“Exposed nonsense”
Trump probably offset itself at customs formula
05.04.2025 – 7:02 p.m.Reading time: 3 min.
Donald Trump justifies new punitive tariffs with a simple formula. But his employees probably used AI – and made a big mistake.
Donald Trump’s government has probably based her new customs policy on a faulty formula. This reports, among other things, the “time”. The calculation of the US tariffs is based on an equation with which the alleged customs pollution is determined by trading partners. This also includes the EU. In the case of Europe, Trump recently gave a value of 39 percent – this served as the basis for a counter -custom of 20 percent. But the problem: the calculation apparently is based on false assumptions.
The tariffs are part of Trump’s plan to establish so -called reciprocal relationships. This means that the USA should raise as high tariffs as they pay for exports. As evidence, Trump presented a cardboard sign with customs numbers for different regions last week, including the EU. According to the White House, the values are based on an “economically sound formula”. But as it turns out, this formula is incorrect.
The focus is on the so-called “price transfer effect”: The US government assumes that import prices only increase by a quarter of the customs of customs when introducing tariffs-specifically: a dollar inch led to $ 0.25 higher prices in the USA. That would mean that the customs surcharge would not hit American consumers too much.
However, according to a study by Harvard economist Alberto Cavallo, which Trump’s team originally related, this value is significantly higher: realistic an increase of around $ 0.95 is realistic. The companies therefore pass on the extra costs for tariffs almost entirely to their customers.
This has a big impact: In the equation of the government, two parameters are reduced by the wrong assumptions – which the formula simplifies. What remains is a simple calculation: Export minus import is the same as the trade deficit, which is then shared by the import value. In the case of the EU, the $ 235 billion (deficit) is divided by $ 605 billion (imports) = around 0.39 and 39 percent. Trump then halved it again “from mild” and thus comes to 20 percent tariffs. But if you use the more realistic values, the result is around four times smaller than 39 percent: it is about nine percent.
The economist Julian Hinz from the Kiel Institute for the World Economy said in the “Wirtschaftswoche” that the assumptions of the US government were politically opportune: it was assumed that foreign companies lowered prices to cushion the customs increase. “However, the data evaluations show that this is not true. Very few foreign companies have reduced their prizes,” said Hinz.
Another suspicion is even more remarkable: the formula could have been created by a generative AI like Chatgpt. Several media, including “The Verge” and “Zeit”, reported that AI models would provide very similar equations when asked about a simple method to calculate fair tariffs. The formula used by Trump corresponds to a standard response how to generate chatbots on the corresponding prompt.
The journalist James Surowiecki had first indicated that the formula of the Trump administration ultimately only divides the trade deficit through the import value.
Surowiecki called this type of calculation “Extraordinary Nonsense” (pronounced nonsense).
