President Trump’s Tariff Formula Makes No Economic Sense. It’s Also Based on an Error.

President Trump’s latest tariff plan is under fire from a conservative think tank, which says the math behind it is both flawed and misleading. The American Enterprise Institute (AEI) warns that the formula used by the White House drastically overstates the trade barriers imposed by foreign countries — and risks harming the U.S. economy.

The issue:

 The Trump administration’s “reciprocal” tariff formula calculates foreign tariffs based on the U.S. trade deficit — not on actual policy. AEI says this leads to exaggerated numbers, because the formula mistakenly uses retail price data instead of import price data. That misstep inflates estimated foreign tariffs by 400%, resulting in U.S. tariffs as high as 50% — even in cases where trade barriers are low or non-existent.

What they recommend:

 AEI calls for a correction to the formula. Doing so would reduce most tariffs to the 10% minimum floor, ease global trade tensions, and lower the risk of recession — all without abandoning the administration’s stated goals.

Go deeper:

 AEI emphasizes that trade deficits are shaped by many factors, including international capital flows and supply chains, not just tariffs. And even if the formula had merit (which AEI disputes), it was applied incorrectly. Fixing this basic error could offer quick relief to U.S. businesses and consumers while restoring credibility to trade policy.

This is a brief overview of a post from the American Enterprise Institute. For complete insights, we recommend reading the full article.