Written by: Muhammad Zidane Alhalita Staff of Research and Development

How It All Started

“You know, China makes the fentanyl, gives it to Mexico, puts it through Canada.”

Never has a global hegemon made a statement so assumptive and bold, considering the current dire state of international affairs. President Donald Trump, exercising his authority under the International Emergency Economic Powers Act (IEEPA), declared the above statement to justify his recent swift policy on tariffs. 

At the beginning of 2025, specifically on February 1st, Trump announced the imposition of tariffs on three of the US’ main trading partners—Mexico, Canada, and China—and later expanded them to other countries as well. The primary justification for this policy was the concern of various issues related to illegal immigration and drug trafficking, particularly fentanyl, into the United States (Sorongan, 2025). According to CNN Business, here is a breakdown of the tariffs imposed on these countries:

• Mexico: A 25% tariff was applied to all imports from Mexico.
• Canada: Most Canadian imports were subjected to a 25% tariff, although energy products such as crude oil were given exemptions, with a reduced rate of 10%.
• China: Imports from China were initially taxed at 10%, later increased to 20%.

On April 2nd, 2025, Trump announced a broader tariff policy under the name“reciprocal tariffs”. He stated that reciprocal tariffs would be applied to around 90 countries with the aim of eliminating the US trade deficit (Picchi, 2025). Trump remarked, “Reciprocal tariffs on countries throughout the world.” He added, “Reciprocal. That means: they do it to us and we do it to them. Very simple. Can’t get any simpler than that,” (Sullivan, 2025).

Image 1. Trump announces reciprocal tariffs.
Source: Investopedia

On the other hand, the White House also announced a formula for determining its reciprocal tariffs. This tariff sparked considerable controversy, as economists argued that the formula overlooked several crucial factors.

Image 2. Trump’s “controversial” formula for calculating tariffs.
Source: WITF

Tariff or “Tariff”?

The tariff formula employed to determine reciprocal tariffs has become the subject of ridicule among mathematicians and economists due to several fundamental flaws in its methodology. Then, how exactly is the “Trump Tariff” applied? Let us dissect.

In this formula, xi represents the volume of exports from country i to the US, while mi denotes the volume of imports from the US to country i. The variable ε refers to the elasticity of import demand, and φ represents the import price. However, we need not concern ourselves too deeply with the economic meaning of ε and φ, as the White House arbitrarily set ε = 0.25 and φ = 4 for all countries, disregarding the unique economic elasticities of individual nations. This is precisely where the absurdity lies. According to Kevin Corinth and Stan Veuger of the American Enterprise Institute, ε should not be 0.25, but rather closer to 1, approximately 0.945 (Doherty, 2025).

What, then, is the purpose of such arbitrary values? Quite simply, it was done merely to SIMPLIFY the calculation and to “look cooler”. If we multiply the variables, ε × φ equals 1, since 0.25 multiplied by 4 results in 1. What remains, therefore, is a formula based solely on the trade deficit:

Image 3. The actual formula behind Trump’s tariff calculation.
Source: Personal Document

Thus, what is referred to as the reciprocal tariffs are, in reality, the trade deficit of the US with a particular country, rather than a conventional tax, import duty, or any other levy that typically comes to mind when we hear the word “tariff.” The outcome of this tariff formula is then arbitrarily halved under the guise of goodwill.

For instance, the US imports goods from China amounting to US$440 billion, while its exports to China total only US$145 billion (DetikNews, 2025). Based on the calculation below, this results in a so-called discounted tariff of 34% for China.

Image 4. Result of US tariff calculation on China.
Source: Personal Document

Trump claimed that China imposed a 67% tariff on American products, whereas  data released by the World Trade Organization (WTO) revealed that China’s average tariff was merely 4.9% in 2024. Similar discrepancies were also evident in the cases of the European Union (39% vs 1.7%) and India (52% vs 6.2%) (AFP, 2025). This illustrates that what is referred to as the “Trump Tariffs” does not entirely represent tariffs in the conventional sense, such as import duties, customs levies, or other formal charges typically applied within international trade systems. Rather, the policy reflects a unilateral response to trade deficits between nations, particularly between the US and its trading partners.

