Trump publishes “Formula” to justify tariffs. But “it’s full of mistakes”

The White House has published a formula to apply evenly to all countries to justify the rates announced by Donald Trump on Wednesday. However, the formula has raised much criticism from economists, including the Nobel Paul Krugman prize.

On the date he dubbed “Liberation Day”, Donald Trump imposed a global rate of 10% to 184 countries and the European Union (EU), which in some cases rose to 34% for China or 20% for European products.

To impose these tariffs – which the White House justified as a form of retaliation for the barriers faced by US exports worldwide – Trump declared the state of “national emergency”.

The US President claimed that the current commercial situation poses a risk to the country’s safety.

“This is one of the most important days, in my opinion, in the history of the United States. It is our declaration of economic independence“, He said in a big event at the White House on Wednesday.

These rates are the central part of the effort to bring back production to the US and remodel a worldwide trade system that Trump has long considered it unfair.

White House Publics Formula

The White House published the “formula” math to justify the tariffs imposed on global imports.

Donald Trump It has exposed the alleged “tariffs” that other countries are currently imposing on the United States. However, the figures presented do not correspond to the current value of customs rights.

According to the White House, China would be taxing American products by 67%, however, according to the World Trade Organization (WTO) statistics in 2024, it applied an average customs tariff of only 4.9%.

The difference is equally large for the European Union (1.7%, according to the WTO, against the 39% shown by Donald Trump) and to India (6.2% against 52%).

The White House claims to consider other commercial barriers In addition to simple customs rights – citing, in particular, environmental standards and the manipulation of exchange rates.

“It’s full of mistakes”

The US commerce representative published a formula with multiple variables in Greek letters. Although, several variables cancel each other.

In fact, to calculate so -called customs rights, the White House divides the trade balance (the difference between imports and exports) by the value of imports – whatever the country.

This calculation does not take into account the specificity of trade relations.

“The formula is based on the relative value of the commercial surplus with the United States,” confirms Deutsche Bank economists.

“This formula is so full of mistakes that it is difficult to know where to start”says the economist Paul KrugmanNobel Prize for the economy, noting that calculations only take into account the transacted goods, omitting services.

What accounts are these?

Applying the formula published by the Administration to the data of 2024 published by the Census BureauAFP reached the numbers presented by Trump

The new rates announced for each country then correspond to this result, divided by two.

If the formula gives less than 10%, or if there is a commercial surplus, the United States applies a minimum uniform rate of 10% being the case of more than a hundred countries and territories, including the United Kingdom and Australia.

The formula also uses simple assumptions to estimate the impact of an increase in the price of imported products on the internal demand of the United States, called “elasticity”, this variable is considered the same for all countries, regardless of the product.

However, one of the scientific articles cited by the White House to substantiate its formula stresses that elasticity “varies depending on the product and importer”.

“Sick survived,” said Trump

After criticism of most economists, who predict that they are US consumers to support costs, Trump compared the tariffs to surgery, arguing that “the patient has survived and is recovering”.

“The medical operation is over! The prognosis is that the patient will be much stronger, bigger, better and more resilient than ever. Let’s make America big again! ”Wrote Donald Trump on the Truth Social network.

However, in an interview with Fox News, the vice president, JD Vanceadmitted that the benefits of this measure will not be seen immediately.

“It will not happen immediately. If we seek deregulation and cost cutting policies, people will see this in wallets and benefit from it,” he said.

“What I ask people to understand that we will not solve things overnight,” Vance said, explaining that the government is “working hard to lower prices.”

Sharp declines in the bag

The first day of negotiation in the financial markets since the tariffs were announced Started with sharp falls on the New York Stock Exchange.

The main scholarship index, Dow Jones Industrial Averag, lost almost 1,200 points, a drop of 2.75%.

The impact of these new rates was felt by companies in all sectors, which had a high volatility this morning: Nike (-11.3%), Apple (-9%), Amazon (-7.7%), Goal (-7.4%), Tesla (-3.90%), Alphabet (-3.60%) and Stellantis (-3.45%), between others.

Inflation will increase

The Council of the European Central Bank (BCE) believes that the rates announced by Donald Trump Short -term inflation will increase.

According to the minutes of the monetary policy meeting held in early March, “the combination of American tariffs and retaliation measures can lead to the risks of discharge for inflation, especially in the short term.”

“Furthermore, companies also learned to increase prices faster in response to new inflationary shocks, ”the document adds.

The Council of the ECB, which in March lowered the interest rates in a quarter of point, to 2.5%, meets on April 16 and 17, but it is not clear that decision will make this time lower the interest rates or if you prefer to take a break and keep them.

Government gathers with business associations

The Ministry of Economy will meet next week with 16 business associations from various sectors to evaluate the impact and measures of mitigation of tariffs announced by the US Administration on Portuguese companies and the national economy.

According to a statement issued Thursday by the ministry, these meetings will take place from Wednesday to Friday, in Lisbon and Porto, also with the participation of representatives of the Agency for Investment and Foreign Trade of Portugal (AICEP), IAPMEI, Compete, Directorate-General for Economic Activities (DGAE) and Portuguese Bank of Fomento (BPF).

The goal is “open a dialogue channel with the sectors that will be most affected By the model of ‘reciprocal tariffs’ ”, namely the automotive industry, fuels, rubber, electric and electronic sector, metallurgy and metallomechanics, wood and furniture, cork, shoes, tannoms, textile and clothing, textile and lanifice, in addition to the AIP, CIP and AEP employer associations.

“It is intended Audience Associations Representative of companies in these economic activities on the evaluation that make the impact of imposing new customs rates on European products, ”says the Ministry of Economy.

At the same time, The executive wants to hear “the proposals which they have to mitigate and minimize this impact on national exports. ”