Does Anyone Understand the Math Behind the Trump Tariff Formula?

[lustylad]

Hey, if I wasn't banned I would have launched this thread a month ago.


Let's start here:

https://www.wsj.com/economy/trade/tr...ained-ba47bfde

"Data sleuths on social media soon reverse-engineered the formula behind the White House’s calculations, zeroing in on the trade-related math. Dividing the U.S.’s 2024 goods-trade deficit with China—$295 billion—by the amount the U.S. imported from China resulted in the White House’s 67%."


Hmmm... ok, I think I'm starting to get it, even though the actual China tariffs have been jerked up and down like a yoyo since April 3.


But what's with the epsilon phi stuff?

The “epsilon” is “the elasticity of imports with respect to import price,” phi is “the pass-through from tariffs to import price,” according to the USTR. In order to calculate the tariff, the USTR set epsilon to -4 and phi to 0.25, so if you multiply them together you just get -1 .... in effect, they cancel each other out.

https://amanverjee.medium.com/trump-...e-24d4ec4a23ac


Seriously? I think I need some help. From Tiny and TC. The rest of yinz can stay out of it, unless you are fluent and literate in economics.

Please tell me the Trump formula incorporates some measure of the tariff levels each country is currently imposing on our exports. This is supposed to be (at least partly) about reciprocity, right?

Please tell me the epsilon-phi stuff isn't just shallow window-dressing designed to make the "formula" look more sophisticated.

Ya gotta think every country that comes over here seeking to negotiate a trade deal is asking the same questions.

[eccieuser9500]

I think I do? Fluent? Hell yeah. Supply and demand. That's it.

Classic gif



Fuck.

[lustylad]

Ok Charlie Brown, you're in.

Every time you shake the magic 8-ball the answer comes up the same...

[eccieuser9500]

Thanks









But, do they work?

Spare you the classic clip.

[lustylad]

Anyone? Anyone? Anyone?

Originally Posted by eccieuser9500

"We’re operating at a fiscal deficit now that is unsustainable over a very long period of time. We don’t know whether that means two years or 20 years because there’s never been a country like the United States. But as Herbert Stein, the famous economist, said, “If something can’t go on forever, it will end.” We are doing something that is unsustainable, and it has the aspect to it that it gets uncontrollable to a certain point."

- Warren Buffett, Berkshire Hathaway Annual Shareholders Meeting, 5/3/25

[Tiny]

Originally Posted by lustylad

Hey, if I wasn't banned I would have launched this thread a month ago.


Let's start here:

https://www.wsj.com/economy/trade/tr...ained-ba47bfde

"Data sleuths on social media soon reverse-engineered the formula behind the White House’s calculations, zeroing in on the trade-related math. Dividing the U.S.’s 2024 goods-trade deficit with China—$295 billion—by the amount the U.S. imported from China resulted in the White House’s 67%."


Hmmm... ok, I think I'm starting to get it, even though the actual China tariffs have been jerked up and down like a yoyo since April 3.


But what's with the epsilon phi stuff?

The “epsilon” is “the elasticity of imports with respect to import price,” phi is “the pass-through from tariffs to import price,” according to the USTR. In order to calculate the tariff, the USTR set epsilon to -4 and phi to 0.25, so if you multiply them together you just get -1 .... in effect, they cancel each other out.

https://amanverjee.medium.com/trump-...e-24d4ec4a23ac


Seriously? I think I need some help. From Tiny and TC. The rest of yinz can stay out of it, unless you are fluent and literate in economics.

Please tell me the Trump formula incorporates some measure of the tariff levels each country is currently imposing on our exports. This is supposed to be (at least partly) about reciprocity, right?

Please tell me the epsilon-phi stuff isn't just shallow window-dressing designed to make the "formula" look more sophisticated.

Ya gotta think every country that comes over here seeking to negotiate a trade deal is asking the same questions.

The formula came out of Peter Navarro's ass. So no Lusty Lad, it does not incorporate tariffs or try to quantify non-tariff trade barriers other other countries impose on the USA.

I have no idea where the epsilon and the tau came from or what they mean, but yeah, if their product is -1, they're meaningless. And the formula for each country is Tariff = ((US imports - US exports)/(US imports)) x 1/2, or 10%, whichever is higher. The formula only applies to goods. It conveniently omits services. And goods from countries like Australia that have a trade deficit with the USA still bear the duty.

FYI, here are the trade threads,

https://www.eccie.net/showthread.php?t=3037731
https://www.eccie.net/showthread.php?t=3028877
https://www.eccie.net/showthread.php?t=3033888

[Lucas McCain]

The better question is does Trump understand the math and how it should be universally applied, and the answer is an emphatic "no". And more importantly, just because an equation is provided, and for the sake of argument let's say that it is correct, that does not mean it applies to each trade partner broadly no matter what because the variables are different and there is not simply one size fits all like Trump wants to do. That's just pure laziness and no planning... kind of like his McDonald's diet.

