiles to the US.

In total, Bangladesh exported $8.4B to the US and imported $2.2B from the US, leaving a trade deficit of $6.2B or 74% of $8.4B. Divide that by 2 and you arrive at the 37% Trump tariff. As noted, the Greek letters further multiply the result by ¼ and 4, but basic middle-school math reveals that those numbers cancel.
Bangladesh, based on other reports, has an actual weighted average tariff with the US closer to 13%. That would imply that the “generous” tariff of 37% isn’t half the actual tariff rate but in fact 3x the actual.
What are the chances that the US tariffs will result in the US replacing Bangladesh’s ability to mass produce affordable cloths? Zero. What are the chances that the US tariffs reverse the progress Bangladesh has made? Very high.

It’s not just Bangladesh. As shown in the chart below nearly all the high tariff countries are low-income countries. 100% of countries with a Trump tariff rate over 35% had an average annual salary less than $10K. The only two countries with Trump tariffs over 30% and an average salary over $10K are Taiwan and Switzerland. Their deficits are largely a function of punching above their weight in manufacturing.

The bulk of Taiwan’s deficit is due to semiconductor exports to the US (and most of that is attributed to Semiconductor powerhouse TSMC). And Switzerland excels in healthcare exports and (no surprise) watches, clocks and precious metals.