Such actions raise significant concerns, as tariff measures imposed without undergoing a process of consultation or mutual agreement clearly contravene the foundational principles of the WTO. Specifically, the policy violates Articles I and II of the General Agreement on Tariffs and Trade (GATT) 1994, which emphasise the importance of the Most-Favoured-Nation (MFN) principle and adherence to previously agreed tariff bindings. The principle states that all countries are to be treated equally in international trade. The US’ turn towards unilateralism – perhaps to restore confidence in a declining hegemony – undermines the spirit of multilateralism that has served as the cornerstone of the international trade system since the end of the Second World War.

Trump’s claim that “China makes the fentanyl, gives it to Mexico, puts it through Canada” is also misleading and oversimplified. In reality, Mexico has taken serious steps to combat fentanyl trafficking. US border data in early 2025 showed a 50% drop in fentanyl seizures from Mexico. Canada plays a minimal role – less than 1% of fentanyl seized in the US came from Canada, as confirmed by PM Justin Trudeau (Subari, 2025). Meanwhile, according to VOA Indonesia, China has also cooperated by shutting down companies and accounts linked to the fentanyl trade.
Furthermore, data shows that 86.3% of fentanyl smugglers in 2021 were US citizens, not foreigners (Octavia, 2025). This shows that the problem is one that must be solved by the US itself and not other countries. According to the CDC, US drug overdose deaths fell by 24% in 2024, and Dr. Nora Volkow said that fentanyl-related deaths dropped by 30.6% (Mann, 2025). Given these facts, imposing tariffs on Mexico, Canada, and China over fentanyl is illogical. These countries have shown progress, while much of the issue is domestic. Tariffs, a trade tool, are not a sensible or effective solution to a domestic health crisis.

Trump’s claim regarding immigration is also misleading. The number of illegal immigrants from China crossing the US-Mexico border remains relatively low compared to those from Central American countries. In 2023, while over 37,000 Chinese nationals were apprehended at the southern US border, this figure is still significantly lower than the number of migrants from other nations in the region (VOA Indonesia, 2025).

The implementation of the Trump Tariffs had wide-ranging effects, not only for the US’ own economy and its trading partners, but also for the global trade system as a whole. Domestically, although the policy aimed to protect local industries and reduce trade deficits, it has in fact placed considerable pressure on the manufacturing and agricultural sectors. Numerous companies faced increased import costs, which in turn led to higher consumer prices. Some industries were even forced to relocate production or reduce their workforce in an effort to cut costs, directly contradicting the original goals of the policy. Former Treasury Secretary Larry Summers famously likened this approach to “astrology in astronomy” due to its “irrational” nature.

On a global scale, these unilateral tariffs triggered retaliatory measures from other countries, leading to a domino effect of prolonged trade tensions. One of the most prominent examples was the US-China trade war, which not only shook global stock markets, but also slowed global economic growth for several years. It is also crucial to recognise that previous world wars were, in part, ignited by reckless economic and trade disputes, such as the Second World War, which came to be as a result of the notorious Great Depression, among many other factors.

Institutionally, Trump’s policy has damaged the credibility of the United States in global trade governance. This move, which directly contradicts WTO principles, has set a dangerous precedent in which other countries may feel emboldened to take similar unilateral actions, thereby weakening the WTO’s role as a dispute settlement body and a guarantor of multilateral trade stability. The US may even lose its trusted trading partners because of its “destructive” move.

For now, Trump has announced a 90-day delay on the tariffs, which has sparked speculation that he may be attempting to manipulate the market. This move has raised eyebrows among economists and political analysts, who suspect it could be timed to influence economic indicators or investor sentiment.

In addition, Trump delivered a highly inappropriate speech, using coarse and undiplomatic language that many considered unbecoming of a president. He stated, “These countries are calling us, kissing my as*. They are—they are dying to make a deal. Please – please, Sir, make a deal. I’ll do anything, I’ll do anything, Sir…” (Guardian News, 2025)

Image 5. Trump, when he uttered the profanity.
Source: Guardian News

Such remarks were widely condemned, not only by political opponents, but also by several commentators and former diplomats, who argued that the rhetoric lacked the decorum and professionalism expected from a head of state. Critics also noted that this kind of language could undermine the credibility and respectability of the US on the global stage, sending a message of mockery rather than mature leadership. For many, the speech exemplified Trump’s tendency to prioritise theatrics over substance, and further alienated key allies rather than fostering constructive dialogue.

