Navigating the Turbulence of Reciprocal Tariffs

Why Eco-Economics Holds the Key

:On April 2nd, 2025, the Trump administration declared a "Liberation Day" for the United States with the announcement of broad increases to U.S. tariffs on nearly every trading partner (except Canada and Mexico). This move represents a significant shift in global trade policy, imposing an average additional tariff of approximately 16%, bringing the overall effective U.S. tariff rate to an estimated 22% to 30%. This follows an earlier increase of around +8% this year.

Photo by Mika Baumeister on Unsplash

These new tariffs are not based on other countries' actual tariff rates, but instead on the bilateral goods trade surplus the U.S. has with each country. The calculation involves dividing the U.S. goods deficit with a given country by the total goods exports from that country to the U.S., halving the result, and setting a minimum tariff of 10%. This methodology has been heavily criticized for having "~zero connection to actual tariff rates" and leading to "perverse outcomes". For example, Lesotho faces a 50% tariff, while South Africa, within the same customs union and charging the same tariffs on U.S. imports, is assessed the minimum 10% tariff. Certain sectors like steel/aluminum, copper, pharmaceuticals, semiconductors, lumber, bullion, and energy/minerals not available in the U.S. are excluded.