- Conservative research tank I found that the White House is measured by the flexibility of retail prices when the import price flexibility should have been used. This error means that the customs tariff outputs were four times higher than it should.
the formula The White House used to account Its recent tariff depends on an error that has been connected to what it should almost be.
Two researchers at the American Institute of Institutions (AEI), a conservative research tank, found that the White House uses the wrong value when assessing the rate at which prices will change as a result of tariffs. The correct version of the formula uses price changes in the cost of imports, which means the cost of an American company based to buy an interest from a foreign seller. Instead, the White House achieves a change in the retail price, which consumers pay.
This means that the formula was by four factors, because the White House appreciates the flexibility of import prices at 0.25 when it should have been 0.945, according to AEI.
“It’s the Bush Jameel League,” said Stan Fyger, one of AEI’s colleagues. luck In a phone call. “For such a big policy, you expect a higher level of professionalism.”
Using the wrong value, make the formula inaccurate, according to Veuger and its co -author Kevin Corinth.
“Now, our view is that the formula on which the administration relies has no basis in economic theory or commercial law,” Corinthians and Veueger wrote. “But if we are inviting it to be a sound basis for American trade policy, we must be allowed at least to be expected that White House officials are carefully related to their accounts.”
Another economist at AEI, Derek, has gone beyond that, saying that the administration did not make a mistake, as much as mathematics intentionally made the result they wanted.
“This was all forged,” scissors He said Monday CNBC. “It was a way to get a very high tariff because President Trump wanted to announce a very high tariff.”
In their original report, Corinthians and Veuger said they hoped that the White House will reduce customs tariff rates as a result of their discovery. They wrote: “We hope that they will correct their mistake soon: The liberalization of the resulting trade will provide a batch that affects the need for the economy and may help us yet stagnate the recession.”
The three commercial days since President Donald Trump Declare US A new tariff system He saw markets all over the world a tank. In the United States, Dao Jones, S & P 500, and Nasdak The complex of all the hole. In Asia, the shares in Japan and Hong Kong sank further on Monday, after Trump’s pledge Escape Continuous trade war. While in Europe the stocks About 4.5 % decreased On Monday, after a bleak performance last week.
The accounts used by the White House were somewhat controversial after it became clear that the reduced “mutual tariff” amounts were based on a Simple format From the division of the trade deficit of the United States with a foreign country out of the total exports of this country to the United States, the resulting number was divided into two and the customs tariff rate for the aforementioned country was used.
Corinth and Garden Fujer said that even without error, the formula was doubtful. And they wrote the formula, “It is meaningless.” “The trade deficit with a specific country is not determined only by customs tariffs and non -sharp commercial barriers, but also by international capital flows, supply chains, comparative advantage, geography, etc.”
Given that the Trump administration’s tariff was described as a mutual tariff, analysts and investors expected that they will rely on a careful and unsafe trade barriers in the country with regard to American -made goods. Instead, they depended on the formula, which Washington Post Reports President Donald Trump personally insisted on using.
Trump’s personal views on the tariff, from Veuger’s point of view, were the main reason for the recent tariff policy.
“What has been driving politics is that since the 1980s, Trump has been protected, and it is believed that the trade deficit is losses and surplus trade is profits.” “He loves customs tariffs. Then you can distinguish it with various more sophisticated and intellectual rationalities. But this is what it is – rationalizing.”
The White House said that the use of retail rates instead of import prices was justified because consumers make decisions to buy based on retail prices instead of wholesale prices. A spokesman added that in his opinion, the tariff rates should have already been greater.
Corinth and Fujer referred to research From the Professor of Harvard Business College Alberto Cavalo in the US Trade Representative (USTR) note On how to fill a tariff, as evidence that the accounts have misrepresented the difference between retail prices and import prices. “This explains this distinction,” they wrote Cavalla’s work.
Cavallo also covered the fact that his work was referred to in the USTR report.
“It is not quite clear how they use our results,” Cavallao Books on x Last week. “Based on our research, the elasticity of import prices with regard to the tariffs is closer to 1. If this number is used instead of 0.25, the implicit mutual definitions will appear about four times smaller.”
If this version of the formula is adopted, it will significantly reduce the tariff rates imposed on countries. For example, the compound rate of 49 %, will decrease to 13 % and Vietnam will move from 46 % to 12.2 %. The vast majority of countries will end up with a 10 % tariff of the White House, which is part of the new White House policy.
This story was originally shown on Fortune.com
https://fortune.com/img-assets/wp-content/uploads/2025/04/GettyImages-2207581012-e1744054641997.jpg?resize=1200,600
Source link