Ego economics

Several weeks ago, not long after Donald Trump was sworn in as President of the United States, I remarked to my wife that, judging by the noises he was making, he would likely have upset every country in the world by the end of his four-year term. As it turns out, I was being overly generous—he didn’t even need three months. After weeks of nervous anticipation among countries trading with the United States, Trump finally unveiled what he called his “discounted reciprocal tariffs” on over 200 nations. I said discounted, because apparently, when you’ve invented your own brand of economic logic, it only makes sense to dress it up with a catchy sales label too.

Most countries were handed a base tariff rate of 10%, but for others, the rates were calculated using a formula that Trump claimed would make things “fair.” This formula was supposedly rooted in the idea of reciprocity—but not the kind that makes actual economic sense. No, this was Trump’s own unique brand of trade justice.

The US Trade Representative then published an overview of how it was all calculated. At first glance, it looked like the kind of equation that would give even a seasoned economist pause—Greek letters like delta (Δ), tau (τ), epsilon (ε), and phi (φ) tossed in for dramatic effect.

But dig just a little deeper and the whole thing turns absurd. Strip away the Greek and you’re left with a very basic formula: (exports from the US – imports to the US) ÷ imports to the US. Then, for good measure, Trump "generously" halved the result and imposed a 10% minimum. The variables epsilon and phi were assigned values of 4 and ¼, which conveniently cancelled each other out. 

Take China, for example. In 2024, the US exported USD 143.5 billion worth of goods to China and imported USD 438.9 billion in return. Run that through Trump’s magic mathematics, apply the 50% discount, and you get a 34% tariff slapped onto Chinese goods. Add that to the existing 20% tariff, and you’ve got a grand total of 54%—which was later arbitrarily increased to 145%. To China’s credit, after they responded with a 125% tariff on US imports, they announced they wouldn’t dignify Trump’s irrationality with any further retaliation.

Was this formula dreamed up by Trump himself, or was it the work of his backroom “yes-men” and economic whizkids? Either way, it’s a new kind of economic reasoning—one that most economists glance at, frown deeply and mutter, “What in the actual hell is this?”

At the heart of the formula lies Trump’s obsession with trade deficits. If the US buys more from another country than it sells to them, that is cheating in Trump’s world. Never mind that trade deficits are shaped by a dozen different factors—savings rates, currency valuation, investment flows, interest rates, and yes, the small matter of Americans too lazy to work in factories. But in Trump's eyes, if the balance sheet isn’t in America’s favour, someone’s playing dirty.

The term “reciprocal” is in itself a complete joke. The formula doesn’t compare the tariffs other countries impose on US goods. It just punishes them based on how much more they sell to the US than the US sells to them. So you could have a country with low actual tariffs but a trade surplus—and it gets hammered. Meanwhile, a country with steep tariffs but balanced trade gets off almost scot-free with 10%. That’s not reciprocity. That’s arithmetic revenge.

The consequences of this mess means higher prices for American consumers, supply chains in chaos and retaliation from trading partners who are understandably not in the mood to be pushed around. And that’s exactly what happened.

And those weird flourishes in the formula—the halving of the outcome, the mandatory 10% minimum tariff—don’t come from any known economic textbook. They were probably scribbled on the back of a Mar-a-Lago cocktail napkin, because Trump wants it so.

So, what we’re left with is a trade policy that (1) ignores how global trade actually works, (2) uses the wrong metrics to define “fairness”, (3) inflicts real damage on both US consumers and trading partners, and (4) was clearly made up with no real economists in the room.

It’s simplistic, flawed and dangerous. But if the goal was to stir chaos, rattle markets, confuse diplomats and light trade fires that’ll take years to put out, then it's mission accomplished for Trump and his loyal band of yes-men.

When a lunatic swung the tariff bat

The madness began on 02 April 2025. Donald Trump, never one to disappoint in the drama department, decided it was time to unleash his so-called “reciprocal” tariffs on the world. I say “so-called” because what it really looked like was the actions of a raving lunatic waving a very large stick around—hoping to look strong while actually wrecking the room.

