Trade deficit vs tariff: How were Trump reciprocal tariffs calculated?

The US claims India charges a 52% per cent tariff on US imports, but where does this figure come from? Let's find out

US President Donald Trump on Thursday morning (IST) revealed his administration’s reciprocal tariff plan on several countries which ranged from a baseline 10 per cent to a staggering 50 per cent. This comes after the Trump administration had already announced tariffs on several countries, including Canada, Mexico, and China. While some tariffs had been expected following remarks made by the President since taking office in January, others seem to be arbitrary and have left many confused.

 

Amid this, a report by The Wall Street Journal explains how the tariffs may have been calculated. The methodology appears to lie with a country’s trade imbalance with the US rather than existing tariff structures. The White House’s newly announced tariff rates seem to follow a pattern where the deficit in goods trade between the US and a specific country is divided by the total value of American imports from that nation.

 

 

Currency manipulation and trade barriers

President Donald Trump unveiled the tariff structure during an address at the White House, presenting a chart that listed the percentage of tariffs charged to the US by various countries. The figures included terms such as “Currency Manipulation and Trade Barriers,” but they did not necessarily align with the actual tariff rates imposed on American goods by those nations. 

 

The report points out that while an analysis had estimated that China’s average tariff on US imports was around 23 per cent as of the previous month. The White House’s figures suggest a much higher 67 per cent rate. A number that seems to be derived from taking the US goods-trade deficit with China, which stood at $295.4 billion in 2024, and dividing it by the $438.9 billion worth of imports from China.

 

This approach was consistently applied to at least 71 out of the 184 nations and the European Union included in the tariff announcement. In these cases, the new US tariffs were set at roughly half of the calculated percentage derived from this formula.

 

US-India trade deficit

Applying this logic to India, based on data from the office of the US Trade Representative (USTR) would show: 

US goods imports from India: $87.4 billion

US goods exports to India: $41.8 billion

US goods trade deficit with India: $45.7 billion

Trade deficit ÷ Imports = $45.7 billion ÷ $87.4 billion = 0.5229 (approx)

 

By this formula means the trade deficit was approximately 52.3 per cent of US imports from India.  In the chart presented by Trump this morning, the figure 52 appeared next to India under the column titled ‘Tariffs Charged to the U.S.A’.

 

What about countries where the US has trade surplus?

For countries where the US maintains a trade surplus, a different method was applied. Rather than using the trade deficit-based formula, the White House set a flat reciprocal tariff of 10 per cent on their exports to the US.

 

What does the Trump admin say?

When questioned about the tariff calculations, the White House referred journalists to an online statement issued by the Office of the US Trade Representative (USTR).

 

“Reciprocal tariffs are calculated as the tariff rate necessary to balance bilateral trade deficits between the US and each of our trading partners,” the statement read. “This calculation assumes that persistent trade deficits are due to a combination of tariff and non-tariff factors that prevent trade from balancing.”

 

“Reciprocal tariff rates range from 0 to 99 per cent, with unweighted and import-weighted averages of 20 per cent and 41 per cent,” USTR said.