This is the first of a series of tables put out by the US government yesterday to supposedly justify what it calls reciprocal tariffs:
Others in the series are available here.
The problem with the chart is that it is complete nonsense. Trump has made up numbers and then halved them, and called them the US tariff rate.
For example, the average tariff rate in the EU on US imports is around three per cent, because such charges apply to so few products. That's it. In other words, a reciprocal tariff of three per cent might have been justified. Such tariffs already exist.
Then there is, of course, VAT, or value added tax.
VAT is not a tariff. It is a domestic sales tax charged on all products sold in the EU irrespective of the point of origin. Precisely because it does not discriminate, it is not and cannot be a tariff. To suggest it is such a thing is absurd. Any serious economist and tax expert would agree. Trump disagrees. He claims it is a tariff.
But then consider that the average EU VAT rate is around twenty per cent, although the appropriate weighting for US imports is a little hard to know. So, adding the average VAT rate onto the three per cent tariff rate comes to a little over 20 per cent in so-called tariffs for the EU. Trump claims it is 39 per cent. The UK, on the other hand, he claims to have a 10 per cent rate, and the UK's VAT happens to be at EU average rates, meaning that neither claim makes any sense at all.
If the UK exploits this, we will lose out very badly.
Serious problems on the border in Ireland already look to be very likely.
The point is, imposing taxes on the basis of works of fantasy is not a rational economic act. It is, instead, an act of aggression. The UK has to realise that it is just a pawn in that war.
Will we?
Will we have the sense to say that the UK's tariff rate makes no more sense than the EU's does?
Will we have the sense to not mention Brexit?
Will we have the sense to align with the EU against the aggressor, from whose actions we are also suffering?
Or will we fall into Trump's trap?
I fear it will be the last. We would pay a high price for that.
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The numbers don’t make any sense because they are nonsensical. They’ve just taken the US deficit with that country (for goods only) and divided it by the level exports.
Yes, it really is that stupid. Link to a twitter thread attached.
Where is your link, Mariner?
James Surowiecki and a few others have figured it out:
For every country, the USA has taken its trade deficit with that country and divided it by the country’s exports to the USA
So the USA has a $17.9 billion trade deficit with Indonesia. Their exports to the USA are $28 billion. $17.9/$28 = 64%, which Trump claims is the tariff rate Indonesia charges the USA. Which is extraordinary nonsense.
It’s an act of aggression against Americans: consumers in other countries are not affected unless other countries throw rocks in their own harbours.
This is so bizarre…..
Don’t worry Mr Turning, Fox News will have explanations for the Mango faithful which will make sense to them.
The error we are all making is trying to parse logic out of something that is performative, it like trying to parse logic out a performance by CoCo the clown – there is no point because it is a performance, In this case, the performance aims to keep Mango in the news (& people talking about him).
I am confident that we will have something like this once per week for the next couple of years (yawn) so Mango-man-baby feels important.
When the counter tariffs come there will be spurious justifications from the EU and the UK as to the % and the total value of them. They won’t consult mainstream economists on trade nor will they show the formula used so we can see their working. It will all be hidden away with rhetoric like we didn’t start this, this is to protect consumers, this is to protect this industry, sorry for anyone worse off etc.
I agree with your conclusion though I think your framing is wrong. We will not FALL into his trap, I fear we will be PUSHED or HERDED into the trap by his willing helpers in Tufton and Downing streets.
The Treasury being staffed by ex money market people are already sacrificing the disabled and sick to finance inflated city bonuses, why not add a few more people to the human sacrifice to the great god money.
Time for labour MPs to recall they represent their ectorate not the NEC.
I watched the speech slack-jawed last night.
FT Alphaville spotted where the numbers come from. The percentage quoted for each country is just the goods deficit divided by total imports. So, nothing to do with tariffs imposed on the US at all – just complete nonsense.
You are right – we must stand with Europe. Europe must respond by dealing with tax and data usage of Big Tech.
Is that it? Crazy..
Apparently it is that crazy. Which then puts our 10% award in a new context. As I understand it we have a roughly equal trade balance with the US, and as everyone knows a number divided by itself is 1, so our tariff rate should be 1, but Trump declared a minimum of 10% so we are actually 10 times worse off than his bogus calculation would suggest!
