Reside updates: Shares plunge as Trump’s tariffs spark world commerce conflict

“How did Trump calculate the primary column of tariffs charged to the US?” Juan in Nicaragua asks.

At first, commerce economists have been flummoxed by how the tariffs had been calculated.

However the crude methodology utilized by the White Home to calculate the record of “reciprocal” world tariffs has since grow to be clear.

The Trump administration used a easy formulation: It took every nation’s commerce deficit with the US, divided it by the worth of that nation’s exports to the US – after which divided this determine by half, in a gesture of “kindness.”

Let’s take this step-by-step, utilizing official US information and the instance of Vietnam, which President Donald Trump claimed imposed a 90% tariff on US items and subsequently would get a 46% “reciprocal” tariff of its personal.

In 2024, Vietnam, a large and rising world manufacturing hub, offered $136.6 billion price of products to the US.

As a result of People need to purchase issues like Nike footwear much more than Vietnamese need to purchase issues like Ford automobiles, the US offered so much much less to Vietnam. Vietnam purchased simply $13.1 billion of products from the US that very same 12 months.

Subtracting $13.1 billion from $136.6 billion offers Vietnam a commerce surplus of $123.5 billion with the US. However one man’s commerce surplus is one other man’s commerce deficit – which Trump has made clear he finds unpalatable, akin to being “ripped off.”

Dividing the $123.5 billion by $136.6 billion (the worth of Vietnam’s exports to the US) offers 0.90 – or, in share phrases, 90%. In a supposed act of “kindness,” Trump almost halved this, which means Vietnam will “solely” now face a tariff of 46%.

With few exceptions, the White Home repeated this system for all international locations on its tariff chart. To be clear, these international locations are being punished for having commerce surpluses with the US – not as a result of that they had imposed a “tariff” on items traded with the world’s largest economic system.

The pattern was first identified by James Surowiecki, a monetary author, in a publish on X.

This publish has been up to date with further data.