The last 7 months of tariff policies – which the White House has increasingly pushed on state level markets – have already attracted the ire of some leading economists. Specifically, the administration has established a baseline tariff of 10% for any country that does not maintain a notable trade deficit. This move will have serious consequences for a large variety of countries, including those that are key to our global supply chain. This decision has immense impact on Southeast Asian countries, particularly Vietnam. It has become a key base of operations for some of the US’s biggest manufacturers, including Nike, Intel, and Apple.
Donald Trump, the former president, proposed a reduction of the standard tariff for countries with a substantial trade deficit, halving the 10% rate. This policy is emblematic of the battles the United States finds itself in with such issues as strategic trade policy execution. From the 1970s onward, the US has run persistent trade deficits. The bad news is that this trend won’t be reversing any time soon. The United Kingdom Sports received an astonishing $12 billion trade surplus in 2024. To get this data, we really just went directly to the horse’s mouth— that being the US Census Bureau.
The White House’s approach involved calculating the trade deficit for each country by dividing the total goods deficit by the value of imports. This simplistic approach has alarmed many experts who argue that this method misses the mark in both scope and sophistication. Adam Tooze, an economic historian at Columbia University, criticized the policies, stating, “This is not serious trade policy or grand strategy.” He pointed out that countries such as Cambodia (49%), Laos (48%) and Vietnam (46%) are subjected to high tariffs. These countries aren’t protecting their markets from US exports out of malice, but rather protecting themselves as a function of their economic realities.
These were the administration’s calculations, the starting point for looking at China’s trade deficit numbers as a guidepost. Tooze quickly identified a major thread in this logic. “This is not because they discriminate viciously against American exports,” he asserted. “The US does not make a lot of goods that are relevant for them to import.”
The world has been turned upside down by Trump’s “America First” strategy. It has disrupted the last three decades of efforts by previous administrations to project economic power globally. The US thus has important economic and geopolitical advantages as the issuer of the global reserve currency. Paradoxically, it is hamstrung by having to run larger trade deficits than any other country can maintain.
One of the most poignant examples of the administration’s tariff strategy is Lesotho. This tiny southern African country has one of the largest gaps between the rich and poor. The country faces an outrageous tariff of 50%, illuminating one of the administration’s more draconian efforts that are out of touch with economic realities.
The impact of these tariffs goes far beyond short-term economic damage. In doing so, they risk stretching our ties with nations that are key to ensuring strong supply chains. And now, major manufacturers are looking to countries such as Vietnam to serve their manufacturing needs. With growing trade tensions, an increased restriction of their operations would lead to higher costs paid by you, the American consumer.
Trump’s defense of his approach often leaned on the principle of reciprocity in trade. “Reciprocal – that means they do it to us, and we do it to them. Very simple. Can’t get simpler than that,” he stated during his presidency. As critics have pointed out, this naive understanding overlooks the realities of global trade patterns, competitive dynamics, and economic interdependence.