Agreed
But none of it makes sense
Thank you and well said, Clive.
I’m working from home today and able to flick between the BBC and French tv. France is proposing such measures, nothing like the BBC’s let’s gloss over it and have a cuppa.
Experts are on French tv. Not so in the UK. In addition to this community, I’ve had a look at what David Edgerton and Prem Sikka have to say and am sad, but not surprised, that they are not on air.
A summit of EU and ASEAN leaders is being arranged. Blighty won’t be there as it seeks to triangulate.
With regard to what Starmer and Reeves can do. They won’t. They know the UK and Labour are finished*, so they need to sell the UK to US firms and prepare their parachutes for 2029. Speaking of 2029, have Richard and readers seen the latest More In Common poll? *The state of the UK was discussed by civil servants at a minor reception yesterday to celebrate twenty years of service by colleagues from Romania. The consensus: The UK is finished.
In addition, Starmer has been helped, not just by Zionist, but US neocon and neoliberal interests, too, since he became DPP and, quite likely, before. He has favours not just to return, but is like that, too. Starmer comes from some money and has never been progressive.
Let me, again, laugh at remainers who opposed Corbyn and thought Starmer was one of them and remind them that, as late as the Monday before the 2019 election, Corbyn met Barnier to discuss a Norway plus deal that included an idea from me about EU supervision of the City in return for single market access.
Prem has been on the phone to me this morning, for some time
No one interrupted us with an invitation to go on air….
As usual some interesting info. The book “Get In” notes that in Jan 2019 – Cummings offered his services to Corbyn & Co on the basis of “Get Breixt Done” (his slogan apparently). Obvs, turned down – but he predicted that if Corbyn had got Brexit through under May – it would have been the tories that were wiped out. Interesting story – ditto your data. What might have been.
I keep thinking back to the Starmer we saw in McLibel (the docu) and the one now. How can people change so much?
They won’t make it to 2029. No way
“The state of the UK was discussed by civil servants at a minor reception yesterday to celebrate twenty years of service by colleagues from Romania. The consensus: The UK is finished.”
Oh wonderful. And what are we going to do about that?
The arguments about tariffs never looked right. It appears this is much more to do with the trade deficit (and very broad-brush comparatives thereon); and then some dubious applied generalisations to the results (probably to six standard deviations!).
Slack-jawed, Mr Parry. You? Nope, don’t believe it.
🙂
My Mastodon feed is full of exposés of the mathematical error in the Trump tariff calculations.
Now they’re saying the formula used to calculate existing foreign tariffs is not only incorrect, but is the same as that ChatGTP suggests when you ask it how to zero a trade deficit with another country.
It’s not funny. Or is it ?
If it was not so serious it would be funny.
If a student did it, it would be a fail.
Betteridge’s law of headlines does not apply.
Good
I’ve seen a new aphorism coined recently.
Trump’s razor: when faced with multiple explanations for a phenomenon, the simplest explanation is usually the most stupid one.
🙂
Sorry, trying to post while walking to work. Should have read the most stupid explanation is usually the best.
Rather less pithy when you cock up the post!
It worked for me….
Will the UK fall into Trump’s trap?
Yes. Yes it will. Did you hear the sound of purring last night because our tariff rate is half the EU’s?
This is the complete fantasy of Brexit in a nutshell… one wonders what advantage there will be for the UKs export of oranges and olive oil?
“Will we have the sense to not mention Brexit?”
They’re already jumping for joy over at the Telegraph, anyway, so as Labour is just Tory-lite, I fear not:
“United Kingdom: 10% – Lower than feared and gives Brexit Britain a competitive advantage over the EU”
“Trump just proved Brexit was the best decision Britain ever made”
“Europe’s manufacturers may even decide to move to the UK ”
It’s all over the front page & op-ed. Delusional stuff, especially the claim that EU manufacturers might come here. They’re absoutely barking.
They really are stupid
What the hell are the Telegraph clowns talking about!? Investment into the UK from the EU since their previous Brexit has collapsed.
Morons.