He slapped a blanket 10% tariff on practically everything imported into the United States, effective from the fifth of April. No exceptions, no finesse—just a sweeping tax on the world, including some countries and territories that most Americans probably couldn’t even find on a map. But that wasn’t enough. For countries that dared to run a trade surplus with the US—China, the European Union, Japan, South Korea, Taiwan—he decided they deserved something extra. So he rolled out the real meat of the madness: “reciprocal” tariffs at much higher rates, starting on the ninth of April. China, naturally, got singled out for special treatment—34% tariffs right off the bat, on top of what was already in place.

And just like that, the world’s stock markets reeled. Investors panicked. Trillions wiped off global market valuations almost overnight. The Dow plummeted, the FTSE crashed and the Nikkei followed suit in a domino effect of red screens and frantic sell-offs. The volatility index, the VIX, spiked to levels not seen since the height of the 2020 pandemic, signalling extreme market fear. Safe havens like gold and the Swiss franc surged, as investors scrambled to protect their assets. Nobody—literally nobody—had any idea what came next. Trump had done what even major recessions sometimes fail to do: he single-handedly roiled global financial markets with one press conference. Trading floors were a scene of pandemonium, with traders shouting orders and analysts scrambling to reassess their models, which had suddenly become useless. The financial press went into overdrive, headlines screamed about impending economic doom.

On 03 April 2025, Canada had had enough of Trump’s nonsense. Prime Minister Mark Carney retaliated with a 25% tariff on US auto imports. Then came China a day later, matching the 34% tariff and announcing plans to restrict rare earth exports—critical materials for high-tech manufacturing. They also blacklisted 27 US companies. No surprises there. China never blinks, and they certainly didn’t this time.

By 05 April 2025, Trump’s across-the-board 10% tariff officially kicked in. But when 09 April 2025 rolled around—the day everyone expected the next escalation—Trump pulled a semi-surprise: a 90-day pause on most of the additional tariffs… except for China, which got slapped with a 125% tariff. Not to be outdone, China raised theirs to 84%, effective immediately.

The European Union joined the fray too. They cleared retaliatory tariffs on $23 billion worth of US goods, with a staggered implementation plan. Canada was already enforcing its auto tariff response. And just when everyone thought that was the end of it, the White House felt the need to clarify—because apparently even they got confused—that the total tariff on Chinese goods was now 145%.

Throughout this chaotic week, the markets continued their wild swings. Every tweet, every press release, every murmur of a policy shift sent shockwaves across trading floors. Investors were on edge, unsure whether to buy, sell or just wait it out. Uncertainty alone was enough to trigger massive losses. Algorithmic trading and human panic fed off each other, amplifying the volatility. Long-term strategies were thrown out the window, replaced by short-term desperation and damage control.

Amidst the escalating trade war, Xi Jinping responded with a series of pointed remarks, emphasising China's resilience and rejecting what he called “bullying tactics.” He declared that China’s economy was strong enough to withstand external pressure, highlighting efforts to boost domestic consumption and diversify trade partnerships. “China will not yield to unilateral pressure,” he said, framing the US tariffs as a violation of international trade rules. He went on to outline China’s strategic response: retaliatory tariffs, export controls on critical materials and deeper trade ties with other nations. The message couldn’t have been clearer—China wasn’t going to back down, and it would use every economic lever at its disposal to push back.

Adding to this, Chinese officials publicly dismissed Trump’s ballooning tariffs as “nonsense,” bluntly stating that the 125% retaliatory tariff would be their final move. They signalled that any further escalation from the US would not be met with matching increases, suggesting they had no intention of dragging the tit-for-tat battle into mutually assured destruction. Instead, they hinted at other, unspecified measures—more strategic and likely less visible. Many analysts interpreted this as a calculated shift, a move away from headline-grabbing tariffs toward quieter, potentially more targeted non-tariff retaliation. If not de-escalation, then at least a conscious step back from the brink.

But there was more. Late on the 10th of April, in classic Trump fashion, came a policy U-turn. A quiet, late-night announcement retroactively exempted smartphones, computers and certain electronics from the tariffs—backdated to 05 April 2025. Apparently someone remembered that Apple, Dell and the rest of Silicon Valley still mattered. The Customs and Border Protection agency issued the exemption just in time to save Big Tech from what was shaping up to be a supply chain catastrophe.

