'Incredibly stupid': Experts call out the poor math behind Trump's tariffs

The reciprocal tariffs announced by US President Donald Trump shocked many. A base line tariff of 10 per cent would be charged on all US imports from April 5, while the reciprocal tariffs would be applicable from April 9, the Trump administration announced. But a couple of experts have called out the allegedly poor math behind the calculations of 'derived' tariffs for each country.

The US administration said the reciprocal tariffs or the blanket rate were arrived at after considering the non trade barriers including the currency manipulation undertaken by the trade partners. For example, in India's case, the applicable 'discounted' tariff is set at 27 per cent (26 per cent as per brokerages) against the 'derived' tariff rate of 52 per cent -- the tariff that India charged to the US. But how did it get this 'derived' rate?

Ryan Petersen, Founder and CEO of Flexport said his team was able to reverse engineer the formula the US administration used to generate the "reciprocal tariffs." 
 
"It's quite simple, they took the trade deficit the US has with each country and divided it by our imports from that country,"  Petersen said in a X post. Flexport is a US multinational that focuses on supply chain management. 

"This is…incredibly stupid," said American political scientist, author, and entrepreneur, Ian Bremmer.
 
Bremmer gave several examples, including that of India. He noted that India had $45.7 billion trade surplus with the US (US trade deficit) and its exports stood at $87.4 billion (US imports) i.e. 45.7/87.4 = 52% claimed tariffs charged.

This explains why the “tariffs charged to the USA” column looked made up, Bremmer explained.

Amar Ambani of YES Securities also shared the magic formula:

JM Financial said 56 per cent of India’s exports to US are concentrated in Telecom equipment (20 per cent), Drug Formulations (10 per cent), Jewellery (16 per cent) and garments (10 per cent).

The tariffs imposed on India seem rather high, higher than what India levies on most US items. That said two of India’s high ticket exports — IT services and pharmaceuticals, are untouched by this announcement, with the latter in exempted list. 

"This was in line with our earlier view that healthcare is a sensitive sector and may not see material tariff threats. Items like apparels and auto parts will see major tariff raises, but India seems protected from a competitive point of view, as tariffs on several south Asian economies that compete with India on these items are even higher. If at all, India can actually gain from China’s loss, which by some measures now stares at 54% tariff if the existing 20% are added on top of the additional 34%," Bernstein said in a note. 

The big loss will eventually come in the form of US discretionary spending, which can have medium term
consequences for the economy if the tariff war heats up, it said.

"India imposes their own uniquely burdensome and/or duplicative testing and certification requirements in sectors such as chemicals, telecom products, and medical devices that make it difficult or costly for American companies to sell their products in India. If these barriers were removed, it is estimated that U.S. exports would increase by at least $5.3 billion annually," the White House said in a Fact Check note.