Numerous formulas have been proposed to calculate reciprocal tariff levels, with some being more advanced. Although the specific formula used by Trump remains unconfirmed, it shares resemblances with concepts put forward by Peter Navarro.
One basic formula involved dividing a country’s imports by US exports and then halving that figure. This approach overlooked essential factors, such as the US’s limited coffee and banana production and the service surplus.
Tariff Mismatches
Trump indicated a 46% tariff on Vietnam, implying that Vietnam had an approximate 90% tariff on US goods. According to the 2025 National Trade Estimate, Vietnam’s average most-favoured nation tariff rate was 9.4% in 2023.
The rates included 17.1% for agricultural products and 8.1% for non-agricultural products. Most US exports to Vietnam face tariffs of 15% or lower, though food and agricultural products encounter higher rates.
In examining these remarks, it becomes clear that there is a fundamental misalignment between the tariffs suggested by former officials and the actual structure of trade regimes. A formula that takes the US import value and divides it by its exports — and then halves it — presents a simplified and ultimately misleading way to quantify tariff inequality. It gives an inflated sense of imbalance without adjusting for the underlying composition and nature of traded goods.
Vietnam, for example, imports comparatively little in the way of US agricultural output not due to policy alone, but because of structural realities — like climate, consumption habits, and established supply chains. On the export side, Vietnam sends large volumes of electronics, textiles and other manufactured goods to the United States. These goods are low-cost and produced at scale, which naturally skews any direct value comparison. Attempting to match tariffs using numerical ratios thus results in exaggerated figures, such as the suggestion of a 46% reciprocal rate, when the average applied tariff remains under 10%.
Breaking these numbers down, the 17.1% tariff on agricultural products isn’t universally applicable across all items; it’s weighted and plays out differently depending on product category. Items like beef or certain grains may face higher barriers, but others see far less restriction or benefit from bilateral agreements. Meanwhile, non-agricultural products, which dominate Vietnam’s trade volume, sit lower at an average 8.1%. It’s this spectrum of rates that traders must parse through, not a single all-encompassing figure.
Trade Policy Implications
Given this, we know the simplistic use of trade balances or import/export ratios doesn’t capture the nuance of WTO regulations, preferential trade agreements, or production capabilities. While such approaches may be politically attractive, they’re operationally flawed. Current signals suggest that policy rhetoric is outpacing legal or economic feasibility. Therefore, pricing volatility could tick upward, particularly in sectors affected by misinterpretation of upcoming trade policy announcements.
Looking over the next few weeks, it would be reasonable to expect increased headline risk affecting contracts sensitive to trade metrics — energy, grains, some industrial metals. We could see reactionary moves in spreads as traders adjust positions based on tariff rumblings. References to reciprocal tax policies might increase hedging activity on ports of entry and exit, especially in Asia-Pacific pairs.
With this in mind, we’ve been watching implied volatilities in export-heavy markets — some of which are slowly creeping upwards. There’s a clear need to evaluate not just cross-border flows but announcements per se. Corrections to earlier estimates or public climbdowns can whiplash short-dated instruments with limited warning.
Hedging strategies should reflect both policy speculation and its eventual policy abandonment. This is, after all, not the first time we’ve seen numerical inconsistency force a repricing of expected outcomes. If historical patterns hold, demand for options around manufacturing and agri indexes will not only remain, but intensify briefly as participants reassess what has been said versus what can be done.
More broadly, it’s unlikely that multilateral trade norms allow for any sudden imposition of blanket tariffs at these stated levels without direct WTO challenge. That adds another layer of uncertainty — legal delays may stall actual implementation while traders react purely to the noise. It’s a game of forward pricing on the expectation of change, not the substance of it.
Therefore, in the face of these analytical disparities between public statements and actual tariff applications, we would treat upcoming policy remarks as volatility triggers, rather than shifts in hard fundamentals — and trade accordingly.
