White House Lacks Financial Literacy - 'Tariffs' Show
April 03, 2025
Presidential Message on National Financial Literacy Month, 2025 - The White House, Apr 1 2025
The foundation of American economic prosperity is a society empowered with the knowledge and tools to make informed financial decisions to achieve the American Dream. ...
I welcome that message.
Teaching financial literacy must start at the top. The members of the Trump administration obviously lack the knowledge and tools to make informed financial decisions.
It is the only possible explanation for how they came up with these numbers:
China does not have a 67% tariff on U.S. goods (it's 7.3%). The EU does not have a 39% tariff on U.S. goods (it's 5.2%). The numbers are bollocks.
So where do they come from? The official explanation from the U.S. Trade Representative is here. Its baloney:
James Surowiecki @JamesSurowiecki - 0:22 UTC · Apr 3, 2025Just figured out where these fake tariff rates come from. They didn't actually calculate tariff rates + non-tariff barriers, as they say they did. Instead, for every country, they just took our trade deficit with that country and divided it by the country's exports to us.
So we have a $17.9 billion trade deficit with Indonesia. Its exports to us are $28 billion. $17.9/$28 = 64%, which Trump claims is the tariff rate Indonesia charges us. What extraordinary nonsense this is.
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Even given that it's Trump, I cannot believe they said "We'll just divide the trade deficit by imports and tell people that's the tariff rate." And then they decided to set our tariffs by just cutting that totally made-up rate in half! This is so dumb and deceptive.
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.. it's actually worse than I thought: in calculating the tariff rate, Trump's people only used the trade deficit in goods. So even though we run a trade surplus in services with the world, those exports don't count as far as Trump is concerned.
The last point is a major one, for China, but especially for the EU :
EU-US trade in goods and services reached an impressive €1.6 trillion in 2023. This means that every day, €4.4 billion worth of goods and services cross the Atlantic between the EU and the US.
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The total bilateral trade in goods reached €851 billion in 2023. The EU exported €503 billion of goods to the US market, while importing €347 billion; this resulted in a goods trade surplus of €157 billion for the EU.Total bilateral trade in services between the EU and the US was worth €746 billion in 2023. The EU exported €319 billion of services to the US, while importing €427 billion from the US; this resulted in a services trade deficit of €109 billion for the EU.
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EU-US goods and services trade is balanced: the difference between EU exports to the US and US exports to the EU stood at €48 billion in 2023; the equivalent of just 3% of the total trade between the EU and the US.
Despite that Trump has decreed a 20% on all goods from the EU. The natural countermeasure from the EU will be to put a 20+% tariff on all import of U.S. services.
Trump also decreed a minimum 10% tariff on imports from every country. Products made by the penguins of the uninhabited Heard and McDonald Islands in the Antarctic will now come with a 10% surcharge.
There is really no economic reasoning behind these numbers.
Arnaud Bertrand @RnaudBertrand - 4:16 AM · Apr 3, 2025To illustrate just how nonsensically these tariffs were calculated, take the example of Lesotho, one of the poorest countries in Africa with just $2.4 billion in annual GDP, which is being struck with a 50% tariff rate under the Trump plan, the highest rate among all countries on the list.
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As a matter of fact Lesotho, as a member of the Southern African Customs Union (SACU), applies the common external tariff structure established by this regional trade bloc.
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So since the tariffs charged by these 5 countries on U.S. products are exactly the same, they must all be struck with a 50% tariff rate by the U.S., right? Not at all: South Africa is getting 30%, Namibia 21%, Botswana 37% and Eswatini just 10%, the lowest rate possible among all countries.Looking at Lesotho specifically, every year the U.S. imports approximately $236 million in goods from Lesotho (primarily diamonds, textiles and apparel) while exporting only about $7 million worth of goods to Lesotho (https://wits.worldbank.org/CountryProfile/en/Country/LSO/Year/2022/TradeFlow/EXPIMP/Partner/by-country).
Why do they export so little? Again this is an extremely poor country where 56.2% of the population lives with less than $3.65 a day (https://databankfiles.worldbank.org/public/...), i.e. $1,300 a year. They simply can't afford U.S. products, no-one is going to buy an iPhone or a Tesla on that sort of income...
The way the tariffs are ACTUALLY calculated appears to be based on a simplistic and economically senseless formula: you take the trade deficit the U.S. has with a country, divide it by that country's exports to the U.S and declare this - falsely - "the tariff they charge on the U.S."
And then as Trump did in his speech last night, you magnanimously declare that you'll only "reciprocate" by charging half that "tariff" on them.
As such, for Lesotho, the calculation goes like this: ($236M - $7M)/$235M = 97%. That's the "tariff" Lesotho is deemed to charge this U.S. and half of that, i.e. roughly 50% is what the U.S. "reciprocates" with.
It's extremely easy to see why this makes no sense at all.
Lesotho has a comparative advantage over the U.S. as it can dig up and sell diamonds. But it lacks the purchasing power to buy U.S. goods and services. The calculations by the Trump administration ignore those basic facts.
No tariffs were by the way introduced against Belarus, Russia and North Korea. This because of sanction, the U.S. has allegedly no trade relation with them. (Other than buying enriched Uranium for its nuclear power stations?)
Did the Trump administration anticipate how this nonsense will explode in its face?
It is Smoot-Hawley writ large.
Posted by b on April 3, 2025 at 8:53 UTC | Permalink