President Donald Trump on Wednesday unveiled new U.S. tariffs on imports in his “Liberation Day” speech in Rose Garden. “In a few moments, I will sign a historic executive order instituting reciprocal tariffs on countries throughout the world,” Trump said in his speech. “Reciprocal,” he emphasized. “That means they do it to us, and we do it to them. Very simple, can’t get any simpler than that.”
The new tariff rates the White House published are not reciprocal. Reciprocal tariffs would charge the same tariff rate that foreign countries place on American exports. The Trump administration’s tariff rates were based instead on whether the U.S. has a trade deficit or surplus with any given country. Trade deficits reflect how many more goods and services a country imports from another country than it exports to that country. And if exports outvalue imports from a certain country, there would be no trade deficit but a trade surplus.
For countries with whom the U.S. has a trade deficit, the Trump administration calculated tariffs by taking our trade deficit with a given country and dividing that figure by the value of the exports. “[The Trump administration] didn’t actually calculate tariff rates + non-tariff barriers, as they say they did,” tweeted James Surowiecki, a contributing writer for Fast Company and The Atlantic, who was one of the first to highlight the administration’s tariff calculations on X. “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.” Per World Trade Organization estimates, Indonesia’s trade-weighted average tariff rate is 5.3 percent.
Moreover, the administration’s trade deficit calculations excluded services and accounted only for goods. “The U.S. has a services trade surplus of nearly $300 billion,” National Review’s Dominic Pino wrote, “but none of that gets counted in the formula, making trade deficits look bigger than they actually are and justifying a higher tariff rate.”
The White House pushed back on Surowiecki. “No we literally calculated tariff and non tariff barriers,” White House deputy press secretary Kush Desai replied on X, linking to an article and formula from the Office of the U.S. Trade Representative (USTR). However, as the first sentence of that article Desai shared states, “Reciprocal tariffs are calculated as the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of our trading partners.” (Emphasis added.)
The USTR website states further: “This calculation assumes that persistent trade deficits are due to a combination of tariff and non-tariff factors that prevent trade from balancing.” So, because tariff rates can affect trade deficits—a high tariff rate would reduce imports, affecting the balance of trade—the administration claimed its “reciprocal” tariffs were based on tariff and non-tariff factors. While partially true, this neither demonstrates that the tariffs are indeed “reciprocal” nor disproves Surowiecki’s claim about how the tariff rates are calculated. In fact, the USTR effectively verifies Surowiecki’s claim.
The USTR website page, which Desai also included in an image attached to his tweet, shows the following formula for how the administration calculated the new tariff rates.
That looks confusing, but let’s break it down. Δ𝘵i represents the tariff rate applied to U.S. imports from a certain country. 𝒳i represents U.S. exports to the same country, while 𝓂i represents U.S. imports, so the numerator is simply the U.S. trade deficit with that country. Surowiecki claimed the administration divided the trade deficit by its imports, 𝓂i. The USTR equation’s denominator shows a more complex equation: 𝓂i multiplied by ε—standing for price elasticity of import demand—and by φ—elasticity of import prices from the tariffs. In short, ε and φ capture, respectively, the degree to which 1) the quantity of imports and 2) the prices of imports will be affected by higher tariff rates.
However, ε and φ are not variables in this particular equation. They are fixed numbers. Per USTR, “price elasticity of import demand, ε, was set at 4” and “the elasticity of import prices with respect to tariffs, φ, is 0.25.” Multiply 4 by .25 and you get 1. That means the denominator comes out to 𝓂i times 1, which is just … 𝓂i. And so the USTR equation indeed divides the trade deficit by imports, as Surowiecki correctly noted.
To illustrate the difference between the rates the U.S. is imposing on other countries and what reciprocal tariffs would look like, take South Korea. The White House’s calculations imply that South Korea imposes 50 percent tariffs on American exports. But according to its finance ministry, “Korea’s effective tariff rate for goods imported from the U.S. is approximately 0.79 percent” because of a U.S.-South Korean trade agreement signed in 2012. The U.S. Customs and Border Protection website similarly states, “Most [South] Korean industrial and consumer goods currently enter the United States free of duty.”
But per the U.S. trade representative, the U.S. exported $65.5 billion worth of goods to South Korea in 2024 and imported $131.5 billion worth of South Korean goods. Using the formula described above yields a purpoted “50 percent” tariff rate imposed by South Korea.
The Trump administration took that formula’s figure, -0.5 for South Korea, and divided it by two to calculate the U.S. “discounted reciprocal” tariff rate. So, while South Korea imposes an effective tariff rate of .79 percent on U.S. goods, the reciprocal tariff rate the U.S. is imposing on South Korea is 25 percent.
The formula also explains why Israel—which days before “Liberation Day” announced it would remove all tariffs on U.S. exported goods—is facing 17 percent tariffs.
The only countries not slapped with Wednesday’s “reciprocal” tariffs were Russia, Cuba, North Korea, and Belarus. This is because, as Pino noted, they “are the only four countries in the world with which the U.S. does not have permanent normal trading relations (PNTR).” All four countries face sanctions from the U.S., restricting trade between our countries.
The Dispatch Fact Check reached out to the White House for comment. A spokesperson reiterated that sanctions preclude trade with Iran and referred us to the annex of the executive order regarding specific tariff rates.
If you have a claim you would like to see us fact check, please send us an email at factcheck@thedispatch.com. If you would like to suggest a correction to this piece or any other Dispatch article, please email corrections@thedispatch.com.
