Despite being labeled as “reciprocal,” these rates have no direct relationship with the published tariff schedules of other nations and were calculated by referencing the trade deficit that the United States has with each nation. Simply put, the formula employed by the administration is as follows:
Reciprocal Tariff (%) = U.S. Trade Deficit with Country / U.S. Imports from Country
This result has then been cut in half to produce what the White House calls a “discounted reciprocal tariff” for each nation.
Major U.S. trading partners such as the European Union, China, and allies in East Asia have all been hit with high tariffs because of their trade imbalances with the United States. Notably exempt from this round of tariffs are Canada and Mexico, who will continue to enjoy tariff-free entry into the U.S. market for USMCA-compliant goods. Additionally, Russia did not receive the 36% tariff that USTR's formula dictated it should have.
Several emerging economies have received massive tariff rates that could prove economically disastrous for them if implemented. In one stark example, Cambodia—a relatively poor nation with a GDP per capita below $3,000—will bear the burden of a 49 percent tariff hike. The United States currently purchases 41 percent of Cambodia’s total exports, around 70 percent of which are textiles.
