Amongst the more bizarre aspects of the Trump tariff announcements last night were the figures he came up with for the tariffs being charged by other countries.
Even people who are as unfamiliar with economics as I am wondered, “Where on earth did he get those from?” They didn’t seem to bear any resemblance to reality. And while lies are part and parcel of most Trump announcements, the numbers had to come from somewhere, surely?
Well, it turns out that’s because they’re actually not to do with tariffs at all. These are not extra costs being imposed by other countries. They are simply a measure of the trade deficit that the USA has with those countries. Or, to put it another way, the degree to which US citizens want stuff from your country more than your citizens want stuff from the US… that’s how much we’re going to punish your country.
The FT has more details and an appropriate dose of incredulity. As they point out, suppose your country sells lots of bananas to the US… Well, bananas don’t grow in the US, so Americans can’t buy them locally. But we’re still going to impose tariffs…
“The numbers [for tariffs by country] have been calculated by the Council of Economic Advisers … based on the concept that the trade deficit that we have with any given country is the sum of all trade practices, the sum of all cheating,” a White House official said, calling it “the most fair thing in the world.”
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