Trump's Tariff Formula Is Surprisingly Simple

So how did the US figure out the individual tariffs it levied on different nations? The White House posted an explainer with complicated-looking formula, but the BBC unpacks it to find a "simple" one beneath. As does CNN, which explains it succinctly:

• "The country's trade deficit divided by its exports to the United States times 1/2. That's it."
• China provides an example: The US buys more goods from China than it sells, resulting in a deficit of $295 billion. The total amount China exports to the US is $440 billion. Dividing 295 by 440 results in 67%, and half of that results in the 34% tariff levied on the nation.

• Financial writer James Surowiecki appears to have been one of the first to crack the puzzle in a tweet. "They just took our trade deficit with that country and divided it by the country's exports to us," he wrote, adding that, in his view, the formula is "nonsense."
• Given the jolt delivered to the global economy, Axios finds it remarkable that such a "surprisingly simplistic formula" is behind it all. What's more, the formula comes with implications: "It implies fewer off-ramps for countries that seek tariff relief, and thus less potential for de-escalation," the post reads. "If tariffs are applied without regard to the details of each country's economic policies and circumstances, what is there to negotiate?"
• But in a sign of how fuzzy all of this is, CNBC talks to an expert who draws precisely the opposite conclusion about negotiations: "All I can say is that the opaqueness surrounding the tariff numbers may add some flexibility in making deals, but it could come at a cost to US credibility," says Rob Subbaraman of Nomura.
• NYU business professor Nouriel Roubini tweets that the formula is "totally flawed as it assumes that the only fair trade balance is zero," per Business Insider.
• A New York Times piece suggests the factors are so complex that the White House used some reverse engineering to get where they wanted to be. "Given what seems to be their desire to get something out quickly, it appears what they've done is come up with an approximation that is consistent with their policy goals," says Emily Kilcrease, director of the Energy, Economics and Security Program at the Center for a New American Security.

(More tariffs stories.)