The Story The problem with the theory behind Trump's tariffs
Apr 6, 2025
Mehreen Khan, the Economics Editor at The Times, joins to dissect the implications of Trump’s sweeping tariffs. She critiques the simplistic calculations behind these policies and exposes the flawed economic theories influencing them. Khan discusses America’s unique borrowing advantages despite high deficits and the challenges of achieving self-sufficiency in manufacturing. The conversation also raises alarms about how shifting trade dynamics could diminish the U.S.'s global influence and reshape international economics.
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Tariff Announcement
- President Trump announced tariffs in the Rose Garden, using a cardboard chart.
- The chart compared US tariffs with other countries' tariffs, aiming for reciprocal protectionism.
Tariff Formula
- Trump's tariff calculations are based on a crude formula: a country's deficit with the US divided by its exports to the US, then halved.
- This formula, surprisingly similar to one generated by ChatGPT, seems designed to eliminate US trade deficits.
China Tariffs
- China faces a potential 79% tariff on goods entering the US, including existing tariffs and penalties for buying Venezuelan oil.
- This is the highest tariff for any country and reflects efforts to counter China's growing manufacturing power.