Trade Deficits and Truth Deficits
Trump's reciprocal emergency tariffs are neither "reciprocal" nor "emergency"—and journalists need to stop echoing his propaganda
Last week, Donald Trump imposed what would have been (and could still prove to be) the biggest tax hike in American history on U.S. consumers, a sweeping package of draconian tariffs at levels not seen since the days of Smoot-Hawley, which helped mire us in the Great Depression. The markets promptly and predictably tanked. Within a week he had “paused’ many of the newest tariffs for 90 days, while leaving in place a blanket 10 percent tax, as well as earlier taxes on targeted goods from Canada and Mexico, as well as a mindboggling 140 percent levy on China.
There’s no shortage of economists explaining why these are a terrible idea—Noah Smith has a good survey of the arguments if you still need to be persuaded on that score. What I want to focus on instead is how thoroughly the pitch for them is grounded in lies—and worse, lies that a lot of journalists who know better are effectively propagating by echoing Trump’s dishonest language.
Maybe the most significant of these lies is embedded in the way they’re invariably described: “Reciprocal” tariffs.
Trump’s 10 percent across-the-board baseline tariff applies even to countries which do not themselves impose tariffs on US goods, like Australia. Then there’s the additional—currently paused except for China—“reciprocal” tariff supposedly (but not actually) based on the level of tariffs and trade barriers other countries impose upon U.S. goods.
Actually, the way Trump invariably puts it—as you can see in the chart he’s brandishing above—is that his tariffs are based on the tariff rate other countries “charge the U.S.” This is a lie within the reciprocity lie—a kind of matryoshka doll of dishonesty—that Trump has been preposterously persistent about, even though anyone who has taken any kind of basic economic class knows that this is not how tariffs work. Countries “charge” tariffs to their own populations, because they’re paid by importers, and the cost of those taxes is almost invariably passed on to consumers. Trump has been corrected on this countless times, but insists on continuing to speak as though tariffs are a magical way of extracting free money from other countries. Still, it needs to be stressed every time: Other countries do not “charge”us tariffs. They tax their own people. Just like American tariffs tax Americans.
Many who looked closely at that chart, however, noticed a newer lie: It purports to set “reciprocal” tariffs at half the rate “charged” to the United States by other countries—but the supposed tariffs and trade barriers ascribed to those other countries were ludicrously high. The chart claimed, for instance, that the European Union levied tariffs of 39 percent on American goods, which anyone with even a nodding acquaintance with trade policy knows is wrong. Estimates vary a bit—you have to calculate the total taxes on a wide array of different goods from the different members states—but by most accounts the average EU tariff on American goods is 1-5 percent, not nearly 40 percent. There was no way to get to the listed figure even by adding in European Value Added Taxes—which in any event would make no sense, since the VAT is effectively a sales tax levied equally on domestic and imported goods, and nobody imagines that neutral state sales taxes should count as tariffs.
As observers quickly figured out—and the Office of the U.S. Trade Representative soon confirmed—none of these numbers really represented foreign trade barriers or tariffs. Instead, a much simpler and much stupider formula was used: The U.S. trade deficit with a given country, divided by that country's exports to the US. This is, as some on social media noted, “coincidentally” the formula that many popular chatbots will suggest if you ask it for a simple way to set tariff levies, although most of those chatbots will also point out that it is a naive and dumb way to do it. (Notoriously, Trump’s chart also bizarrely listed tariffs on a number of uninhabited islands, as well as places that are just components of another country, like the island of Reunion, which is part of France. But many of those places do have top-level Internet domains, despite not being actual countries. This is not the kind of mistake any human being remotely knowledgable about trade would make—and seems like strong evidence that the tariff policy currently wreaking havoc on your 401k was essentially spat out by an LLM, with no humans checking its work.)
One Trump aide tried to explain this bizarre calculation to The New York Post:
The numbers [for tariffs by country] have been calculated by the Council of Economic Advisers … The model they use is based on the concept that the trade deficit that we have with any given country is the sum of all unfair trade practices, the sum of all cheating,
This is—and really there’s no other way to put this—completely insane. The trade deficit between the U.S. and another country is not in any way a valid proxy for trade barriers, and certainly not for “cheating.” Moreover, there is no reason whatever to expect that a massive economy like the United States should have exactly balanced imports and exports with any other particular country. It’s like expecting your local supermarket to spend exactly as much at your business as you spend on groceries—and insisting that they must be “cheating” if the sums don’t tally exactly.
The tiny African nation of Lesotho is illustrative: They export a few hundred millions dollars worth of goods to us each year—primarily textiles and diamonds. They don’t do much buying of U.S. goods in return, not because of outrageous taxes or nefarious currency manipulation, but because Lethoso is extremely poor. People there mostly can’t afford to have already-expensive U.S. goods shipped across the ocean. As with the grocery store, the dollars Americans spend there make their way back via more circuitous route, rather than via direct purchases from the U.S., and for reasons that have nothing to do with the absurd notion that a tiny impoverished kingdom is somehow ripping off the United States. Yet entirely because direct trade is between the two countries is so unbalance, they got hit with some of the highest “reciprocal” tariffs under Trump’s formula, a potentially ruinous blow to a country heavily dependent on those exports. Nothing about this remotely “reciprocal.”
