Trump’s New Tariffs Don’t Add Up — Especially for Moldova

Quick Hit: April 3, 2025

Happy “liberation day” to all those who celebrate. Yesterday Donald Trump announced sweeping “reciprocal” global tariffs and ignited a massive trade war. No countries were spared and materials provided by the White House also indicated tariffs against non-countries including uninhabited islands in the antarctic.

The tariffs were presented as “reciprocal” with one column claiming to show the tariffs a country charges the US (“including currency manipulation and trade barriers”) and the next showing what the new tariffs on that country would be. Globally the minimum new tariff appears to be 10% and the maximum is around 50%. Moldova sits in the higher tier with the US claiming that Moldova levies 61% tariffs on US goods and therefore the US will now levy 31% on Moldova. In most cases the new American tariffs represent 50% of the claimed tariffs against the United States.

This is called a “discounted reciprocal rate” and it is a lie.

Does Moldova Charge 61% Tariffs on American Goods?

No. Economists have been scrambling to make these numbers add up. Nobel Prize Winning Economist Paul Krugman, on his excellent Substack, notes that the EU charges less than a 3% tariff on US goods. Trump claims 39% and uses that number to justify 20% new tariffs. Krugman notes that even if you add in Value Added Tax (VAT), which is not a tariff, you can’t get anywhere near 39%. Similarly the 61% number for Moldova is simply ludicrous.

Unless… it isn’t what they claim it is

James Surowiecki on X appears to have been the first to crack the code and figure out where all of these number come from. His conclusions were subsequently reported out by the NYTimes and later confirmed by the White House.

Basically, what Trump is calling “Tariffs charged to the U.S.A. including currency manipulation and trade barriers” is actually the "Trade Deficit as a Share of Imports." Here’s how it works in the case of Moldova.

In 2024 the US-Moldova trade relationship was the following:

• US Exports to Moldova: $53.6 million

• Moldova Exports to the US: $136.5 million

• US-Moldova Trade Deficit: -$82.9 million

Then you consider the following equation:

\( \frac{\text{US Trade Deficit with Moldova}}{\text{US Imports from Moldova}} = \text{Trade Deficit as a Share of Imports} \)

Plugging in the 2024 numbers above you get a ratio of 60.7%. Trump rounded this up to 61% and then halved it to levy 31% tariffs on Moldova.

Wait… What?!

That’s basically what the whole world is wondering right now. The Trump administration is claiming that these are “reciprocal” tariffs - which is not true. It appears that the design of this whole “liberation day” situation is to attempt to rebalance American trade globally. Critically - we are only talking about goods here not services (when factored in the US has a much more balanced trade relationship with many countries).

The implication of this is pretty startling. Since Trump isn’t matching a 10% tariff against a 10% tariff there isn’t really any way for a country to negotiate a reduction. The tariffs supposedly levied on the US don’t exist - so there’s nothing to reduce. In a game of chicken it’s as if Trump somehow threw the other driver’s steering wheel out the window. Trump can still back down - but other countries have almost no option except to retaliate.

Where does all this leave Moldova?

Lucky for Moldova the overall trade between the countries is quite low. Imports from the US accounted for only 0.5% of total Moldovan imports in 2024, and exports to the US accounted for only 3.8% the same year. At the same time Moldovan exports to the US had steadily been increasing year on year and there were major bilateral efforts at increasing trade. With these 31% tariffs there is likely to be a sharp reduction. For a country already in a recession and struggling to get the economy moving under the shadow of the War in Ukraine, the timing is not great.

While the direct impacts on Moldova might not be huge the indirect impacts will be. If Trump doesn’t back down and cancel the whole “global trade war” thing it will cause a massive realignment in global trade. Moldova’s proximity to the EU and access to EU markets will somewhat tie the country to the block in the coming storm. But how this all plays out is anyone’s guess right now.