I was going to ask on Facebook if anyone here knew how Trump’s tariffs were calculated, but the NYT appears to have back-calculated it, and the Office of the US Trade Representative has posted an explanation that confirms this.
The bottom line is that the tariffs are based solely on the percentage trade deficit with each country (with a minimum of 10 percent). They are NOT done product by product, as would be more normal. Thus, if we import 30 percent more from a country than we export to it, the tariff is 15 percent (because in an apparent effort to somewhat soften the blow, the tariffs are set at 1/2 of the percentage trade deficit).
The posted formula is more complex than that, and is full of Greek letters and opaque terminology, but when you wade through the math, it becomes exactly what the NYT describes. Most confusing are a pair of parameters for import elasticity with respect to price and tariffs that are set at 4 and .25, then multiplied together. The two parameters actually make sense, but it looks like their values aren’t particularly well known and were set to cancel out as a sort of best guess.
The stated goal of these calculations is to find a tariff rate that will bring the trade deficit to zero, based on President Trump’s long-standing belief that trade deficits are stealing from Americans.
That is vastly over-simplified. Yes, there are lots of manufacturing jobs that have migrated overseas, especially in certain industries. Yes, high tariffs would (presumably) bring many of them back, at least eventually. But we would then be paying much higher U.S. wages for these products, and prices would go up.
Furthermore, people in foreign countries would have less money to buy our stuff, so our exports would go down.
Also, money from trade deficits migrates back to the U.S. in the form of overseas investments. These can be controversial, but they are one of the things President Trump claims to want. Shutting off the money that produces them does not seem wise.
The bottom line is that trade deficits have been going on for a long time in the U.S.–five decades, according the Office of the U.S. Trade Representative–and the economy has greatly expanded. Again, yes jobs in certain sectors have migrated, but it President Trump wants to bring some of those back, a more focused approach would seem more appropriate and less disruptive, overall.
Finally, the calculation used by the U.S. Trade Representative’s office appears based on the highly unlikely assumption that other countries won’t retaliate. If they do, our exports would drop, and the calculation would have us raise our tariffs. That’s a formula for everyone’s tariffs spiraling into the stratosphere. That said, President Trump is known for using strong actions as scare tactics, so it’s possible that this will be temporary.