Donald Trump's Tariff Formula 'Based on an Error'—Conservative Think Tank

 https://www.newsweek.com/donald-trumps-tariff-formula-based-error-conservative-think-tank-2055893

As President Donald Trump's tariffs spark alarm and criticism from across the political spectrum, analysts at conservative think tank the American Enterprise Institute (AEI) believe the formula used to calculate the import levies is "based on an error."

"However, the elasticity of import prices with respect to tariffs should be about one (actually 0.945), not 0.25 as the Trump Administration states. Their mistake is that they base the elasticity on the response of retail prices to tariffs, as opposed to import prices as they should have done. The article they cite by Alberto Cavallo and his coauthors makes this distinction clear. The authors state that 'tariffs [are] passed through almost fully to US import prices,' while finding 'more mixed evidence regarding retail price increases.' It is inconsistent to multiply the elasticity of import demand with respect to import prices by the elasticity of retail prices with respect to tariffs."

Polling analyst Nate Silver shared the report on Friday on X, formerly Twitter, and wrote: "OMG they applied their stupid f***ing formula incorrectly?!?"

In a separate X post, Silver wrote that the administration "dramatically increased the chance of a recession, wiped out trillions on wealth, and delivered a COVID-magnitude shock to the global economy...because they applied their stupid f***ing formula incorrectly?"