This episode explores the questionable methodology behind President Trump's announcement of reciprocal tariffs on various countries. Against the backdrop of this announcement, the podcast interviews Thomas Sampson, an Associate Professor at the London School of Economics, to analyze the claims made by the President. More significantly, the analysis reveals that the tariffs weren't calculated based on actual tariffs imposed by other countries on US goods, but rather on each country's trade deficit with the US, expressed as a percentage of exports to the US, and then halved. For instance, Lesotho, a poor country exporting diamonds to the US but importing little in return, faced a high tariff despite lacking trade barriers. The discussion highlights the flawed logic of equating trade deficits with unfair trade practices, illustrating how bilateral trade balances don't reflect underlying economic realities. In contrast to the President's claims, the expert emphasizes that these balances are influenced by factors like differing levels of economic development and consumer preferences, not just trade barriers. This episode concludes by emphasizing the lack of economic logic behind targeting country-specific trade deficits as a policy goal, highlighting the arbitrary and potentially damaging nature of the announced tariffs.
