President Donald Trump's new tariff policy appears to follow a simple yet controversial formula: dividing a country's trade surplus with the US by its total exports to calculate the percentage of "tariffs charged to the USA," according to _bne IntelliNews'_ analysis of the recently announced rates announced late on April 2.
Globally, reactions have been negative to the Trump administration’s [seemingly random allocation of tariffs](https://intellinews.com/us-imposes-17-tariffs-on-israeli-goods-while-iran-faces-only-10-374730/?source=iran), which include places such as the tiny French overseas department of St Pierre and Miquelon off the coast of Canada.
However, the formula becomes evident when examining the numbers for several major trading partners with the US government's trade policy seemingly thought up on the "back of a fag packet," to use an 1980s English expression.
The European Union, with a $235.6bn surplus on $605.8bn exports, yields a calculation of 39% (235.6/605.8), close to the claimed tariffs. Indonesia's $17.9bn surplus on $28.1bn exports yields 64% (17.9/28.1), while India's $45.7bn surplus on $87.4bn exports yields 52% (45.7/87.4). Perhaps most striking is Vietnam, where a $123.5bn surplus on $136.6bn exports yields 90% (123.5/136.6).
This calculation method helps explain why countries with large trade surpluses relative to their total exports to the US face higher tariff rates under Trump's plan. The approach treats trade deficits as equivalent to tariffs, regardless of actual trade barriers imposed by these nations.
Israel's 17% tariff rate and Iran's 10% rate reflect this formula rather than political considerations, though the optics of Iran receiving better treatment than Israel could prove politically problematic for the administration which has backed Israel to the hilt.
Trump described his policy as "America Liberation Day" during the White House Rose Garden announcement on April 2. "It's very simple: if they do it to us - we do it to them," he stated.
The policy will begin with a base 10% tariff on all goods imported from countries outside the USMCA agreement this weekend, with additional country-specific tariffs starting on April 9.
Global financial markets have already reacted negatively, with futures on major indices dropping significantly. European markets recorded significant losses on April 3 as investors responded to the new US tariff regime, with financial sector shares particularly affected amid concerns about broader economic impacts.
The pan-European STOXX 600 fell 1.5% in early trading, with German equities experiencing steeper declines of 1.8%. Germany's vulnerability stems from its strong trade relationship with the US, which was ranked as its most important trading partner last year.
US market indicators also showed negative sentiment, with futures contracts dropping 3.1% as capital moved toward traditional safe-haven investments, including government bonds and precious metals.
Following the news, Israeli Finance Minister Bezalel Smotrich said on April 3 that he was convening ministry officials to formulate a path through the sanctions despite the country announcing on April 1 that it would remove all tariffs with the US in expectation of being excluded from the list.
As part of the list, Israel was hit with 17% tariffs while sanctioned Iran was hit with 10% and currently only sends very limited items, including foods and carpets, to the US. The damage to the Israeli economy and tech sector is much more significant.
Smotrich said he would "analyse opportunities and risks and formulate courses of action, both in relation to President Trump and his team and regarding the necessary steps to strengthen Israel's industry".