This is what happens when you unquestioningly allow political funding to inculcate politics.
You get people who cannot do basic math (or much else) running your country.
If the West thinks that this is the right way to go, then it needs its head examining.
The rich are quite happy to have idiots in government. That is the lesson.
But will it be learnt?
It strikes me that it would be nice if a journalist asked Starmer/Reeves about how they felt about the fact that the tariffs levied on our exports to the US (a tariff calculated in a bizarrely stupid and nonsensical way), is so much lower than the other EU countries because we export little to the US and have a substantial trade deficit with them?
It would be nice to hear them answer. The follow up would be, if we ‘grow’ our economy by increasing our exports to the US, what do they expect to happen to the tariff rate?
Something else which occurred to me is that we’ve been laughing at Trump’s belief that the exporting countries are those that pay these tariffs in the first instance when it will actually be consumers in the US. However, after watching Sky News this morning, it seems that all the journalists must think this as well because not one of them actually pointed out how tariffs actually work or mentioned how much it would cost the US. It was insinuated that the exporting countries would be paying them.
Hello Richard.
Does this move by Donald Trump test how powerful the USA is compared to both individual countries, like China and blocs, like the EU or BRICS? Is this its purpose, irrespective of any pain for ordinary people?
Is there any possibility at all that manufacturers shall move enough production and supply to the US or subservient us client states, like the U.K., for Trump/ tech-bros to claim a victory? Or is this a totally nonsensical idea? Is Trump willing to test this idea regardless of how nonsensical it is?
If the EU, China/BRICS can’t somehow nullify the effect of these tariffs, what then?
We learn to live without US products
I haven’t been glued to the radio or TV all morning, but it appears that the BBC and Sky haven’t realised that the 25% tariff on cars also applies to cars coming from the UK. They seem to believe that only the 10% tariff will apply. If that’s what they think, they’re wrong. JLR cars will be be subject to the 25%.
Source?
Jonathan Reynolds on the gov.uk website.
“Yesterday evening, the United States announced a 10% reciprocal tariff on UK exports and have today imposed a 25% global tariff on cars. This follows the application of tariffs of 25% on US imports of steel, aluminium and derivative products that was announced on 12 March.
No country was able to secure an exemption from these announcements, but the UK did receive the lowest reciprocal tariff rate globally. ”
https://www.gov.uk/government/speeches/statement-by-the-trade-secretary-on-us-tariffs
The whole statement seems pretty clear that the 25% on cars is additional to 10% ‘reciprocal’ tariff (and the 25% on steel, aluminium and derivatives)
Agreed
Chat GPT, who are quoting the Scottish Sun. Here it is:
Do you know if the 25% tariff on car imports announced by President Trump yesterday will apply to cars from the UK? The UK media seem to be saying that only the 10% general tariff will apply. Is this right?
ChatGPT said:
Yes, the 25% tariff on car imports announced by President Trump will apply to cars imported from the UK. While the UK faces a general 10% tariff on its exports to the U.S., automobiles are subject to a higher, specific tariff of 25%. This means that British car manufacturers exporting to the U.S. market will encounter this increased tariff rate.
The Scottish Sun
Hi again! I’ve just asked Chat GPT to verify the story by giving me a US Government source, and it’s gone somewhat coy! It seems it’s not currently clear. Sorry.
No problem
Nothing is clear….
Sorry (again) for coming back with another message, but it seems to me that there’s a possible scoop for someone here, and maybe it could be you!
I asked Chat GPT to put its reasoning hat on, and it’s come up with this:
Based on the available evidence, the most likely correct answer is that the 25% tariff announced applies to automobiles imported from all countries that meet the tariff criteria—including the UK.
An official proclamation from the White House (as found on whitehouse.gov) states that the 25% tariff on automobiles and certain automobile parts is applied globally, regardless of the country of origin. This indicates that even though the UK might otherwise face a general 10% tariff on other exports, vehicles fall under the category subject to the 25% rate.
Thus, I believe the response stating that the 25% tariff will apply to UK car imports is the more accurate one, based on the authoritative U.S. government source.
For the most up-to-date confirmation, it’s always best to check the latest official announcement on the White House website.
I think you may be right