How did Trump work out these tariffs?
Friday, 4 April 2025
One thing jumped off the page during Thursday morning 'Liberation Day' press conference.
During the announcement, as Stuff's Glenn McConnell reported (and the world saw), Trump had a man hold a big cardboard poster that claimed to show the tariffs American exporters currently pay. It also revealed the tariffs Trump will impose.
New Zealand, we found out, would be paying a new 10% tariff. This is the baseline for Trump's tariffs and some say we got off easy.
But next to that figure was another figure: 20%. This figure essentially told us the White House believes American exporters are currently facing an, on average, 20% tariff when they sell goods to New Zealand.
New Zealand officials were a little stumped by this. As Stuff reported on Thursday, Trade Minister Todd McClay said he had officials trying to “clarify” with American counterparts where that 20% allegation had come from.
So, where did it come from?
We weren’t 100% sure yesterday but it appears we now know.
As CNN reports: “The Trump administration used quite a simple calculation: the country’s trade deficit divided by its exports to the United States times 1/2. That’s it.”
It appears that the calculation was first proposed by journalist James Surowiecki in a post on X. And the US administration seems to have confirmed that was the calculation it used.
So to give you an example… if the US had a trade deficit of $2 billion with Country X, and Country X exported $10 billion worth of goods to the US, the calculation would be:
Divide the trade deficit by the exports: $2 billion / $10 billion = 0.2 (or 20%)
Halve the result: 20% / 2 = 10%
So apply that to New Zealand.
The Office of the United States Trade Representative reported that New Zealand purchased $4.5 billion worth of goods from the US last year. New Zealand sold $5.6 billion worth of goods during the same time.
The US divided the goods deficit - $1.1 billion - with the total New Zealand exports.
And there you go… 20%. But as the New York Times reports “because Mr. Trump said he was being kind’. the final tariff number was cut in half“.
As you’ll find if you go and Google for ‘how did trump calculate county's tariffs’ as we did writing up this piece, a lot of smart people don’t believe these tariffs are reciprocal or fair.
As the BBC reports: “Reciprocal would mean they were based on what countries already charge the US in the form of existing tariffs, plus non-tariff barriers (things like regulations that drive up costs).”
They go on saying: “The White House's official methodology document makes clear that they have not calculated this for all the countries on which they have imposed tariffs. Instead the tariff rate was calculated on the basis that it would eliminate the US's goods trade deficit with each country.”