How Trump’s Team Used Trade Deficits to Calculate Tariff Rates

President Trump’s administration calculated its raft of new tariffs primarily based on existing trade balances — a departure from pledges to match the tariff rates and other trade barriers from other countries.  In a statement published last week to explain its methodology for tariffs that rocked the globe, the United States Trade Representative detailed a formula that divides a country’s trade surplus with the U.S. by its total exports, based on data from the U.S. Census Bureau for 2024. That number was then divided by two, producing the “discounted” rate.

China, for instance, had a trade surplus of $295 billion with the U.S. last year on total exports of $438 billion, a ratio of 68%.  Divided by two according to Trump’s formula, that yielded a tariff rate of 34%.  The same calculations roughly produced the rates for other economies like Japan, South Korea and the European Union.

Countries where the U.S. runs a trade surplus were also hit, facing a flat 10% rate regardless, as did nations where trade was roughly even.

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