You can't just apply a damn math formula and say, "we've finally figured it all out so let's apply it to everything to fix the trade deficit." And more importantly, who the hell said the math is even correct in the 1st place? Does Navarro have a PHD in math from MIT? Hell, I looked at that goofy formula and thought it was about a fraternity that one of my college buddies is/was in. Haha

https://en.wikipedia.org/wiki/Phi_Delta_Epsilon

[Jacky S]

I suppose we can just let every Country on the Planet to keep charging the US exorbitant tariffs to allow our products to be sold in their Country while their goods are
getting, in comparison, a free ride here.

[VitaMan]

I had read somewhere they just took the trade deficit with each country and divided it by some number.

[Hdtown]

Let's be clear here, Diaper Don doesn't understand

[Yssup Rider]

Lusty, only you understand... please explain it to Schitzenpants

[VitaMan]

The formula has gone by the wayside, as the administration is revising everything....several times.


All they have done is create more uncertainty and risk for businesses. That is why many businesses have paused production, and ocean vessel transports have dropped 40 % or more.

[Texas Contrarian]

Originally Posted by lustylad

Seriously? I think I need some help. From Tiny and TC. The rest of yinz can stay out of it, unless you are fluent and literate in economics.

Please tell me the Trump formula incorporates some measure of the tariff levels each country is currently imposing on our exports. This is supposed to be (at least partly) about reciprocity, right?

Please tell me the epsilon-phi stuff isn't just shallow window-dressing designed to make the "formula" look more sophisticated.

Ya gotta think every country that comes over here seeking to negotiate a trade deal is asking the same questions.

Hey, Lustylad! Welcome back. Good to see you posting again.

Sorry, though. I'm going to have to take a pass on telling you that the epsilon-phi stuff isn't just shallow window-dressing designed to make this silliness look "more sophisticated!"

Just a hunch, but I'm guessing that the only reason it was presented in such a form is that someone thought it might appeal to Donald's most visceral instincts, since he thinks we are "losing" to any country with which we run a trade deficit. Or even "subsidizing" it! He's said more than once that it's outrageous that we're "subsidizing" Canada to the tune of $200 billion annually. Someone may have told him that this is similar to the "scaled tariffs" idea proposed by Jesse Richman a dozen or so years ago, and would hammer down bilateral trade deficits with the world's "worst offenders" (as Trump probably views them).

The bizarreness and ridiculousness of this whole exercise is almost in a class by itself. But I guess it sounds good to Donald to impose extra-high tariffs on countries that have the temerity to exploit Americans by purchasing goods and services from us that are only worth a small fraction of what we import from them.

Take Madagascar, for example. It produces something like 75% of the world's high-quality vanilla, and we buy a large percentage of their production. They don't buy all that much from the US, so the "formula" sticks them (us, actually!) with a 47% tariff rate. This makes sense in Donald's world, since we are "losing" bigly to Madagascar. Of course, it's one of the poorest countries on the planet with a per capita GDP well below $1,000 annually. So it should be easy enough to understand that there's no way that impoverished nation can afford to buy very much stuff from us. Nonetheless, the answer provided by this wonderful plan is to heavily tax American consumers' vanilla consumption. (Makes perfect sense!)

By the line of reasoning inherent in the belief system that seems to have motivated the production of the aforementioned "formula," we're getting our asses kicked by a bunch of primitive Malagasy tribesmen in a trade war.

How ignominious!

[Capital]

I'm trying to wrap my brain around the ideas typically spouted in this Forum. A Pussy-centered Website whose Members support Trump 3-1, yet understand his Tariff scheme is economic hogwash.

[Tiny]

Originally Posted by Texas Contrarian

Take Madagascar, for example. It produces something like 75% of the world's high-quality vanilla, and we buy a large percentage of their production. They don't buy all that much from the US, so the "formula" sticks them (us, actually!) with a 47% tariff rate. This makes sense in Donald's world, since we are "losing" bigly to Madagascar. Of course, it's one of the poorest countries on the planet with a per capita GDP well below $1,000 annually. So it should be easy enough to understand that there's no way that impoverished nation can afford to buy very much stuff from us. Nonetheless, the answer provided by this wonderful plan is to heavily tax American consumers' vanilla consumption. (Makes perfect sense!)

By the line of reasoning inherent in the belief system that seems to have motivated the production of the aforementioned "formula," we're getting our asses kicked by a bunch of primitive Malagasy tribesmen in a trade war.

How ignominious!

Stinkin' Madagascans! They took our jobs!

Great post

Originally Posted by Capital

I'm trying to wrap my brain around the ideas typically spouted in this Forum. A Pussy-centered Website whose Members support Trump 3-1, yet understand his Tariff scheme is economic hogwash.

Not true about the composition of the Board. Please refer to the recent "GolferGuy/IRA/Trump Supporter" poll. A majority of Board Members now dislike Trump. What a change from a few years ago!

However otherwise yes, you're right. Many of us are bipolar. I for one had extreme love for our current president when he lowered the corporate income tax rate, pushed the mRNA COVID vaccines through the FDA, and tried to bring peace to Ukraine. I experienced extreme hatred when he tried to steal an election and imposed the irrational tariffs that are the subject of this thread.

Yes Capital, some of us think and decide for ourselves, instead of mindlessly following party leaders, media pundits, and social media political influencers.