Donald Trump's proposed tariff plan, introduced in the White House Rose Garden, simplifies international trade relations into a 'reciprocal' tariff structure based on calculated trade deficits. Experts criticized the methodology, which appeared overly simplistic. For instance, the calculation divides a country's trade deficit for 2024 by the total value of imports, and halved for a proposed tariff rate. This has resulted in confusion, particularly regarding the inclusion of value-added tax (VAT). Despite the presented formula, many analysts feel the approach lacks strategic depth and could undermine effective trading relationships.
The approach raised eyebrows with experts who said VAT was highly unusual to include; because it is a sales tax paid on domestically produced goods and foreign imports alike.
Experts expressed shock at the method used by the White House, emphasizing that it lacked depth and didn't inspire confidence in effective trade policy.
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