Conclusion

The so-called “reciprocal tariffs” represent a drastic shift from multilateralism to unilateralism in global trade policy. Rather than addressing the root causes of trade imbalances, these measures create ripple effects that harm both domestic industries and international economic stability. With rising production costs, retaliatory tariffs from trade partners, and increased uncertainty in the global market, the policy may prove to be not only ineffective, but also damaging in the long run. More alarmingly, it was a decision made unilaterally, bypassing international consensus, directly contravening the spirit and regulations of the WTO, particularly the principles of non-discrimination and fair negotiation.

History has shown us that economic tensions, when handled recklessly, can escalate into global crises, as seen in the events leading to the Second World War. It is, therefore, concerning that such a significant move was carried out in a manner so short-sighted and, frankly, absurd. The “Trump Tariffs” were not a well-calculated strategy, but rather a hasty, politically-driven maneuver that ignored economic logic and global diplomatic norms. Moving forward, the international community must reinforce the importance of cooperation, legal frameworks, and shared responsibility in shaping trade policies, lest we repeat the costly mistakes of the past.

References

AFP (2025). TRUMP’S TRADE MATH BUFFLES ECONOMIST. Breitbart. Accessed on April 10, 2025. https://www.breitbart.com/news/trumps-trade-math-baffles-economists/.

CDC Newsroom (2025). CDC Reports Nearly 24% Decline in US Drug Overdose Deaths. CDC. Accessed on April 12, 2025. https://www.cdc.gov/media/releases/2025/2025-cdc-reports-decline-in-us-drug-overdose-deaths.html.

detikNews (2025). Rumus Apa yang Dipakai Trump Menerapkan Tarif ke Negara Lain?. detik.com. Accessed on April 10, 2025. https://news.detik.com/bbc-world/d-7856343/rumus-apa-yang-dipakai-trump-menerapkan-tarif-ke-negara-lain. 

Doherty, E. (2025). Economists take issue with Trump’s tariff formula, arguing rate is inflated. CNBC. Accessed on April 10, 2025. https://www.cnbc.com/2025/04/05/economists-take-issue-with-trumps-tariff-formula-arguing-rate-is-inflated.html.

Guardian News (2025). ‘They are kissing my ass’: Trump says countries are pleading to negotiate tariffs. YouTube. Accessed on April 12, 2025. https://youtu.be/c143MbcoITw?si=CzaEZa0xj7z_coMi.

Mann, B. (2025). Trump says new tariffs will cut US drug deaths but fatal overdoses were already plummeting. NPR. Accessed on April 12, 2025. https://www.npr.org/2025/02/27/nx-s1-5311570/fentanyl-tariffs-canada-mexico-trump.

Octavia, C. F. (2025). Menlu Meksiko: Warga AS sumber utama penyelundupan fentanil. ANTARA News. Accessed on April 12, 2025. https://www.antaranews.com/berita/3454149/menlu-meksiko-warga-as-sumber-utama-penyelundupan-fentanil.

Picchi, A. (2025). See the full list of reciprocal tariffs by country from Trump’s “Liberation Day” chart. CBS News. Accessed on April 10, 2025. https://www.cbsnews.com/news/trump-reciprocal-tariffs-liberation-day-list/.

Subari, W. A. (2025). Pengamat Tanggapi Kebijakan Tarif Trump Berdalih Fentanil. Media Indonesia. Accessed on April 12, 2025. https://mediaindonesia.com/internasional/749231/pengamat-tanggapi-kebijakan-tarif-trump-berdalih-fentanil.

Sullivan, A. (2025). What’s really behind Trump’s ‘reciprocal’ tariffs?. DW. Accessed on April 10, 2025. https://www.dw.com/en/trump-reciprocal-tariffs-trade-china-economy-wto/a-72177305. 

VOA Indonesia (2025). AS, China Siap Luncurkan Upaya Tangani Produksi dan Distribusi Fentanil. VOA. Accessed on April 12, 2025. https://www.voaindonesia.com/a/as-china-siap-luncurkan-upaya-tangani-produksi-dan-distribusi-fentanil/7461331.html.

— (2025). China Mulai Kembali Kerja Sama dengan AS Terkait Migrasi Ilegal. Accessed on April 12, 2025. https://www.voaindonesia.com/a/china-mulai-kembali-kerja-sama-dengan-as-terkait-migrasi-ilegal/7606964.html.

Wallace, A. (2025). Here’s what will get more expensive from Trump’s tariffs on Mexico, Canada and China. CNN Business. Accessed on April 10, 2025. https://edition.cnn.com/2025/02/01/economy/trump-tariffs-mexico-canada-china-increased-costs/index.html.