The
entire new tariff scheme is napkin math. Although it could also be napkin math done by some LLM.
If it was real math, it wouldn’t assume that there is some magical trade elasticity that is completely linear in the tariff rate. And real math might notice that the prices of goods that are subject to tariffs are an utterly absurd measure of value, cost, movement of money, or anything else.
Consider:
A US company does a bunch of R&D and designs a widget. They pay $10 each to a Chinese factory to manufacture it. They warehouse the widgets in Hong Kong. Each widget purchased by a US customer results in a “$100” item being imported. $90 stays in the US. $10 goes to China.
The same company does exactly the same thing except they ship in bulk to a US warehouse. The imported item is now “$10”. The tariff is 1/10 as much, the napkin math sees 1/10 as much trade imbalance, but the economic effect of the import is identical.
Or maybe they ship from Hong Kong to a French customer. This should be seen as an export from the US to France with $90 and an export from China to France worth $10. But I think it’s invisible to the napkin math.
Now consider that the US is home to some wildly successful companies with names like AMD and Nvidia. They sell chips for thousands of dollars each, worldwide. They pay TSMC quite a lot less to make them. If they warehouse in the US, they may be screwed now! If they ship from Taiwan to a buyer somewhere else, the US has, in effect, exported quite close to the full sale price of that chip, but no trade goods ever touched US soil. Can the napkin math sees that?
You can bet that several other countries use brains instead of napkins and will have no difficulty thinking that they could retaliate by restricting or taxing of these US-designed goods even if they’re imported from elsewhere. And China is working very hard to make their own alternatives, and they will surely be willing to export them.
(Don’t forget: The UK and Israel have CPU design expertise. ASML is dependent on tin zapping tech from San Diego, but they’re an EU company. And it looks like the successor to that tin zapping tech might be free electron lasers, and that technology come from US national labs and universities, but other countries also have FELs, and the nerdy physicists who fiddle with them are not happy with the US government right now.)