It’s like the dumbest AOC logic applied to global trade
Countless people around the world are dumbfounded and dismayed in the wake of this tariff chaos. And, ironically, the sentiment was probably best captured by Canada’s new Prime Minister, Mark Carney, who said, “While this is a tragedy, it is also the new reality.”
He’s right on both counts.
It is the new reality in that the 80+ year period, in which the United States embraced the mantle of global economic leadership, is essentially over. In fact future historians may point to April 2, 2025 as the day when the American-led, post-WWII global order came to an end.
He’s also not being dramatic when he calls it “tragic”, especially because this damage is entirely self-inflicted and based on a deeply flawed premise.
The Trump administration actually published its ‘formula’ for calculating the new tariffs, and it turns out there’s a pretty big math error.
The American Enterprise Institute found that the White House used the wrong number in their calculation— and as a result of that single mistake, their tariffs are about 4x higher than they’re supposed to be.
The authors noted that, if the math had been done correctly, the highest tariff imposed would be 14%, as opposed to 50%. And the vast majority of foreign countries would be well below the administration’s 10% floor.
But there’s an even bigger issue when you actually look at the administration’s math. Here’s a real life example:
According to the Office of the US Trade Representative, the United States imported $8.4 billion worth of products from Bangladesh in 2024. In contrast, the US exported just $2.2 billion worth of American-made products to Bangladesh.
This means that the US trade deficit with Bangladesh is $6.2 billion (2.2 in exports minus 8.4 in imports = -6.2).
Now, according to their formula, you’re supposed to take the $6.2 billion trade deficit and divide by $8.4 billion in imports. In this case that’s 74%… which they claim is Bangladesh’s tariff on US products. (I’ll come back to this.)
And finally they divide 74% by 2 to arrive at a final, 37% ‘discounted’ tariff on products from Bangladesh.
That’s how their math works.
The obvious bad assumption, as you probably noticed, is the assumption that 74% equals Bangladesh’s tariffs on US products.
Their central idea is that the only reason America has a trade deficit with Bangladesh is because of tariffs. And that’s just stupid.
America has a trade deficit because Bangladesh is full of sweat-shop labor that works for 50 cents an hour making socks and underwear.
The US imports this stuff because American consumers like inexpensive socks and underwear. But Bangladesh is still an extremely poor country…therefore they cannot afford to import very many US-made products (which are higher value and hence more expensive).
This is the reason the trade imbalance exists.
The administration, on the other hand, is assuming that any trade deficit is always and exclusively the result of tariffs. That’s completely wrong; it’s almost as if they’re just making up their own economics to justify imposing tariffs.
Frankly this idea is similar to how the Left whines about billionaires.
AOC famously crystallized the Left’s stupidity when she said, “You don’t make a billion dollars. You take a billion dollars.”
Forget about innovation, or creating products and services that consumers love. To the Left, the only way someone becomes successful is by screwing the “working class”.
Similarly, this administration’s view is that the only way Bangladesh has a trade surplus with the United States is by screwing America.
It’s a deeply, deeply flawed assumption that can lead to disastrous consequences.
President Trump tried to brush off the financial meltdown by saying, “I don’t want [markets] to go down, but sometimes you have to take medicine to fix something.”
Well, that’s absolutely the right idea. Sadly it’s the wrong issue.
America does need to take its medicine when it comes to eliminating the $2 trillion annual budget deficit. America needs to take its medicine on Social Security, which is no more than seven years from running out of money according to the government’s own reports.
There are so many problems the US needs to solve, i.e. take its medicine, in order to make a comeback— all of which are far more urgent than bringing the ‘socks and underwear’ industry back to America.
This isn’t medicine. It’s poison.
Simon Black is an international investor, entrepreneur and permanent traveler. His daily letter is both educational and entertaining, and we suggest that those who want unbiased, actionable information about global opportunities sign up for Sovereign Man’s free, actionable newsletter at http://www.SovereignMan.com.
From Simon Black of SovereignMan.com
Source: https://www.schiffsovereign.com/trends/its-like-the-dumbest-aoc-logic-applied-to-global-trade-152447/
