President Trump’s new tariffs on more than 100 countries used the same simple formula to calculate the rate for each of them.
The formula’s central value is the trade deficit, the difference between imports and exports between each country and the United States, for the year 2024.
The slightly more detailed math looks like this:
Mr. Trump has said these tariffs will reduce trade imbalances and level the international playing field.
But his one-size-fits-all formula is blunt: It applies the exact same math to countries whether they have hefty trade barriers or wide-open markets. It considers only the size of a trade deficit, not why the deficit exists.
And it has some key choices hidden within it. Change any one of those choices, and the resulting tariffs would look very different.
Here, we take you through these variables so you can see how different choices might yield big changes for the countries that trade with the United States.
The Trump administration calculated the trade deficit using only goods — physical items that can be shipped — and not services, such as technology, media, banking and tourism. (A DVD counts; a Netflix subscription doesn’t.)
That’s great news for Bermuda, the archipelago nation that exports few goods but plenty of financial services to the United States (thanks to its favorable tax laws, American companies like to bank there). Under the current rules, it pays a 10 percent tariff. If its service dollars were counted, it would pay 37 percent.
But it’s bad news for most of America’s other trading partners. The United States imports more goods from the European Union than it sends. But it exports more services than it buys. If you counted services in the trade gap in Mr. Trump’s formula, the tariffs on the E.U. would shrink almost in half.
Many countries are in the same boat as the European Union, because the United States is the world’s largest exporter of services. Switzerland, in particular, would see its tariffs drop quite a bit if services were taken into account. It exports plenty of pharmaceuticals and watches to America, but if you count all the services it imports from America, its trade deficit shrinks significantly.
countrycurrent ratenew ratechange
Bermuda10%37%+27 pts.
Costa Rica10%15%+5 pts.
Philippines17%20%+3 pts.
South Africa30%22%-8 pts.
India26%18%-8 pts.
European Union20%10%-10 pts.
Brunei24%14%-10 pts.
Switzerland31%10%-21 pts.
The Trump administration has emphasized goods because it blames large goods deficits for a decline in manufacturing jobs. But many economists argue that ignoring services leaves out a key area of trade.
The Trump administration used 2024 data to calculate the tariff rate, but trade deficits can vary year to year.
Consider this: In 2024, the United States exported more to Saudi Arabia than it imported, but the opposite was true in 2023. Bolivia was the reverse — the United States had a trade deficit with Bolivia in 2024 but a surplus in 2023.
Picking the most recent year might not really capture whether a country has significant trade barriers. It might, instead, be telling us something about the state of a country or the world’s economy at that moment.
If the administration had smoothed out any oddities by using the average trade deficit over the last five years, tariffs on large countries wouldn’t change much. China’s tariffs would rise by one percentage point; the European Union’s would shift by even less.
But for some countries, a different time frame could have meaningfully changed the calculated values — not necessarily to their benefit.
For example: The United States had a tiny trade deficit with Equatorial Guinea in 2024, so the African country is getting a much better deal than it would have in previous years, when the deficit was several times higher. Brunei, on the other hand, has sold more to the U.S. than it has bought the last couple of years. Look back a little further, and it would’ve benefited from the years it spent as a net buyer of American goods.
countrycurrent ratenew ratechange
Equatorial Guinea13%30%+17 pts.
Kosovo10%27%+17 pts.
Ghana10%21%+11 pts.
Malaysia24%32%+8 pts.
Moldova31%23%-8 pts.
Tunisia28%19%-9 pts.
Namibia21%10%-11 pts.
Brunei24%10%-14 pts.
The new tariffs will very likely cause changes in trading patterns, meaning even more year-to-year variation than before. If the administration decides to keep the formula intact for years, it may need to update the trade deficit values regularly.
The Trump administration set a 10 percent minimum tariff for every country. At least 100 countries and territories that buy more from the United States than they sell — which seems to be what Mr. Trump wants — were still given the 10 percent tariff.
The United States has a large trade surplus with Australia — it exports more than twice as much to Australia as what it buys — indicating the kind of trade relationship Mr. Trump is seeking. And yet Australia will be charged the same 10 percent tariff rate as New Zealand, with which the United States has a calculated 20 percent trade deficit. (If anything, Australia would impose a steep tariff on U.S. goods if it followed Mr. Trump’s system.)
If the administration had not imposed a 10 percent minimum, the tariffs on some of America’s major trading partners might look like this:
countrycurrent ratenew ratechange
Australia10%0%-10 pts.
Brazil10%0%-10 pts.
Chile10%0%-10 pts.
Colombia10%0%-10 pts.
Saudi Arabia10%0%-10 pts.
Singapore10%0%-10 pts.
Britain10%0%-10 pts.
United Arab Emirates10%0%-10 pts.
Using the current Trump formula as a starting point, there are many arbitrary choices that would result in different tariffs and a different world economy. We played out every iteration of our choices from above, to see what tariffs might look like under different decisions.
Here are the countries with the widest ranges of possible tariff rates, based on those scenarios.
These ranges include eight possible scenarios, based on three decision points: including versus excluding services; using 2024 data versus 2020-24 data; a 10 percent floor versus no floor.
country
Bermuda
Kosovo
Brunei
Switzerland
Equatorial Guinea
Monaco
Mozambique
Venezuela
Nigeria
Kenya
Beyond that, the Trump administration made several other arbitrary choices in its formula.
The biggest is that the formula divides the result by two. Mr. Trump said this was chosen to be “kind,” essentially halving the calculated tariff rates. Of course, he could have chosen to divide by three or four to be more kind or not divide at all to be less kind.
The full formula also multiplies the tariff rate by two other variables that we didn’t show above, meant to approximate the “price elasticity of import demand” and the “tariff pass-through to retail prices.” But the numbers the administration chose for those variables are 4 and 0.25, which cancel out (4 × 0.25 = 1) and have no effect on the final rate.
The tariff for Afghanistan is set at 10 percent, though the formula would have resulted in a 25 percent fee. The administration has not explained why Afghanistan is the sole country with different math.
A handful of countries were excluded from the new tariffs, including Canada and Mexico, which face separate tariff negotiations with Mr. Trump, and Russia and North Korea, which have other sanctions already placed on them. For China, on the other hand, the new tariffs are in addition to existing tariffs already in place, bringing China’s total tariff rate to at least 54 percent.
Exceptions on certain products also create some quirks. The United States will charge a 39 percent tariff on all goods from Iraq, largely because Iraq exports a lot of oil. However, oil and gas imports have been excluded from tariffs. This means that products like textiles or dates imported from Iraq will be charged a large tariff because of Iraq’s oil exports, even though the oil exports themselves will not be charged tariffs.
It is hard to say how long the formula will remain intact. Mr. Trump said Thursday that he was willing to make deals with other countries if the United States received something “phenomenal.”