I’m dwelling on this because it means that the term “reciprocal” tariffs is effectively a lie and a piece of propaganda. And every journalistic outlet that uses that phrase, even in scare quotes, is complicit in propaganda and lying to their audience, unless they are immediately explaining why that term is false. An embarrassing number of news outlets have run articles explaining the bizarre formula used, and how it is completely unrelated to the target country’s taxation of U.S. goods—and then blithely continued using the phrase “reciprocal tariffs” in their other coverage.
I want to argue that this matters a lot to public perception of the rationale behind the policy. While it would still be a bad idea, there would at least be a certain internal logic to it if the US really were imposing tariffs commensurate with those imposed upon us, as an attempt to quickly pressure countries into lowering their own tariffs. The ultimate aim would be free trade, and other countries could at least in principle eliminate our tariffs by reducing theirs. But there is nothing the government of Lesotho can do to magically enable its people to be able to afford American cars.
It also matters to the perception of the policy’s fairness: Calling them “reciprocal” leads people to think of them almost as an act of self-defense. We're only doing to them what they've already done to us, right? I note, incidentally, that this is of a piece with the broader MAGA strategy of inventing an offense that hated groups have committed in order to justify taking action against them. Instead of just admitting that trans people make them feel confused and icky, MAGA will spin fantasies about trans people “grooming” children or public schools trying to surgically transition kids without their parents knowledge or consent. Inventing an offense, and the “reciprocity” of your own response, is how we harm weaker groups of people without having to admit to ourselves what we’re doing.
Every time a publication lazily uses that phrase “reciprocal tariffs,” they are helping rationalize it to their readers—and misleading them in the process.
The second important lie I want to consider has to do with Trump's own authority to impose the tariffs. Press coverage now treats it as normal and unremarkable that the President is making the unilateral decision to impose tariffs, even when that decision is portrayed as unwise.. But of course, constitutionally, that is not how things are supposed to work. The power to set tax rates—whether their income taxes or import taxes—resides in the legislature. No one thinks the president can or should be able to declare tomorrow that the income tax rate is being increased.
Unfortunately, under the International Emergency Economic Powers Act, Congress has unwisely delegated to presidents the power to impose such levies in “emergency” situations, such as when when a county has committed an aggressive act or human rights violation, and it's perceived as necessary to respond with sanctions more rapidly than Congress might be able to pass comprehensive legislation.
Trump, of course, has thoroughly exploited this “emergency” power in an effort to enact his policy without the inconvenience of having to seek congressional approval.
Shortly after taking office, he imposed taxes on Canada, invoking the supposed emergency of the Fentanyl crisis, when, of course, fentanyl being trafficked from Canada is just not a real thing. Indeed, the US appears to send more fentanyl to Canada that is sent to the United States from Canada. So that emergency is fictional, and the executive order authorizing those tariffs was an abuse of power.
In this case, the executive order issued by Trump invokes instead the supposed emergency of the hollowing-out of the US manufacturing base, a trend it tracks to more than 20 years ago. This should not need to be said, but a gradual economic adjustment over time—a shift over a period of 25 years—from industrial to service employmen is almost definitionally not an emergency. This is the stuff of absolutely ordinary trade policy: If it counts as an “emergency,” it is hard to imagine any policy challenge that could not be categorized that way. To call this an “emergency” is, in effect, to render the category meaningless and simply say the President now has unilateral control over trade policy.
But in fact, this claim is a double lie, because trade—though you might not know it from tediously familiar rhetoric about outsourcing and offshoring— is just not that significant a cause of the decline in American manufacturing employment, which has a lot more to do with technological change. The reality is we still do a great deal of manufacturing in the United States, but thanks to automation, a lot fewer burly human beings are required to do that manufacturing. As a very simple and intuitive demonstration, take a look at this graph tracking the gradual decline in U.S. manufacturing employment. Populist rhetoric often blames the phenomenon on the dread North American Free Trade Agreement, which took effect in 1994—but you’d be hard pressed to deduce that from the shape of the graph.
No amount of tariffs are likely to reverse that long term trend.
In short, the rationalization for these catastrophic tariffs is almost completely fictitious. They’re “reciprocal” tariffs that aren’t actually at all reciprocal, imposed via “emergency” powers in the absence of any actual emergency. It is possible that Trump himself is simply so ignorant that he believes these things. It's possible that he has a pre existing commitment to the idea that tariffs are of panacea, and will seize on whatever rationalization he can get his hands on, as seems to be consistent with his character. But it may also be the case that he's simply hoping to encourage both American producers and and foreign governments to offer him bribes. After all, what he has effectively done is suggest that he is reciprocating against tariffs imposed by other countries, but because those tariffs are mostly imaginary, there's nothing those countries can do that would bring the tariffs down by the amount his charts imply is necessary. They cannot lower trade barriers that do not exist, and so they have to find another way to placate Trump.
Whether Trump knows better or not, American journalists do. And while I realize it’s tedious to have to keep pointing out the same lie in article after article, that is ultimately what they owe their readers. Every time they use the phrase “reciprocal tariffs” without immediately pointing out how and why that label is a lie, they are complicit in Trump’s effort to justify his policy by deception. Every time they write about Trump’s decision to impose those tariffs without pointing out that he’s doing so by cynically abusing “emergency” legislation to usurp a power that belongs to Congress, they normalize authoritarian executive rule. We ought to demand they do better.