Trump Tariffs: How did the Trump administration decide the rate of reciprocal tariff, the formula came out

US President Donald Trump finally announced reciprocal tariffs on April 2. A massive tariff of 27 percent has been imposed on goods coming to the US from India. But it is still less compared to other countries. The US has imposed a tariff of 37 percent on Bangladesh, 54 percent (new 34 percent + 20 percent imposed earlier this year) on China, 46 percent on Vietnam and 36 percent on Thailand. Trump has announced reciprocal tariffs on about 60 countries.

Reciprocal tariffs have been imposed by the US on those countries which impose tariffs on American goods coming to their country. After the announcement of these new tariffs, people started trying to know how the US has decided the tariff rates. In answer to this question, a formula is going viral on the internet, about which it is being said that the Trump administration has decided the retaliatory tariffs on the basis of this formula. This formula is also being shared on social media.

A CNN report says that the calculation used by the Trump administration is not reciprocal at all. Matching tariffs across countries in dollar terms is a Herculean task. It involves delving into each country's tariff schedule and matching a complex array of products, each of which has different charges for different variants.

So what is the formula after all

It is being said that the Trump administration chose a very simple calculation for reciprocal tariff. That is – 'Divide America's trade deficit with a country by that country's exports to America and then divide the number obtained by 2.' According to CNN's report, the first post about this calculation was shared by journalist James Surowiecki on social media platform X. It was supported by Wall Street analysts. The Trump administration later confirmed that it used this calculation.

For example, the US trade deficit with China in 2024 was $295.4 billion. In 2024, the US imported Chinese goods worth $439.9 billion. Now if we divide this trade deficit by the imports made by the US from China, we will get 0.67 or 67 percent. Dividing it by 2 will give the result of 33.5 or approximately 34 percent. This is the figure of reciprocal tariff imposed on China.

The Trump administration says that 67 percent is the rate that China has imposed on the US as tariff. But this was not the case. China's trade surplus with the US was 67% of the value of its exports.

Countries with large trade surpluses are the target

According to CNN, Mike O'Rourke, chief marketing strategist at Jones Trading, says that although these new tariff measures have been framed as retaliatory tariffs, it turns out that the policy is actually to target surpluses. It appears that no tariffs have been used in the calculation of the reciprocal tariff. The Trump administration is targeting countries with large trade surpluses with the United States. Tariff rates will generally be the highest on countries on which US companies rely heavily in their supply chains.

Julian Klymochko, CEO and CIO of investment firm Accelerate FT, has called Trump's move the biggest economic mistake ever. In a post on X, he also said that the figures that the Trump administration is citing as tariffs imposed by other countries on the US are not actually tariffs. He said that it is incomprehensible to determine the level of reciprocal tariffs based on completely inconsistent non-tariff calculations.