Trump's Last-Minute Tariff Formula Sparks Market Drop

President Donald Trump personally selected the formula used to calculate tariffs on various countries, finalizing the decision just three hours before the official announcement. This impromptu decision-making process has raised eyebrows and sparked criticism from economists and trade experts.

The tariff calculation formula was based on a simple metric: each country's U.S. trade deficit divided by its exports to the U.S. This approach, while straightforward, has been criticized for oversimplifying the complexities of global trade economics. The formula does not account for the intricacies of international trade, such as the value of services, intellectual property, and other non-tangible exports. This oversimplification has led to a distorted view of trade deficits and has been a source of concern for economists and trade experts.

The tariff policy, which included a 10% baseline tariff on almost every country, was met with immediate market reactions. The day after the announcement, markets experienced a notable drop, reflecting the uncertainty and potential economic impact of the new tariffs. The administration's decision to use a reciprocal tariff system, where the tariff rate for each country is calculated based on both tariffs imposed on U.S. goods and nontrade barriers, has sparked confusion and chaos.

Critics argue that the tariff calculations misrepresent the true nature of global trade relationships. The lack of transparency and the last-minute decision-making process have added to the confusion and uncertainty surrounding the new tariff policy. The administration's approach to tariffs has been described as a "self-inflicted crisis," with questions raised about whether President Trump fully understands the consequences of his actions. The tariff policy has the potential to escalate into a global trade war, with retaliatory measures from affected countries likely to follow.