讀後心得

Recently, Trump proposed reciprocal tariffs to improve the trade deficit. Taiwan's tax rate is 32%, and currently, 70% of Taiwan's exports to the United States are tariff-free, which has a significant impact. Additionally, Trump has set different tax rates for countries like Japan, China, and the European Union. According to his calculation formula, if the United States wishes to eliminate a trade deficit with a certain country, it must raise tariffs. For example, concerning China, the U.S. deficit would require raising the tax rate to 67%, but in a show of mercy, it is set at 34%. Trump's formula emphasizes reducing imports but overlooks the importance of increasing exports in reducing the deficit. Although the high tariffs of certain countries affect American businesses, he should consider adopting the Swiss formula to more effectively lower high tariffs rather than solely relying on reciprocal tariffs. The Swiss formula can significantly reduce tariffs above a certain coefficient, thereby improving the trade environment, but the final discussions failed to reach a consensus.

Recently, Trump proposed a policy of reciprocal tariffs to improve the trade deficit, setting Taiwan's rate at 32%. Compared to the current duty-free treatment that most of our exports to the United States enjoy, this undoubtedly represents a shock. Moreover, countries such as Japan, mainland China, and the European Union have also been assigned different tariff rates, and even the UK, Singapore, and Australia, which export more than the United States, have to pay a 10% tariff.

Trump used a formula to justify the taxation, where the numerator is the U.S. deficit with the relevant countries, and the denominator is the reduction in import demand caused by a 1% increase in the tariff rate. If a 1% increase in tariffs can reduce imports by $1 billion and the deficit is $30 billion, this means that the tariff rate for that country needs to be raised to 30% to balance the deficit. The Office of the United States Trade Representative (USTR) established two parameters, namely, the price effect of tariffs and the price elasticity of demand, linking the adjustment of rates to changes in import demand.

According to U.S. data, the price effect of tariffs is 0.25, while the demand elasticity is -4. Since -4 multiplied by 0.25 equals -1, this means that for every 1% increase in tariffs, there will be a 1% reduction in import demand. For example, in the case of mainland China, the U.S. deficit with China in 2024 is $295.4 billion, while the amount imported from China is $438.9 billion. Each 1% increase in tariffs would reduce imports by $4.389 billion, resulting in a calculation of 67, which indicates that the tariff rate needs to be set at 67% to eliminate the deficit. To show mercy, the final reciprocal tariff rate for mainland China is set at 34%, and other countries are handled similarly.

However, this policy approach focuses solely on reducing imports and is not comprehensive enough. The causes of trade deficits are not only related to imports but also closely linked to exports. If exports can grow, the deficit will naturally decrease. The U.S. deficit has hit new highs year after year, and the root of the problem lies in its insufficient export capability; merely raising import tariffs and forming a formula to justify it is indeed perplexing.

Trump also pointed out that high tariffs on certain products in some countries do affect American businesses' export interests; however, the U.S. faces the same issue. The World Trade Organization (WTO) proposed the Swiss formula during the Doha Round negotiations to reveal hidden high tariffs and achieve significant reductions. The formula selects a coefficient, multiplies it by the current tariff rate, and then divides it by the sum of the two, resulting in a final number that is inevitably lower than the coefficient itself.

If the coefficient is set at 10%, then all product tariffs would be reduced to below 10%. For instance, if the coefficient is 10%, the 40.9% tariff on South African clothing would adjust down to 8.0%; while the 11.5% tariff on EU fish products would drop to 5.3%. In 2005, the WTO decided to adopt the Swiss formula to reduce tariffs on non-agricultural products at the ministerial meeting in Hong Kong, but the level of the coefficient and whether to allow developed and developing countries to use different coefficients remained unresolved after years of negotiations.

If at that time it was foreseen that Trump would propose this crazy formula, the WTO members should have stood up and applauded the discussion of the Swiss formula. Perhaps after the panic caused by reciprocal tariffs, the Swiss formula would be a better choice.

■ The Swiss formula is t1= (a*t0)/(a+t0), regardless of how high t0 is, the adjusted t1 must be less than the coefficient a. When the coefficient is set at 10%, then all product tariffs after adjustment must be below 10%; if set at 5%, then the rate will also be below 5%. This formula results in smaller reductions for low-tariff items but a significant drop for high-tariff items, thus the Swiss formula is called a "non-linear mathematical formula."

■ The Doha Round negotiations originally aimed to leverage the Swiss formula to bring high-tariff products from various countries down to a lower level at once, to promote a freer trade environment. There have been suggestions to lower tariffs on products from developed countries to 8% to 9%, while reducing tariffs for developing countries by 19% to 23%, but developing countries believed this reduction pressure was too great, and ultimately no consensus was reached.