SHANG-JIN WEI
US President Donald Trump reportedly delayed the launch of his global “reciprocal tariffs” until after April 1. If his goal was to avoid being dismissed as a fool by the rest of the world, it is not at all clear that he has succeeded.
Despite the branding, Trump’s “reciprocal tariffs” are nothing of the sort. Consider South Korea: the country collects no tariffs on most US imports under its free-trade agreement with the United States, yet it will now face a 25% US tariff. Meanwhile, Hong Kong – recognized by the World Trade Organization as a separate customs territory from mainland China – imposes no tariffs on US imports, either, but will still be hit with tariffs exceeding 100%.
Trump’s so-called “reciprocal” tariffs are based on a peculiar formula: the tariff on any country, k, is set at a maximum of either 10% or a higher value, 0.5 times k*, where k* is what the White House determines as a comprehensive tariff equivalent of all trade barriers that k imposes on the US. This is computed as k’s trade surplus with the US in 2024, divided by its exports to the US in the same year.
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