On April 2, President Trump announced sweeping tariffs on nearly 90 countries, claiming they were “Reciprocal Tariffs.” But as it turned out, the only thing they reciprocated was confusion. The rates bore no resemblance to the tariff these countries were charging on imports from USA. Instead, the tariff math seemed to follow a logic of its own — part arithmetic, part improvisation, and part whims of the President – who knows?
Let’s attempt to unpack the formula that appears to have been used for computing the tariff rates for different countries. For countries with a trade surplus against the U.S., the tariff rate was roughly calculated as one half of the trade surplus divided by that country’s exports to the U.S. (We say “roughly” because the numbers often drifted off course, like an airport trolley with one wonky wheel.)
The European Union
In 2024, the EU exported $595 billion to the U.S. and imported $373 billion worth of goods, creating a trade surplus of 37.3% [(595-373)/595]. So, the U.S. imposed a 20% tariff — although EU tariffs on U.S. goods are typically between 1% and 4.8%. If this was reciprocity, it came with a rather aggressive interpretation of the word.
India
India exported $75.8 billion to the U.S. and imported $41.4 billion, with a 2023 trade surplus of 45.4%. That earned India a 26% tariff — possibly adjusted upward based on projections or fiscal year confusion (India’s ends March 31, while for U.S. it is December 31 – which might’ve thrown off the Excel sheet). In any case, the tariff suggests someone was rounding liberally — or just guessing.
China
China exported $438.9 billion to the U.S. and imported $143.5 billion, with trade surplus of $295.4 billion in 2024. One half of the surplus works out to about 34% of China’s exports. This figure was added to the existing tariff of 20% to hit China with a total tariff of 54% — the highest tariff rate imposed on any country.
Singapore
Singapore presented a curious case: the U.S. ran a $2.8 billion trade surplus in 2024, exporting $46 billion and importing $43.2 billion. Yet, Trump’s team imposed a 10% tariff on imports from Singapore. No surplus, no foul, and yet, Singapore found itself in the penalty box. And so did countries with trade deficit with the U.S. as they got slammed with the minimum 10% tariff on all imports.
Canada and Mexico
United States-Mexico-Canada Agreement (USMCA) is the trade agreement between the United States, Canada, and Mexico – that governs the movement of goods across the three highly integrated economies. The original version of the agreement was signed during the first Trump presidency. Yet, Trump chose to impose an arbitrarily decided tariff of 25% on Canada and Mexico – with some exceptions for specific goods. If the neighbours expected leniency, because of their highly interlinked economies, they were mistaken.
Automobiles & Auto Components
Also thrown into the mix: a specific 25% tariff on all imported automobiles and auto components, supposedly to support domestic manufacturers. Whether it would help the U.S. auto industry while making cars more expensive for Americans remains to be seen.
And Then There Were the Penguins
Perhaps the most baffling line in the tariff ledger: a 10% tariff on imports from the Heard and McDonald Islands. A google search reveals that these Islands are a territory of Australia – situated about 4,000 kilometers South-West of Australia – which are accessible via a 7-day boat trip from Perth. These remote islands have not been visited by humans in almost a decade and are home only to penguins, seals, and seabirds. They do not export anything to the U.S. – or for that matter to any country! The tariff announced for these islands perfectly illustrates the level of scrutiny (or lack of it) that went into the sweeping policy!
A Policy of Precision? Not Quite.
The examples speak for themselves. The tariff regime appears arbitrary, inconsistent, and at times, disconnected from both economic logic and strategic intent. Whatever the justification, the outcome is clear: the extant web of trade relations with some semblance of order under WTO has been severely jolted by the cavalier approach to tariffs by the U.S. that is neither reciprocal nor reasoned. The global economy, already fragile, must now contend with the uncertainty from the Presidential announcement – with the precision of a dartboard.
Who Wins and Who Loses?
As I argued in my earlier article Why Tariffs Hurt Everyone – all stand to lose from imposition of tariffs. While countries will work out their strategies – including retaliatory tariffs on imports from the U.S. and re-routing their exports to the U.S. via countries with lower tariffs – on how best to manage their trade with the U.S., there is little doubt that the biggest losers would be the U.S. citizens.
In 2024, U.S. imported $3.35 trillion worth of goods ($4.1 trillion including services). Therefore, the burden of tariffs on the U.S. consumers at 10% rate will be at least $335 billion. As the rates are much higher for countries with larger exports to the U.S. (such as China and EU) the actual burden from tariffs on the U.S. consumers is likely to be 2-3 times that figure.
Estimates suggest that at the minimum the average American household could face an additional annual cost of $4200 because of the tariffs. Low income households who spend a larger percentage of income on essential goods would see a disproportionate burden of tariffs.
The Verdict from the Stock Market
The S&P 500 — the bellwether of the U.S. economy — saw its market capitalization obliterated by $5.06 trillion in just two trading sessions, marking a brutal 10.16% collapse. This was not just a market correction; it was a full-blown confidence crisis triggered by a single policy announcement. And this may be just the start of a much bigger fall in the market.
The Growing Risk of Strategic Fragmentation
While the tariffs announced on April 2 may be framed as an effort to “rebalance” trade, the broader implications go well beyond economics. In a deeply interconnected world, trade is not just about the movement of goods; it is a foundational element of geopolitical stability. When trade becomes a tool of unilateral assertion, it risks triggering a sequence of responses that are far harder to control — and even harder to reverse.
The scale and arbitrariness of the newly imposed tariffs — affecting around 90 countries, including close allies and erstwhile strategic partners — mark a clear departure from the rules-based, multilateral trade system that has shaped the global economy since World War II. At the heart of the post-war consensus was the belief that open markets foster mutual growth and peace. When that foundation is weakened, what replaces it is not merely different economics — but much greater geopolitical uncertainty.
Trade tensions rarely remain isolated. Countries affected by the tariffs are already reconsidering their supply chains, trade alignments, and long-term economic partnerships. This, in turn, could accelerate a shift toward strategic fragmentation — where blocs of countries pursue self-sufficiency or align trade strictly along political lines. The danger here is not just slower global growth, but erosion of the cooperative frameworks that have kept major-power conflict in check.
The situation is further complicated by the growing importance of critical minerals, particularly rare earth metals (REMs) and Lithium, which are essential for clean energy technologies, electronics, and defense systems. With China controlling a dominant share of REMs’ production (more than two thirds of global production), and countries like Greenland and Ukraine holding significant reserves, trade policies are increasingly overlapping with national security concerns.
In such a landscape, even economically-motivated tariffs can be perceived as geopolitically strategic moves — potentially inviting countermeasures that escalate beyond the realm of commerce. The risk is not perhaps of immediate conflict, but of a slow, steady drift toward decoupling, in which trust erodes, alliances strain, and global cooperation becomes harder to sustain.
The danger is that tariffs may set off a broader unravelling of the global economic and political fabric — especially because they are accompanied by rhetoric that reveal geopolitical ambitions of the most powerful nation in the world.
A Historical Perspective
The tariffs imposed by the US in the 1930s through the Smoot-Hawley Tariff Act of 1930 played a significant role in exacerbating the Great Depression – which ultimately led to the rise of the Nazi Party and Hitler in Germany. The US has opened up a dangerous path – and while the world is very different now – undermining multilateralism even today has risks that will be difficult to control even by the US – despite its might.
At a time when the world faces shared challenges that demand collaboration in areas like climate change, technology governance, and crisis response, policies that foster division and strife carry a huge cost to humanity – maybe the very survival of the planet.
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