CNN  — 

President Donald Trump unveiled sweeping 10% tariffs on all imports to the United States Wednesday. About 60 countries or trading blocs will see even higher rates in an escalating move that is poised to initiate a global trade war.

Many major US trading partners will be hit hard by Trump’s so-called reciprocal tariffs.

China is levied with a 34% rate, which is additional to the existing 20% duties on all Chinese imports to the United States, while the European Union gets 20%.

China and the EU accounted for around a quarter of US total imports in 2024 and are in the top three suppliers of US imports along with Mexico, according to US Census Bureau data.

Many Southeast Asian countries will also be heavily affected. Among them, Vietnam, Laos and Cambodia will see unprecedented rates of 46% to 49%. These are countries that Americans rely on for consumer goods, machinery and electrical goods and textiles.

Mexico and Canada are exempted from the list. But the existing 25% tariff on their exports to the US that don’t comply with the United States-Mexico-Canada Agreement remains in place, except for Canadian energy and potash, which is tariffed at 10%.

The additional country-specific reciprocal tariffs also won’t add on to product-specific tariffs that have been announced on steel, aluminum and autos.

Rates applied are not reciprocal and don’t account for actual tariff rates

Trump pitched the tariff as “reciprocal,” where the rates would be based on the tariff rate that trading partners charge the United States when factoring in currency manipulation and other trade barriers. But that is not the case.

Instead the reciprocal rates follow a simple formula: the country’s trade deficit divided by its exports to the United States, then halved. The calculation was first suggested by journalist James Surowiecki in a post on X and backed up by Wall Street analysts.

For example, America’s trade deficit with China in 2024 was $295.4 billion, and the United States imported $439.9 billion worth of Chinese goods. That means China’s trade surplus with the United States was 67% of the value of its exports — a value the Trump administration labeled as “tariff charged to USA.”

Half of that 67% rate is the 34% reciprocal tariff rate set for China.

This means that tariffs from other countries were not really factored into the calculation. Instead, the measures target countries with large trade surpluses relative to their exports to the United States, noted Mike O’Rourke, chief marketing strategist at Jones Trading, in a note to investors Wednesday.

This is how Lesotho, a country with which the United States has a $234 million trade deficit — nowhere near its $295 billion deficit with China — ended up with the steepest 50% reciprocal rate.

The baseline 10% tariff will go into effect on Saturday, and any higher tariffs will go into effect on April 9.