section_path: "Reciprocal" tariff policy/Formula calculation
section_name: Formula calculation
paragraph_text: Formula calculation
  
  Soon after the unveiling, financial journalist James Surowiecki reported that the final "reciprocal tariff" policy appeared to calculate the value of a country's trade barriers by dividing the US trade deficit with the country by the value of US imports from the country, where both the trade deficit and the imports focus only on goods, rather than both goods and services. The "reciprocal" tariff rate Trump imposed was then calculated by dividing that value in half. For example, dividing the US's 2024 trade deficit in goods with China, $295 billion, by the amount that the US imported from China, $439 billion, results in the 67% trade barrier value the US assigned to China: $295bn ÷ $439bn = 0.67 which, as a percentage, is 67%.
  
  The Trump administration later published their trade barrier formula online, which simplified to the same formula. With variable i representing a country, m representing imports of goods from that country, and x representing exports of goods to that country, the formula given by the White House is as follows:
  
  The Trump administration formula included measures of elasticity set at ε = −4 and φ = 0.25, then multiplied them for ε × φ = −1, which resulted in no change except to make the result positive when ε × φ was multiplied to other parts of the calculation as defined in the formula. Thus, with x − m being the trade deficit for goods, the formula simplifies to Surowiecki's:
  
  The "discounted" tariff rate is then calculated by dividing the result by 2, making the final formula:
  
  The Trump administration's Office of the United States Trade Representative (USTR) explained that the tariffs "are calculated as the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of our trading partners", aiming to "drive bilateral trade deficits to zero". However, even countries with which the US runs a trade surplus, such as Australia, received a tariff of 10%.