Assuming what I've read, it was actually a simple linear formula
tariff = (x - m)/m.
Where x - American exports to a country, and m - imports. Yeaaaaaaaah.
UPD:
Actually, it's a bit more complex:
tariff = (x - m)/(a*b*m)
a - import elasticity (which is arbitrarily set to 4 for every country)
b - transfer of tariffs to import prices for the national economy (which was arbitrarily set to 0.25)
a*b = 1; so we're back to the first formula. My bet is that some autistic tech bro came up with this.
I mean, I hate neolibs with their "evidance-based policies" that are often detached from real world, but this is just retarded.
Hear me out on this: I don’t think the number actually matters that much. All that matters is that there is some tariff and that it’s large enough to hurt, and that there is incentive to reduce the ‘problem’ (in this case, trade deficit). The formula used here fulfills that requirement. Sometimes simplicity is the best option.
So why does that work? Well for one, you save a tremendous amount of time and money on not needing to collect a huge amount of market data for all these countries. Secondly, even if you did analyze all that data, it wouldn’t magically give you a single percentage for all imports of all goods for that country, because all those goods are wildly different.
You can think of it as being a huge collection of random variables. In the end, it doesn’t matter what they do because integrating them all together is just going to give you a
normal distribution anyway. That is, using a huge collection of unrelated or tangentially related evidence to synthesize a single number is an exercise of futility.
As another point, markets are self-correcting. They are going to behave a certain way regardless of how much you fuck with them. This is the thesis of
The Wealth of Nations. As long as the tariffs are not an overwhelming amount of the price (e.g. >50%), suppliers will have enough flexibility in price setting and sourcing to make decisions for their own benefit. That is, even if the percentage is suboptimal, the market itself will optimize around the value to make the most out of it.
Lastly, the formula incentivizes other countries towards reducing the trade deficits as a direct consequence of the formula definition itself, and it’s easy to understand that. It’s not opaque.
Based on these three points, it’s my opinion that this formula is actually no worse than trying to use a huge sample set of data to come up with a single number instead.