Re: American Liquidation Day
Posted: Thu Apr 03, 2025 11:51 am
Washington Post:
"Economists say the crude formula the White House used to calculate what it’s calling “reciprocal tariffs” is too simplistic to achieve its goal of wiping out U.S. trade deficits — and, for that matter, they say that goal doesn’t make sense, either.
But the administration is defending its approach as a necessary step toward breaking apart a system that officials say is unfair to American workers and manufacturers.
President Donald Trump’s tariff plan, announced Wednesday, would impose a 10 percent baseline tariff on all imports from virtually all countries — plus an additional punitive import tax tailored for each of about 60 countries.
The math used to come up with those rates is what experts are lampooning.
A formula released by the U.S. trade representative ties those punitive taxes to the United States’ bilateral trade deficit in goods with each country — in other words, how much more the U.S. imports from those countries than it exports to them. The calculation finds the ratio between the U.S. trade deficit with a country and that country’s total exports to the U.S. It then divides the ratio in half to produce what the administration called a “discounted reciprocal tariff.”
Economists criticized the formula for its assumption that persistent trade deficits are a reflection of allegedly unfair trade practices by U.S. trading partners. They point out that the math apparently leaves out services — which make up the bulk of the U.S. economy and an important proportion of its exports — from calculations of trade deficits, which has the effect of making U.S. trade relationships look more one-sided. They also say there’s nothing “reciprocal” about the punitive tax rates because they’re disconnected from any actual barriers countries impose on U.S. imports.
“They’ve got an indefensible foundation to an indefensible policy,” said Douglas Holtz-Eakin, president of the conservative American Action Forum."
"Economists say the crude formula the White House used to calculate what it’s calling “reciprocal tariffs” is too simplistic to achieve its goal of wiping out U.S. trade deficits — and, for that matter, they say that goal doesn’t make sense, either.
But the administration is defending its approach as a necessary step toward breaking apart a system that officials say is unfair to American workers and manufacturers.
President Donald Trump’s tariff plan, announced Wednesday, would impose a 10 percent baseline tariff on all imports from virtually all countries — plus an additional punitive import tax tailored for each of about 60 countries.
The math used to come up with those rates is what experts are lampooning.
A formula released by the U.S. trade representative ties those punitive taxes to the United States’ bilateral trade deficit in goods with each country — in other words, how much more the U.S. imports from those countries than it exports to them. The calculation finds the ratio between the U.S. trade deficit with a country and that country’s total exports to the U.S. It then divides the ratio in half to produce what the administration called a “discounted reciprocal tariff.”
Economists criticized the formula for its assumption that persistent trade deficits are a reflection of allegedly unfair trade practices by U.S. trading partners. They point out that the math apparently leaves out services — which make up the bulk of the U.S. economy and an important proportion of its exports — from calculations of trade deficits, which has the effect of making U.S. trade relationships look more one-sided. They also say there’s nothing “reciprocal” about the punitive tax rates because they’re disconnected from any actual barriers countries impose on U.S. imports.
“They’ve got an indefensible foundation to an indefensible policy,” said Douglas Holtz-Eakin, president of the conservative American Action Forum."