The universal tariff package announced by Trump on April 2, 2025 has sparked international reaction. The U.S. President described this measure as a “fair response,” based on the idea that other countries apply similar—or even higher—tariffs to U.S. products.
What is Really Meant by Reciprocity?
However, reciprocity in this context doesn’t mean responding equally to prior trade barriers. Instead, it’s based on a misinterpreted and misused economic indicator: the bilateral trade balance.
The Formula for Tariffs
Trump’s formula to justify these tariffs is:
- US Trade Deficit with Country X / Country X’s Exports to US
This calculation aims to quantify a supposed equivalent tariff that the country in question applies, but it only measures trade imbalance. The larger the U.S. deficit with a country, the higher the tariffs imposed.
The Real Problem
This formula doesn’t measure tariffs; it assesses trade imbalances influenced by multiple factors like exchange rates, consumer patterns, production specialization, savings and investment rates, or demographic structure.
Penalizing a country with high import demands from the U.S., based on this imbalance, isn’t reciprocity—it’s protectionism cloaked in simplified narratives.
Concerns of This Logic
Economically, this logic is double-troubling: it distorts the traditional role of tariffs as corrective tools for specific imbalances or responses to unfair practices. It also sets a dangerous precedent—that trade deficits are injustices requiring tax penalties, despite no evidence that deficits alone are harmful.
Conclusion
Trump’s ‘reciprocal tariff’ isn’t reciprocity. It’s an arbitrary formula confusing symptoms (trade imbalances) with causes and using fiscal solutions for structural issues. Resulting in a trade policy based more on perceptions than data, narratives over analysis.
In interconnected economies, such measures not only harm the targeted country but also penalize U.S. consumers by raising product prices, disrupt global supply chains, and fuel a confrontational logic—as seen with China’s 34% tariffs on U.S. goods—inevitably leading to retaliatory actions.
