On April 2, 2025, U.S. President Donald Trump addressed the nation during a "Make America Wealthy Again" trade announcement event held in the Rose Garden of the White House, located in Washington, D.C.

Photo by Chip Somodevilla | Getty Images

Financial markets are scrutinizing the reasoning behind the substantial tariffs on U.S. imports announced by President Trump's administration on Wednesday, which resulted in a sharp decline in global markets and raised international concerns.

In response, Trump and the White House shared various charts on social media illustrating the tariff rates that they claim other countries have imposed on the U.S. These rates include considerations of "Currency Manipulation and Trade Barriers."

Another column details the newly introduced U.S. tariff rates applied to each country, including the European Union.

Chart of reciprocal tariffs.

Source: Donald Trump via Truth Social

The stated rates are often about half of what the Trump administration alleges other countries charge the U.S. CNBC has not been able to independently verify the accuracy of these claims regarding tariff duties.

Market analysts quickly began attempting to decode the formula used—leading to puzzling conclusions. Notably, many, including journalist James Surowiecki, maintained that the U.S. seemed to have divided the trade deficit by imports from specific countries to determine the tariff rates.

This approach does not align with standard practices for calculating tariffs and suggests that the U.S. may have only considered the trade deficit in goods while disregarding service trade.

As an illustration, the U.S. asserts that China imposes a 67% tariff. In 2024, the U.S. reported a trade deficit of $295.4 billion with China, while imported goods totaled $438.9 billion

When you divide the trade deficit by the value of imports, you arrive at 67%! The same calculation applies to imports from Vietnam.

"The formula is focused on trade imbalances with the U.S. rather than the actual tariff levels or non-tariff barriers in play. This creates challenges for Asian nations, particularly less affluent ones, in attempting to meet U.S. demands for reduced tariffs, as they would need to purchase more American goods than they export to the U.S.," explained Trinh Nguyen, a senior economist for emerging Asia at Natixis.

"Considering that U.S. goods are typically more expensive and that purchasing power is limited for countries that face the highest tariffs, this isn't the best option. For instance, Vietnam has a trade surplus with the U.S. but has already made attempts to reduce tariffs even before the announcement, without any reprieve," Nguyen added.

Additionally, the U.S. seems to have imposed a 10% tariff on regions where it maintains a trade surplus.

The Office of the U.S. Trade Representative detailed its methodology on its website, aligning closely with what analysts had guessed, with some discrepancies.

"While calculating the trade deficit effects from various tariff, regulatory, tax, and other policies in every country is complex and to some degree impractical, their collective impacts can be approximated by determining the tariff level required to bring bilateral trade deficits to zero. If trade deficits persist due to tariffs, non-tariff policies, and market fundamentals, then the reciprocal tariff determining this offset is fair," states the website.

The U.S.T.R. also provided estimates concerning the responsiveness of imports to their prices—essentially, how sensitive the demand for foreign products is to price changes—and how tariffs would likely lead to increased prices for imported goods.

This screenshot from the U.S.T.R. site outlines the methodology and formulas in more comprehensive detail:

A screenshot from the website of the Office of the United States Trade Representative.

Some analysts noted that the government's methods could provide more flexibility in negotiations.

"I can only say that the ambiguity surrounding the tariff figures might allow for greater elasticity in deal-making, though it could come at the cost of the U.S.'s credibility," remarked Rob Subbaraman, head of global macro research at Nomura.

 — This article includes contributions from CNBC's Kevin Breuninger.

On April 2, 2025, U.S. President Donald Trump held a trade announcement event at the White House, where he unveiled sweeping tariffs on U.S. imports. The announcement sent shockwaves through global financial markets, prompting widespread concern about the implications of the new tariff regime. The Trump administration presented data on social media, claiming that these tariffs were necessary due to high rates imposed by other countries on U.S. goods and citing issues like "Currency Manipulation and Trade Barriers."

Market analysts quickly began to scrutinize the methodology behind the administration's reported tariff figures. Observers noted that the tariffs claimed by the U.S. seemed to be approximately half of what was reported for other countries, raising questions about the transparency and accuracy of the calculations. CNBC reported that they could not independently verify the data shared by the administration.

Some analysts, including journalist James Surowiecki, concluded that the U.S. appeared to have used a rather unconventional formula to derive the tariff rates. Specifically, the methodology involved dividing the trade deficit with a given country by the total imports from that country to arrive at the corresponding tariff rates. This approach was criticized for not aligning with standard tariff calculation practices and for focusing solely on goods while neglecting service trade.

For example, the U.S. indicated that China imposed a tariff of 67%. This figure seemed to stem from a trade deficit of $295.4 billion with China, and with total imports from China valued at $438.9 billion, dividing these numbers indeed yielded a 67% "tariff rate." This same calculation also applied to other countries like Vietnam.

Trinh Nguyen, a senior economist at Natixis, remarked on the complicating nature of this method, which focuses on trade imbalances rather than reciprocal tariffs. Nguyen pointed out that it may be challenging for poorer Asian nations to satisfy U.S. demands to reduce tariffs in the short term since they would need to export more to the U.S. than they import, a scenario made difficult by the higher costs of American goods.

Additionally, the U.S. administration appeared to apply a blanket levy of 10% on regions with which it enjoys a trade surplus. The Office of the U.S. Trade Representative provided clarification on its website about their tariff calculation approach. They noted that determining the trade deficit effects of numerous tariffs, regulations, and policies involved was complex, if not impossible. However, they suggested that it was possible to approximate the tariff levels necessary to reduce bilateral trade deficits to zero.

The U.S. Trade Representative's strategy implied a focus on striking a balance between tariff and non-tariff barriers while addressing persistent trade deficits. They also considered the elasticity of imports concerning prices and how higher tariffs would translate into higher prices for consumers.

Despite the ambiguities surrounding these tariff figures, some analysts suggested that the lack of clarity might give the U.S. administration more negotiating flexibility in future discussions with trading partners. However, this could potentially undermine U.S. credibility if seen as manipulating trade data for economic gain.

Overall, the introduction of these new tariffs ignited substantial discourse concerning their justification, methodology, and potential implications on international trade relations, leaving global markets on edge regarding the future direction of U.S. trade policy under Trump’s administration. As financial sectors scrambled to interpret the consequences, the complexities of international trade dynamics became increasingly evident in the context of the U.S. government's strategic calculations.