Economists worry Trump's tariff formula makes harmful assumptions about trade

The US Trade Representative shared the math responsible for Donald Trump's tariffs ranging from 10 to 50 percent.

Transcript

00:00On April 2nd, the U.S. Trade Representative shared the math behind Donald Trump's tariffs.

00:05The formula divides a country or territory's trades surplus with the United States by the value of its total exports to the United States.

00:13The remaining number is then divided by two to get the tariff rate.

00:17Trump's tariffs vary widely between different countries, ranging from 10% to 50%.

00:22China has already responded by slapping a 34% tariff on U.S. imports,

00:28and the European Union Commission is saying it's prepared to respond.

00:31The formula tells us that Trump's main aim is to reduce trade imbalances.

00:36The U.S. Trade Representative said in a statement that the tariffs calculated are necessary to alleviate trade deficits.

00:44But economists have been skeptical of this approach, arguing that it assumes any fair trade balance must be equal to zero.

00:51It equates a country's trade surplus with tariffs, and it only considers goods, not services.

00:58It defends water so much for recovery.