Hacker News Reader

Hacker News

Comment by doener | Hacker News Reader

Full thread

doener

"This guy cracked the tariff formula: @orthonormalist

It’s simply the nation’s trade deficit with us divided by the nation’s exports to us.

Yes. Really.

Vietnam: Exports 136.6, Imports 13.1 Deficit = 123.5

123.5/136.6 = 90%"

https://x.com/Geiger_Capital/status/1907568233239949431

View on HN

  Vietnam: Exports 136.6, Imports 13.1 Deficit = 123.5

Taking Vietnam as an example, keep in mind that the trade deficit calculation only uses physical goods.

Vietnam exports low value physical goods to the US. The US sells high value non-physical services such as Microsoft office, ChatGPT, Netflix, Facebook ads, iOS Appstore fees, iCloud subscriptions, etc to Vietnam. Other services include engineering consultants, US tax auditors, US consulting companies, etc. None of these are factored into the formula.

So a country like Vietnam gets royally screwed by this formula. They are actually buying way more from the US than just the physical goods.

If you're Vietnam, it's very hard to "just take it" as suggested by Treasury Secretary Scott Bessent. The formula is flawed in the first place.

If we truly want fair, the formula should be based on total profit of the goods and services sold. Services have much higher margins than physical goods typically.

This is such an obvious fact and the fact that not more people see through this is insane to me.

The "trade deficit" is an arbitrary number unrepresentative for what the US makes the most money with.

That's true for most other places, including the EU. With services included, the trade imbalance is negligible. Source:

https://ec.europa.eu/commission/presscorner/detail/en/qanda_...

I am quite certain that none of that software revenue is recognized in the US. https://en.wikipedia.org/wiki/Apple%27s_EU_tax_dispute

Some think AI helped with the formula

https://universeodon.com/@cryptadamist/114271484597938775

The takeaway from the X-poster being "it's good that they're using LLMs" is hilarious. Why praise the method if the end result is so bad?

Perfection is just a bugfix away /s

The tariffs might be a bad idea, but this accusation is ridiculous. For a simple methodology like this, it's trivial to prompt engineer a LLM to produce the same response. It doesn't mean that that's how the administration came up with the policy, any more than a LLM getting the same (correct) solution as a student on an assignment means the student used a LLM on that assignment.

I think the accusation carries more weight than you're implying because while correct answers are all similar having two students give eerily similar wrong answers is often used as evidence for cheating.

The fact that this announcement is, to put it generously, weird, and not how anyone in the real world actually implements tariffs points to this administration going with the formula from some undergrad econ textbook or econ blog they found and applying it to a spreadsheet. Maybe they got it from an LLM, maybe they didn't, but what matters is the college sophomore level of consideration of the individual tariffs.

>Maybe they got it from an LLM, maybe they didn't, but what matters is the college sophomore level of consideration of the individual tariffs.

Sounds like we're in agreement? The tariffs are badly thought out, but the "lol they got their policy from LLMs" accusation is entirely spurious.

I really don't think this is entirely spurious considering Elon has been using LLMs to fire government employees. It seems like a very plausible explanation for how they came up with this policy.

>Elon has been using LLMs to fire government employees

Source?

from Mike Johnson, about DOGE's use of algorithms: ""Elon has cracked the code. He is now inside the agencies. He’s created these algorithms that are constantly crawling through the data. And as he told me in his office, the data doesn’t lie. We’re going to be able to get the information."

My speculation, but it's very likely that one of those pieces of analyzed information was the 5 bullet points from each federal employee justifying their job.

https://www.nbcnews.com/politics/donald-trump/live-blog/trum...

https://www.nbcnews.com/politics/doge/federal-workers-agenci...

Is Elon really that stupid?

Just because doesn't lie doesn't mean we understand it correctly.

I think so, but I'm not actually sure that any of the realities that would have lead to this outcome is any less embarrassing for the administration. Because there is real information contained in the fact that pretty much every LLM gives roughly the same answer— it doesn't help that the wording is similar either. Does it mean that they used an LLM? No not really, but it does strongly imply that their formula and the source for it are the "StackOverflow answer" for lack of a better term.

And while it's not wrong I guess it's also the kind of thing that you would expect to use for your econ homework than a real application of policy. I don't think it's unreasonable to assume that the person who made this spreadsheet really did do something to the effect of type "how to calculate reciprocal tariffs" into Google. And that's not a bad thing necessarily if you're a rando who's just been tasked with figuring that out but you couldn't have found someone with more experience with actually doing this and modeling the economic effects?

I think that it's a testament to the genuinely breakneck speeds they been trying to get policy out there that it's been so slapdash.

Seems like it's at least a plausible possibility for Paul Krugman

https://paulkrugman.substack.com/p/will-careless-stupidity-k...

Holy cow! I had to check for myself: there are even more data points on trade balance for all countries at https://www.census.gov/foreign-trade/balance/index.html (whereas @orthonormalist used a partial list from wikipedia) and the percentages I calculate line up exactly with the Trump's full list of "Tariffs Charged to the USA" percentages (https://x.com/RapidResponse47/status/1907541343250878752) !!

Specifically they used 2024 trade balance figures. Example: take a random country, like Botswana, and the country's page at https://www.census.gov/foreign-trade/balance/c7930.html shows a 2024 trade balance of 104.3 (exports) and 405.1 (imports) so 1-104.3/405.1 = 0.74 which matches the "74%" "tariffs charged to the USA" claimed by Trump...

Rarely you get handed such blatant evidence that someone produced bullshit numbers and/or doesn't understand where the numbers come from !

Edit: someone said it doesn't work for Japan but it does. Every country I checked by hand matches the figures exactly... For Japan the figures are from https://www.census.gov/foreign-trade/balance/c5880.html and their 2024 trade balance is: 79,740.8 (exports) and 148,208.6 (imports) so 1-79740/148208 = 0.46 which matches the 46% "Tariffs charged to the USA " from the table shown by Trump...

thanks for the information. In light of this, it seems pretty silly: economy on a world scale isn't a line, it's more like a ring (country A has a deficit with country B, which has a deficit with country ... N which has a deficit with country A) at best. Isn't it like saying everyone should trade everything at the same price with everyone?

Can anyone else confirm this is true? I’m feeling a bit sceptical here.

Confirmed by the White House here: https://ustr.gov/issue-areas/reciprocal-tariff-calculations.

Thanks! This is an interesting read.

...and every country USA has a positive trade with, will get slapped with the 10% tariff. Every country on the table Trump posted, that have received the 10% tariff, the US have a positive trade with.

No winners in this one.

Plenty of countries got excluded from this—Canada, Mexico, Belarus, Russia...

Canada and Mexico were already hit with 25% tariffs (on non-USMCA-compliant goods) last month...

Source for original tariffs: https://www.wsj.com/economy/trade/trump-tariffs-canada-mexic...

Source for continued original, but no new tariffs: https://www.wsj.com/livecoverage/trump-tariffs-trade-war-sto...

Not saying I agree with it, but Trump has communicated that ideally these international companies would build factories in the US. There would be no point in doing that if not for some floor tariff.

Reply on news.ycombinator.com