this post was submitted on 03 Apr 2025
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The numbers come from an overly simple way to level out trade deficits.
So if I sell you $100 in goods and you sell me $120 dollars in goods, I'm "losing" money, therefore 20% tariff (tax to sell me something). In reality, you're going to increase your prices and sell me $140 worth of the same stuff.
All the AIs did was expand this to a global scale, what's insane to me is that the math adds up. It doesn't take an AI to do this though, some economics undergrad could come up with the same thing. Understanding the underlying methodology shows how it completely lacks nuance or understanding of how the world really works.
Too bad it's based on wrong assumptions. It's not the arithmetic that's the issue, it's the model.
And if they did it on a test, they'd flunk it.
Yeah, it fails to understand the rationale for comparative advantage (there's a reason Ecuador exports more bananas than Norway does), and it also fails to consider the balance-of-payments effect of things like foreign direct investment (which looks zero-sum when it first takes place but means the profits are outflows from that point on, unless the foreign investors choose to reinvest them).
Also I don't think the idiots who came up with that table know the difference between a current account balance and balance of trade.
Isn't his weird formula the trade defecit percentage + Tariffs from that country divided by two?
Yes, it really is that stupid.