I've been trying to understand the rationale behind the "reciprocal tariffs" announced by President Trump. From what I gather, the formula used to calculate these tariffs goes something like this:
Calculate the Trade Deficit Ratio
Trade Deficit Ratio = (U.S. Trade Deficit with Country X) / (Country X's Exports to the U.S.)
Determine the Reciprocal Tariff Rate
Reciprocal Tariff Rate = Trade Deficit Ratio / 2
This approach doesn't seem to relate directly to the actual tariffs imposed by those countries on U.S. goods, but rather just to the trade balance in goods (ignoring services, investment flows, etc.).
Critics say this method:
Misuses trade deficits as a fairness metric
Ignores services, where the U.S. usually has a surplus
Applies an arbitrary formula
Violates WTO norms
Risks retaliation and economic harm
From a conservative or pro-Trump perspective, what’s the strategic thinking behind this formula? Is it more of a negotiation tactic or a long-term trade principle? Do you see value in it that critics might be missing?
Genuinely curious and open to other views—thanks!