For all the convulsive terror, disturbance and disruption caused by President Donald Trump’s April 2 Liberation Day announcement, there was something to merit it. It spoke to old themes and concerns, streaked with nostalgia. Bring back the industries. Revive those corpses of the automotive sector long shored to foreign markets. Rebuild a working base long vanished. Turn the depleted rust belt states into thriving, humming economies.
What made the application of tariffs across 180 or so countries did not, in of itself, imperil the use of tariffs as a policy tool. Tariffs were used extensively by nation states prior to Trump winning office. Free trade remains one of the great misnomers, even myths, of international economics. What made Trump’s announcement somewhat nonsensical was the use of a supposedly reciprocal tariff formula that saw punishing additional tariffs on the most indigent countries.
The Office of the United States Trade Representative offered a rationale: ‘Reciprocal tariffs are calculated as the tariff rate necessary to balance bilateral trade deficits between the US and each of our trading partners. This calculation assumes that persistent trade deficits are due to a combination of tariff and non-tariff factors that prevent trade from balancing. Tariffs work through direct reduction of imports.’
This proved far more elaborate than the eventual exercise undertaken. From the outset, a slapping rate of 10 per cent was applied to all goods being imported into the United States, in itself a curious measure. Then came the additional figure for countries boasting a trade surplus with the United States. Let’s take China as an illustration of this point. The goods trade deficit with China based on 2024 figures was US$291.9 billion, with total goods imports US$438.9 billion. When divided, the divided figure arrived at is 0.67 or 67 per cent. To demonstrate the imperial arbitrariness of the whole process, Trump ‘kindly’ offered to discount this figure by half, yielding a final rate of 34 per cent.
This was far from sophisticated and hardly logical. It also seemed at odds with the remarks by the Office of the Trade Representative that the rates were to be calculated accounting for such matters as ‘[re]gulatory barriers to American products, environmental reviews, differences in consumption tax rates, compliance hurdles and costs, currency manipulation and undervaluation’.
Given that they were hardly going to be storming to the front of the queue purchasing US goods in the first place, the broad-brush approach towards poorer countries seemed to scrape the line of lunacy. A telling, neglected point is that many, given their fiscal limitations, have tariffs out of pure necessity. As Cullen S. Hendrix of the Peterson Institute for International Economics remarks, the administrative and bureaucratic incapacity of such states relative to their wealthier peers mean that taxes can only be levied at fewer ports of entry. This makes them ‘a lot easier to collect than the income, payroll, and value-added taxes that make up the bulk of the tax base in advanced economies.’
Economic historian Adam Tooze also made the self-evident point that the United States ‘does not make a lot of goods that are relevant to [developing economies] to import.’ As is expected from an advanced, industrialised economy, US exports, bar certain agricultural products, are often of the capital-intensive nature out of reach for poorer countries.
'The iron law of unintended consequences is likely to come into play with this quixotic approach. To impose such onerous levies on goods from developing economies could actually cripple any credible demand for US goods, as limited as they already are.'
Nor is there anything remotely reciprocal about the tariffs of such countries. A true reciprocal rate applicable to Vietnam, for instance, would not be the 46 per cent calculated by the Trump administration. The country’s most favoured nation (MFN) assessed tariff rate of 9.4 per cent (based on 2024 figures) should, following the logic of reciprocity, draw a tariff rate of 9.4 per cent.
The iron law of unintended consequences is likely to come into play with this quixotic approach. To impose such onerous levies on goods from developing economies could actually cripple any credible demand for US goods, as limited as they already are. There can be no balancing of the trade books to speak of. This is bound to stir resentment, something already fanned by the reduction of 83 per cent of aid programs run by the US Agency for International Development (USAID).
Furthermore, Trump’s great tariff wall is hardly going to see an autarkic, self-sufficient boom in local US production, given that economy’s reliance on the raw materials and agricultural products from developing countries. It would also be impossible, given the specifics of geography and climatic conditions, to reshore, say, cocoa production to the United States in order to displace Côte d’Ivoire, a country responsible for almost half of the world’s cocoa production.
Given that China is seen as the gravest threat to US interests by this administration, this tariff binge will be a boon to Beijing and other members of the BRICS bloc. (To the old grouping of Brazil, Russia, India, China and South Africa can be added the United Arab Emirates (UAE), Ethiopia, Egypt, Iran, and Indonesia.) Instead of trying to encourage a move away from China, something encouraged by such schemes as the ‘China plus one’ strategy and the African Growth and Opportunity Act (AGOA), there is a distinct chance that developing economies will revisit their options and seek closer trading ties with a country Washington has been keen to demonise.
Unintentionally, then, with the US effectively closing itself off from international trade and business, invaluable goods and products that would have found a market in American hands will find alternative fora. Stephen Olson, former US trade negotiator, put it rather well: ‘It’s hard to have constructive, productive relations with a country that just dropped a ton of bricks on your head.’
Dr. Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge. He currently lectures at RMIT University.
Main image: President Donald Trump holds up a chart while speaking during a “Make America Wealthy Again” trade announcement event in the Rose Garden at the White House on April 2, 2025 in Washington, DC. Touting the event as “Liberation Day”, Trump is expected to announce additional tariffs targeting goods imported to the U.S. (Photo by Chip Somodevilla/Getty Images)