Trump's tariff formula punishes the poor - The biggest losers, Africa and Southeast Asia
US President Donald Trump's formula for imposing tariffs presents another negative aspect: it is also hitting some of the world's poorest countries.
The math is simple: take the U.S. goods trade deficit with a country, divide it by that country's exports to the U.S., and convert it to a percentage figure; then halve that figure to produce the U.S. "reciprocal" tariff, with a floor of 10%.
But Madagascar, one of the world's poorest countries with a per capita gross domestic product (GDP) of just over $500, meanwhile faces a 47% tariff on the modest $733 million worth of vanilla, metals and clothing exports it made to the US last year.
Madagascar is not alone: the severity of the formula applied to economies that cannot afford to import much from the US leads inevitably to a high reciprocal figure: 50% for Lesotho in Southern Africa, 49% for Cambodia in Southeast Asia.
"The biggest losers are Africa and Southeast Asia," sector experts explain, adding that the measure "risks further damaging the development prospects of countries already facing deteriorating terms of trade."
But the formula is also sowing confusion among rich countries. For the European Union, it has produced a punitive tariff of 20%, four times the 5% that the World Trade Organization calculates as the EU's average tariff rate.
"So, at least for us, it's a colossal inaccuracy. It costs us three times more today to enter the US than it does for American cheeses to enter our market," say producers of specialty Grana Padano cheese in Italy.
The Commerce Secretary did not directly explain the formula, but said that economists at the United States Trade Representative had been working for years on a metric that reflected all trade barriers imposed by a given country.
But economists around the world noted that the terms cancelled each other out in such a way that it could be reduced to a simple coefficient of the merchandise trade deficit over merchandise trade exports.
"There's really no methodology. It's like finding out you have cancer and finding treatment based on your weight divided by your age. The word 'reciprocal' is deeply misleading," they explain.
Others pointed out that the formula also raised questions about the widespread view that Trump is taking steps toward one-on-one discussions with individual countries that would ultimately see the new tariffs significantly reduced.
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