President Trump skipped the normal months long process to impose tariffs and instead used a 1970s law to bypass them.
Vietnam offers an early test as to whether the policy is about leveling barriers such as tariffs or trying to eliminate bilateral trade shortfalls. In response to the U.S. tariffs, Vietnam quickly offered to cut its tax on U.S. imports to zero, Trump said in a social-media post Friday. He didn’t say how he would respond.
In announcing the tariffs, Trump suggested the rates were based on the rates that other countries were charging the U.S. One example he gave was India. “They are charging us 52% and we charge almost nothing for years and years and decades,” Trump said of India at the White House, while unveiling the reciprocal tax.
But that doesn’t appear to be correct. India’s average weighted tariff on imports last year was 7.7% and its simple tariff average was 15.9%, according to WTO data.
The office of the U.S. Trade Representative said the U.S. calculations assume that persistent trade deficits are the result of a combination of tariff and nontariff factors, such as regulations, that prevent trade from balancing.
The administration has also argued that value-added sales taxes in places such as Europe discriminate against imports from the U.S. Most economists disagree: VATs are levied on all domestically consumed goods, whether imported or locally made.
The U.S. will now charge Vietnam a 46% tariff for its exports to the U.S. Photo: Linh Pham for WSJ
Some countries and regions that had free-trade agreements with the U.S. got hit by the Trump tariffs. South Korea, which charges zero for most U.S. goods, was slapped with 25% tariffs. Chile and most countries in Central America were hit with 10% levies.
Other countries have a range of tough protections, such as Brazil. Its weighted average tariff last year was 9.3%, it restricts certain imports and it subjects foreign companies to high taxes and red tape, economists say. Yet, Brazil got hit by the Trump administration with its lowest rate: a 10% tariff—the same as free-trading Chile and Central America.
“Brazil got a favorable deal,” said Pablo Guidotti, an economist at the Torcuato Di Tella University in Buenos Aires.
Since at least the early 1990s, Trump has complained that the global trading system, which the U.S. helped build, has been “unfair” and is tilted against the country. Trump has reached that conclusion based on a simple premise: If a country is selling more to the U.S. than vice versa, something must be wrong.
But there are many reasons why foreign countries might have bilateral surpluses with the U.S. that have nothing to do with protectionism, said Brent Neiman, an economist at the University of Chicago Booth School of Business who served in former President Joe Biden’s Treasury Department.
“Some countries have raw minerals or resources we need, but are low-income and don’t demand some of our largest exports like advanced equipment or education services. Others might run surpluses because their population is aging or they seek investment opportunities in the U.S.,” he said.
Neiman and other economists say the economic formula used by the Trump administration to set tariffs incorrectly interpreted one variable—how much of a tariff passes through to import prices—and that fixing it would reduce the tariff rate to about a fourth of what the Trump team applied to various countries. Ackman wrote “the global economy is being taken down because of bad math.”
Many economists try to explain the need to run trade deficits with some countries with the following analogy: Most of us gladly maintain a trade deficit with our local supermarkets. We don’t sell them our labor in return, but we still buy products there because we need them and we know it is more efficient compared to us wasting our time trying to grow all our own products.
While trade imbalances with one country are often benign, economists acknowledge the persistence of large imbalances with all countries can be evidence of policy biases. The large overall U.S. deficit is partly the mirror image of China’s large overall surplus, which in turn results from policies that depress consumption and imports and promote exports. The U.S., meanwhile, saves far less than it invests.
Until recently, many countries have historically charged slightly more on average than the U.S. does. The European Union, for instance, charged a weighted average tariff of 3% versus a U.S. level of 2.2%, according to WTO data from 2024. In the case of other trading partners, the gap was far larger.
But the U.S. will now charge an additional 20% on goods from the EU—putting it well above EU levels. The EU is likely to retaliate by putting high tariffs on selected U.S. products rather than across-the-board rates and is weighing other options, such as restricting American services, according to EU officials and diplomats.
Before Trump launched a trade war with China in 2018, Beijing charged the U.S. more than vice versa, 8% compared to 3.1%. By 2020—after tit-for-tat tariff rises on both sides—those had settled at 21.2% and 19.3%, according to data from Chad Bown, a China trade expert at the Peterson Institute for International Economics.
Now, Trump has taken those levels far higher—to 76% as of last week, according to Bown. China in response raised its U.S. goods tariff to 56.6%. That means that for the first time in many years, the U.S. is charging China more than vice versa.
The Trump administration has argued that countries such as China use other means to hurt U.S. exports, including manipulating their currency to keep it artificially cheap. Economists tend to agree.
The Trump administration even put tariffs on countries with which it has a trade surplus, such as Argentina. Argentina has long been one of the most protectionist countries in the world, and currently charges a weighted average of about 12.3% on imports—far higher than the U.S. does on Argentina. Yet it is Argentina, the higher tariff country, that runs the deficit with the U.S.
If tariffs aren’t usually the cause of trade imbalances, can they be used to solve them, as the Trump administration is trying to do? Most economists say it is unlikely. Higher tariffs are likely to reduce demand for imports in the U.S. but also hurt other countries—and that, along with retaliation, hurts demand for U.S. exports.