The reciprocal tariff formula makes the White House administration look like amateurs
I wrote an article that I almost fell off my chair as I watched Trump announce reciprocal tariff rates on April 2. Well, this time I fell off my chair as I read an article on how those punitive rates appeared to be the result of miscalculations and inaccurate methodology.
The formula
The administration used a reciprocal tariff formula that calculates duties based on dividing a country’s trade deficit with the U.S. by the value of a country ,s exports to the U.S. and then dividing that number in half to calculate the tariff rate. The only ones who seem okay with the formula are those in the administration. Otherwise, there is wide criticism for its simplicity and inaccuracy.
Is it amateur hour at the White House?
The reciprocal tariff formula was reportedly based on an academic research article where economist Brent Neiman from the University of Chicago was one of four co-authors. Neiman, in a NYT oped, indicated that the Trump administration had used the research incorrectly to impose extremely high tariffs. As a result, it thus miscalculated the duties.
According to Neiman, the actual tariffs calculated using the methodology in the correct way may have been one fourth the size of the tariff rates announced by President Trump.
While I cannot validate Neiman’s methodology, do you think there would have been such a panic reaction had China, for example, been hit with an 8% tariff rather than 34% (0.34/4) or the EU 5% rather than 20%?
To be clear, I am not taking sides as I can’t say whether the formula used was the result of incompetence or a deliberate attempt to justify punitive duties at historic levels. In any case, there has been no attempt at damage control so you can draw your own conclusion
Extract from
The Trump White House Cited My Research to Justify Tariffs. It Got It All Wrong
My first question, when the White House unveiled its tariff regime, was: How on earth did it calculate such huge rates?…
… The Office of the U.S. Trade Representative released its methodology and cited an academic paper produced by four economists, including me, seemingly in support of its numbers. But it got it wrong. Very wrong… But even taking it at face value, our findings suggest the calculated tariffs should be dramatically smaller — perhaps one-fourth as large….NYT Oped April 7, 2025 by Brent Neiman
Brent Neiman was a Biden administration Treasury official who co-wrote trade-related academic research cited by the Trump White House.
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