Economists Kevin Corinth and Stan Veuger at the American Enterprise Institute said the formula the Trump administration used to set âreciprocal tariffsâ includes a math error that inflates the calculated impact by about fourfold.
After announcing the tariffs the prior Wednesday, the administration released a formula it said was developed with the Council of Economic Advisers to determine the tariff rates. Corinth and Veuger said the formula uses two variables that should not cancel each other out because the administration applied the wrong level for one of them.
They focused on a variable described as the âelasticity of import prices with respect to tariffs,â meaning how much import prices change when tariffs are imposed. Using what they describe as the correct elasticity measure while keeping the same policy goals, they wrote that the levy on Vietnam would have been 12.2% rather than 46%.
In support of its approach, the Office of the U.S. Trade Representative cited research on price elasticity by Harvard Business School professor Alberto Cavallo. The White House did not immediately respond to a request for comment on AEIâs assertion.