On 2 April, the Trump administration unveiled its long-promised “Liberation Day” tariffs. These new tariffs, which the White House has badged as “reciprocal” tariffs apply to 180 countries – almost every trading partner the United States has. President Trump justified the tariffs by claiming that the US has been “looted, pillaged, raped and plundered by nations near and far, both friend and foe alike.” His rationale was that these measures are needed to correct longstanding trade imbalances.
You can see a complete list of tariff rates by country here.
Goods entering the US from China will now attract a levy of at least 34% bringing the total tariff burden on Chinese products to 65% when added to existing measures. Unless the President makes good on his 7 April threat to levy an extra 50% tariff on Chinese goods, which would result in a blanket tariff of 115%.
Imports from India will be hit with a 24% tariff, while those from the European Union and Japan face a 20% charge.
Even tiny economies like Trinidad and Tobago, and countries traditionally seen as close allies of the US – the United Kingdom, Australia and Singapore – have not been spared. All face tariffs of at least 10%.
In Australia’s case, we tend to apply low tariffs on American goods – usually under 5% – thanks to our longstanding Free Trade Agreement, which has been in force since 2005. If the US had applied its “reciprocal” formula to that, we’d be looking at a tariff of around 2.5%. But under the new rules, a minimum threshold of 10% applies, which is why Australian exporters are being hit with that rate. It comes on top of the earlier 25% tariff on Australian steel and aluminium exports.
For the first time in over a century, the overall US tariff rate will rise above its Depression-era peak, taking the country back to something akin to 19th-century protectionism.
How did the Administration calculate this latest round of tariffs?
When President Trump revealed the giant cardboard chart of tariffs in the White House Rose Garden on 2 April, he described the new measures as “reciprocal.” That is, they were designed to match what other countries charge the US – dollar for dollar – including non-tariff barriers like currency manipulation and value-added taxes. The new rules apply even in cases where a Free Trade Agreement is in place.
Mr Trump also claimed that the new tariffs were designed to reflect half of the trade barriers imposed by each partner country. But when researchers dug into the actual calculations, they found something surprising. The method used doesn’t reflect real-world tariffs, currencies or trade policy.
Andrew Chang from Canadian broadcaster CBC/Radio-Canada gives a simple explanation of how the tariff rates were worked out in this video.
As the White House later confirmed, the formula used to calculate the tariffs was extremely simple.
They divided the US trade deficit with a specific country by the total value of imports from that country, then halved the result to arrive at the new tariff rate.
For example, in 2024 the US had a trade deficit of $295 billion with China and imported $439 billion worth of goods. Dividing the deficit by the import total gives roughly 67%. Halve that and you get a 33.5% tariff – which is close to the new 34% rate.
In other words, the tariffs aren’t based on what those countries charge the US. They’re based on the size of the trade deficit – on how much more Americans are buying from a country compared to what that country is buying from them.
But here’s the thing. Trade deficits aren’t inherently bad. Think of it this way. As households, we run surpluses and deficits all the time. Most of us have a big trade deficit with our local supermarket – we buy from them, but they don’t buy anything from us. And we usually have a trade surplus with our employer – they pay us, but we don’t buy goods or services from them in return. Neither situation is a problem that needs fixing.
I’ll be writing more about different aspects of the new tariff regime over the coming weeks. Meantime, if you’d like help navigating what the tariff regime means for your international business and developing a strategy to get you the best outcome, my team and I are here to help.