Trump Tariff 4

Country/Region
Country/Region Tariff*
US Reciprocal Tariffs
Average Annual Salary
Afghanistan
49%
10%
0.00
Albania
10%
10%
8,549
Algeria
59%
30%
#N/A
Andorra
10%
10%
#N/A
Angola
63%
32%
#N/A
Anguilla
10%
10%
#N/A
Antigua and Barbuda
10%
10%
#N/A
Argentina
10%
10%
15,658
Armenia
10%
10%
7,897
Aruba
10%
10%
#N/A
Australia
10%
10%
43,101
Azerbaijan
10%
10%
6,529
Bahamas
10%
10%
#N/A
Bahrain
10%
10%
27,565
Bangladesh
74%
37%
1,699
Barbados
10%
10%
#N/A
Belize
10%
10%
#N/A
Benin
10%
10%
#N/A
Bermuda
10%
10%
#N/A
Bhutan
10%
10%
#N/A
Bolivia
20%
10%
#N/A
Bosnia and Herzegovina
70%
35%
12,655
Botswana
74%
37%
5,945
Brazil
10%
10%
7,000
British Indian Ocean Territory
10%
10%
#N/A
British Virgin Islands
10%
10%
#N/A
Brunei
47%
24%
#N/A
Burma
88%
44%
#N/A
Burundi
10%
10%
#N/A
Cabo Verde
10%
10%
#N/A
Cambodia
97%
49%
#N/A
Cameroon
22%
11%
#N/A
Cayman Islands
10%
10%
#N/A
Central African Republic
10%
10%
#N/A
Chad
26%
13%
#N/A
Chile
10%
10%
13,534
China
67%
34%
15,620
Christmas Island
10%
10%
#N/A
Cocos (Keeling) Islands
10%
10%
#N/A
Colombia
10%
10%
#N/A
Comoros
10%
10%
#N/A
Congo (Brazzaville)
10%
10%
#N/A
Congo (Kinshasa)
22%
11%
#N/A
Cook Islands
10%
10%
#N/A
Costa Rica
17%
10%
#N/A
Cote d’Ivoire
41%
21%
#N/A
Curacao
10%
10%
#N/A
Djibouti
10%
10%
#N/A
Dominica
10%
10%
#N/A
Dominican Republic
10%
10%
#N/A
Ecuador
12%
10%
6,300
Egypt
10%
10%
#N/A
El Salvador
10%
10%
#N/A
Equatorial Guinea
25%
13%
#N/A
Eritrea
10%
10%
#N/A
Eswatini
10%
10%
#N/A
Ethiopia
10%
10%
#N/A
EU
39%
20%
#N/A
Falkland Islands (Islas Malvinas)
82%
41%
#N/A
Fiji
63%
32%
#N/A
French Guiana
10%
10%
#N/A
French Polynesia
10%
10%
#N/A
Gabon
10%
10%
#N/A
Gambia
10%
10%
#N/A
Georgia
10%
10%
8,052
Ghana
17%
10%
#N/A
Gibraltar
10%
10%
#N/A
Grenada
10%
10%
#N/A
Guadeloupe
10%
10%
#N/A
Guatemala
10%
10%
#N/A
Guinea
10%
10%
#N/A
Guinea-Bissau
10%
10%
#N/A
Guyana
76%
38%
#N/A
Haiti
10%
10%
#N/A
Heard and McDonald Islands
10%
10%
#N/A
Honduras
10%
10%
#N/A
Iceland
10%
10%
70,313
India
52%
26%
1,384
Indonesia
64%
32%
#N/A
Iran
10%
10%
#N/A
Iraq
78%
39%
#N/A
Israel
33%
17%
38,846
Jamaica
10%
10%
#N/A
Japan
46%
24%
25,686
Jordan
40%
20%
#N/A
Kazakhstan
54%
27%
8,617
Kenya
10%
10%
#N/A
Kiribati
10%
10%
#N/A
Kosovo
10%
10%
6,705
Kuwait
10%
10%
#N/A
Kyrgyzstan
10%
10%
4,465
Laos
95%
48%
#N/A
Lebanon
10%
10%
#N/A
Lesotho
99%
50%
#N/A
Liberia
10%
10%
#N/A
Libya
61%
31%
#N/A
Liechtenstein
73%
37%
#N/A
Madagascar
93%
47%
#N/A
Malawi
34%
17%
#N/A
Malaysia
47%
24%
7,709
Maldives
10%
10%
#N/A
Mali
10%
10%
#N/A
Marshall Islands
10%
10%
#N/A
Martinique
10%
10%
#N/A
Mauritania
10%
10%
#N/A
Mauritius
80%
40%
10,156
Mayotte
10%
10%
#N/A
Micronesia
10%
10%
#N/A
Moldova
61%
31%
8,042
Monaco
10%
10%
#N/A
Mongolia
10%
10%
7,965
Montenegro
10%
10%
12,667
Montserrat
10%
10%
#N/A
Morocco
10%
10%
#N/A
Mozambique
31%
16%
#N/A
Namibia
42%
21%
#N/A
Nauru
59%
30%
#N/A
Nepal
10%
10%
#N/A
New Zealand
20%
10%
45,808
Nicaragua
36%
18%
3,899
Niger
10%
10%
#N/A
Nigeria
27%
14%
#N/A
Norfolk Island
58%
29%
#N/A
North Macedonia
65%
33%
#N/A
Norway
30%
15%
59,715
Oman
10%
10%
#N/A
Pakistan
58%
29%
#N/A
Panama
10%
10%
15,374
Papua New Guinea
15%
10%
#N/A
Paraguay
10%
10%
#N/A
Peru
10%
10%
6,108
Philippines
34%
17%
2,407
Qatar
10%
10%
#N/A
Reunion
73%
37%
#N/A
Rwanda
10%
10%
#N/A
Saint Elena
15%
10%
#N/A
Saint Kitts and Nevis
10%
10%
#N/A
Saint Lucia
10%
10%
#N/A
Saint Pierre and Miquelon
99%
50%
#N/A
Saint Vincent and the Grenadines
10%
10%
#N/A
Samoa
10%
10%
#N/A
San Marino
10%
10%
#N/A
São Tomé and Príncipe
10%
10%
#N/A
Saudi Arabia
10%
10%
#N/A
Senegal
10%
10%
2,179
Serbia
74%
37%
9,103
Sierra Leone
10%
10%
#N/A
Singapore
10%
10%
55,065
Sint Maarten
10%
10%
#N/A
Solomon Islands
10%
10%
#N/A
South Africa
60%
30%
16,578
South Korea
50%
25%
36,186
South Sudan
10%
10%
#N/A
Sri Lanka
88%
44%
#N/A
Sudan
10%
10%
#N/A
Suriname
10%
10%
#N/A
Svalbard and Jan Mayen
10%
10%
#N/A
Switzerland
61%
31%
89,315
Syria
81%
41%
#N/A
Taiwan
64%
32%
22,157
Tajikistan
10%
10%
2,440
Tanzania
10%
10%
1,889
Thailand
72%
36%
5,078
Timor-Leste
10%
10%
#N/A
Togo
10%
10%
#N/A
Tokelau
10%
10%
#N/A
Tonga
10%
10%
#N/A
Trinidad and Tobago
12%
10%
#N/A
Tunisia
55%
28%
#N/A
Turkey
10%
10%
#N/A
Turkmenistan
10%
10%
#N/A
Turks and Caicos Islands
10%
10%
#N/A
Tuvalu
10%
10%
#N/A
Uganda
20%
10%
#N/A
Ukraine
10%
10%
4,784
United Arab Emirates
10%
10%
#N/A
United Kingdom
10%
10%
33,582
Uruguay
10%
10%
11,217
Uzbekistan
10%
10%
3,831
Vanuatu
44%
22%
#N/A
Venezuela
29%
15%
#N/A
Vietnam
90%
46%
3,438
Yemen
10%
10%
#N/A
Zambia
33%
17%
#N/A
Zimbabwe
35%
18%
#N/A

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