Tech giants, who had been busy chartering cargo flights to bring in iPhones from India just to avoid tariffs, could finally breathe again. Had the exemption not come through, analysts were warning of price hikes that would’ve made iPhones unaffordable to anyone not named Elon Musk. So yes, crisis averted for the moment.

But what a circus. One man’s impulse-driven decisions sent half the world scrambling, and the other half fuming. Stock markets rocked. Economies braced. And through it all, Trump stood at the centre, convinced the world was about to come kneeling to him in gratitude to kiss his ass.

To the rest of us, it looked more like the global economy being dragged into a ditch by a megalomanic man with a sledgehammer and a very loud megaphone. He insulted his allies, punched his rivals and then acted surprised when they fought back.

And still, some people cheered him on.

Honestly, what do you even say to that?

Unbelievably egoistical

The world’s been in turmoil since 02 April 2025, when the maddest madman alive—some say the most egoistical maniac since Emperor Nero—decided to slap tariffs on almost the entire planet, including some unheard-of, uninhabited island somewhere near Antarctica. Whatever twisted strategy it was meant to be, it brought the global stock markets crashing to their knees, wiping out trillions of dollars in value.

And what happened at the end of the day? Donald Trump claimed almost every country came crawling back to, in his own words, kiss his ass. What an idiot. He insults the world, then boasts when others return just to thank him for capping the damage at a mere 10 percent tariff.

But Xi Jinping isn't one for blinking. Maybe it is out of principle, pride or ideology, whatever, China isn't blinking.

When the world’s two biggest economies go head-to-head in a tariff war, who really expects either to back down? It’ll be tit-for-tat until—who knows—kingdom come? One thing’s certain: trade between China and the United States is heading for a near-standstill. Imagine this—imports from China hit with a 125 percent tariff, and goods from the US slapped with an 84 percent duty and likely to climb higher soon.

And China? I'm certain that they've still got weapons to unleash and inflict pain on the United States. Cutting off rare earth exports to the US, for one. Dumping US Treasury securities, for another. As for what cards the US has left up its sleeve—I honestly don’t know.

Trump's chart of tariffs

The tariff rates on US imports that were originally threatened, and those that were announced after the pause on the 9th of April:

Table with 3 columns and 185 rows. Currently displaying rows 1 to 185.

