I knew about secondary sanctions, but I had never heard about "secondary tariffs" until I saw the March 25, 2025 EO concerning Venezuelan oil. The EO states that any country seeking to export goods to the US will be subject to a 25% additional tariff if they also import oil from Venezuela.
To apply secondary tariffs on countries exporting goods to the USA which also imports Chinese low-value goods would be quite stunning, especially since the 25% additional tariffs are not goods or origin specific.
Calculating China-US trade with the 145% tariffs and assuming trade elasticity of 0.65 using the simply formula of (1-0.6*1.45)*$438.9 billion = $25.2 billion is definitely too simple of a model. This is a linear model and while it is reasonable to model things linearly for small changes (e.g. the effect of a 2% tariff is probably double the effect of a 1% tariff), it's definitely wrong for large changes.
I'm not saying it's easy to predict what the actual value would be (you'd probably need to look at trade category by category to understand substitutability), but this is definitely too simple an approach and I wouldn't take this calculation as literally as the article text seems to suggest you are.
I think that’s a completely fair comment. My main point is ultimately that with tariffs at the levels proposed you are going to see a lot of trade diversion which will create pressures elsewhere, but you’re right that this is very oversimplified.
Think we may need to source a darker shade of orange felt tip for you Sam
I knew about secondary sanctions, but I had never heard about "secondary tariffs" until I saw the March 25, 2025 EO concerning Venezuelan oil. The EO states that any country seeking to export goods to the US will be subject to a 25% additional tariff if they also import oil from Venezuela.
To apply secondary tariffs on countries exporting goods to the USA which also imports Chinese low-value goods would be quite stunning, especially since the 25% additional tariffs are not goods or origin specific.
Interesting read. I’ve been digging into what’s really motivating Trump because that’s super important. For anyone who wants a deep dive into what I think are the motives check out my newsletter: https://louisstavropoulos.substack.com/p/trade-tensions-and-portfolio-protection
Calculating China-US trade with the 145% tariffs and assuming trade elasticity of 0.65 using the simply formula of (1-0.6*1.45)*$438.9 billion = $25.2 billion is definitely too simple of a model. This is a linear model and while it is reasonable to model things linearly for small changes (e.g. the effect of a 2% tariff is probably double the effect of a 1% tariff), it's definitely wrong for large changes.
I'm not saying it's easy to predict what the actual value would be (you'd probably need to look at trade category by category to understand substitutability), but this is definitely too simple an approach and I wouldn't take this calculation as literally as the article text seems to suggest you are.
I think that’s a completely fair comment. My main point is ultimately that with tariffs at the levels proposed you are going to see a lot of trade diversion which will create pressures elsewhere, but you’re right that this is very oversimplified.