Trump's Tariff Formula Confound Economists On Faulty Assumptions, Nil Economic Rationale—Here's Why

US President Donald Trump imposed additional 25% tariffs on import of Indian goods, over India's continued purchase of Russian crude oil. The total tariff on India has now doubled to 50%. Trump's latest move comes a week after he announced 25% reciprocal tariffs against the country, citing wide "fiscal deficit" between India-US trading relations.

According to experts, Trump's formula for calculating the trade tariffs is confounding economists, many of whom argue it rests over ''faulty assumptions'' and lacks economic rationale. Trump has labelled India as the "Tariff King" and an "abuser" of trade duties, suggesting that the country unfairly protects its markets through high customs duties.

However, data reveals India’s simple average tariff, which comprises levies on both agriculture and non-agriculture products is around 16%. This is in the same league as Bangladesh (14.1%), Turkey (16.2%) and Argentina (13.4%). Data shows India’s weighted average tariff is only around 4.6%.

Trump has also described India as a “dead economy” and said the US does “very little business” with the country. However, trade data showed that the US was India’s fifth largest trading partner for the fourth consecutive year in 2024-25 with bilateral trade valued at $131.84 billion.

In the previous fiscal, India’s exports to the US rose by 11.6% to $86.51 billion, compared to $77.52 billion in 2023-24. Under “Mission 500,” both sides aim to double bilateral trade to 500 billion dollars by 2030.

In 2016, Trump had blamed India for taking US jobs . "They are taking our 18 jobs. China is taking our jobs. Japan is taking our jobs. India is taking our jobs. It is not going to happen anymore, folks!" Trump said. Even recently, he criticized tech companies for hiring Indian talent.

However, the claim is misleading given the fact that investments by Indian companies are also creating jobs in the USA. Many Indian companies are investing in the US and adding value. According to a CII study released in April 2023, 163 Indian companies invested over $40 billion in the US and created over 425,000 direct jobs.

Experts believe Trump has turned global trade policy into a tool for personal grudges and political drama. He threatened a 50% tariff on Brazilian goods unless President Lula halted the trial of Jair Bolsonaro, Trump's far-right ally and former Brazilian president.

The threat was not based on trade concerns. The US enjoys a surplus with Brazil, but purely on ideological and personal grounds. Trump also called the trial a “witch hunt” and pressured Brazil’s democratic institutions, saying he told Lula to “stop the nonsense” or face economic consequence.

Additionally, in a move blurring diplomacy, business, and coercion, Trump has threatened Taiwan with a 15% blanket tariff on its exports, unless semiconductor giant TSMC agrees to purchase a 49% stake in Intel and pour $400 billion into the US economy.