	China	34%	125%
	European Union	20%	10%
	Vietnam	46%	10%
	Taiwan	32%	10%
	Japan	24%	10%
	India	26%	10%
	South Korea	25%	10%
	Thailand	36%	10%
	Switzerland	31%	10%
	Indonesia	32%	10%
	Malaysia	24%	10%
	Cambodia	49%	10%
	United Kingdom	10%	10%
	South Africa	30%	10%
	Brazil	10%	10%
	Bangladesh	37%	10%
	Singapore	10%	10%
	Israel	17%	10%
	Philippines	17%	10%
	Chile	10%	10%
	Australia	10%	10%
	Pakistan	29%	10%
	Turkey	10%	10%
	Sri Lanka	44%	10%
	Colombia	10%	10%
	Peru	10%	10%
	Nicaragua	18%	10%
	Norway	15%	10%
	Costa Rica	10%	10%
	Jordan	20%	10%
	Dominican Republic	10%	10%
	United Arab Emirates	10%	10%
	New Zealand	10%	10%
	Argentina	10%	10%
	Ecuador	10%	10%
	Guatemala	10%	10%
	Honduras	10%	10%
	Madagascar	47%	10%
	Myanmar	44%	10%
	Tunisia	28%	10%
	Kazakhstan	27%	10%
	Serbia	37%	10%
	Egypt	10%	10%
	Saudi Arabia	10%	10%
	El Salvador	10%	10%
	Côte d’Ivoire	21%	10%
	Laos	48%	10%
	Botswana	37%	10%
	Trinidad and Tobago	10%	10%
	Morocco	10%	10%
	Algeria	30%	10%
	Oman	10%	10%
	Uruguay	10%	10%
	Bahamas	10%	10%
	Lesotho	50%	10%
	Ukraine	10%	10%
	Bahrain	10%	10%
	Qatar	10%	10%
	Mauritius	40%	10%
	Fiji	32%	10%
	Iceland	10%	10%
	Kenya	10%	10%
	Liechtenstein	37%	10%
	Guyana	38%	10%
	Haiti	10%	10%
	Bosnia and Herzegovina	35%	10%
	Nigeria	14%	10%
	Namibia	21%	10%
	Brunei	24%	10%
	Bolivia	10%	10%
	Panama	10%	10%
	Venezuela	15%	10%
	North Macedonia	33%	10%
	Ethiopia	10%	10%
	Ghana	10%	10%
	Moldova	31%	10%
	Angola	32%	10%
	Democratic Republic of the Congo	11%	10%
	Jamaica	10%	10%
	Mozambique	16%	10%
	Paraguay	10%	10%
	Zambia	17%	10%
	Lebanon	10%	10%
	Tanzania	10%	10%
	Iraq	39%	10%
	Georgia	10%	10%
	Senegal	10%	10%
	Azerbaijan	10%	10%
	Cameroon	11%	10%
	Uganda	10%	10%
	Albania	10%	10%
	Armenia	10%	10%
	Nepal	10%	10%
	Sint Maarten	10%	10%
	Falkland Islands	41%	10%
	Gabon	10%	10%
	Kuwait	10%	10%
	Togo	10%	10%
	Suriname	10%	10%
	Belize	10%	10%
	Papua New Guinea	10%	10%
	Malawi	17%	10%
	Liberia	10%	10%
	British Virgin Islands	10%	10%
	Afghanistan	10%	10%
	Zimbabwe	18%	10%
	Benin	10%	10%
	Barbados	10%	10%
	Monaco	10%	10%
	Syria	41%	10%
	Uzbekistan	10%	10%
	Republic of the Congo	10%	10%
	Djibouti	10%	10%
	French Polynesia	10%	10%
	Cayman Islands	10%	10%
	Kosovo	10%	10%
	Curaçao	10%	10%
	Vanuatu	22%	10%
	Rwanda	10%	10%
	Sierra Leone	10%	10%
	Mongolia	10%	10%
	San Marino	10%	10%
	Antigua and Barbuda	10%	10%
	Bermuda	10%	10%
	Eswatini	10%	10%
	Marshall Islands	10%	10%
	Saint Pierre and Miquelon	10%	10%
	Saint Kitts and Nevis	10%	10%
	Turkmenistan	10%	10%
	Grenada	10%	10%
	Sudan	10%	10%
	Turks and Caicos Islands	10%	10%
	Aruba	10%	10%
	Montenegro	10%	10%
	Saint Helena	10%	10%
	Kyrgyzstan	10%	10%
	Yemen	10%	10%
	Saint Vincent and the Grenadines	10%	10%
	Niger	10%	10%
	Saint Lucia	10%	10%
	Nauru	30%	10%
	Equatorial Guinea	13%	10%
	Iran	10%	10%
	Libya	31%	10%
	Samoa	10%	10%
	Guinea	10%	10%
	Timor-Leste	10%	10%
	Montserrat	10%	10%
	Chad	13%	10%
	Mali	10%	10%
	Maldives	10%	10%
	Tajikistan	10%	10%
	Cabo Verde	10%	10%
	Burundi	10%	10%
	Guadeloupe	10%	10%
	Bhutan	10%	10%
	Martinique	10%	10%
	Tonga	10%	10%
	Mauritania	10%	10%
	Dominica	10%	10%
	Micronesia	10%	10%
	Gambia	10%	10%
	French Guiana	10%	10%
	Christmas Island	10%	10%
	Andorra	10%	10%
	Central African Republic	10%	10%
	Solomon Islands	10%	10%
	Mayotte	10%	10%
	Anguilla	10%	10%
	Cocos (Keeling) Islands	10%	10%
	Eritrea	10%	10%
	Cook Islands	10%	10%
	South Sudan	10%	10%
	Comoros	10%	10%
	Kiribati	10%	10%
	São Tomé and Príncipe	10%	10%
	Norfolk Island	10%	10%
	Gibraltar	10%	10%
	Tuvalu	10%	10%
	British Indian Ocean Territory	10%	10%
	Tokelau	10%	10%
	Guinea-Bissau	10%	10%
	Svalbard and Jan Mayen	10%	10%
	Heard and McDonald Islands	10%	10%
	Réunion	10%	10%