AIAAIC - White House appears to use AI to calculate tariff rates

White House appears to use AI to calculate tariff rates

Occurred: April 2025

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Trade tariff rates set by the Trump administration sparked controversy due to their apparent reliance on AI-generated formulas and flawed economic assumptions.

What happened

President Donald Trump announced sweeping "reciprocal tariffs," including a baseline 10 percent rate and higher tariffs for 60+ nations, calculated using a simplistic formula based on trade deficits divided by imports and halved.

Observers noted striking similarities between these calculations and outputs from generative AI models like ChatGPT, Claude, Gemini, and Grok, raising concerns about the accuracy and methodology used.

Economists criticised the formula for its failure to account for global trade complexities, potentially leading to inflated tariffs that could disrupt international markets, raise consumer costs, and provoke retaliatory measures.

Why it happened

The US administration appears to have adopted a straightforward approach - possibly influenced by generative AI tools - to address perceived trade imbalances quickly.

The method adopted oversimplifies the intricate dynamics of international trade, such as elasticity of prices, supply chains, and existing tariff schedules.

Critics speculate that the reliance on AI or similar calculations reflects either a misunderstanding of economic principles or a deliberate attempt to present inflated figures for political purposes.

What it means

Directly impacted nations may face unjustified tariff hikes, straining diplomatic relations and potentially triggering trade wars. At the time of writing, trillions of dollars have been wiped off capital markets, including those in the US.

In addition, US consumers and businesses are likely to bear higher costs for imported goods, exacerbating inflationary pressures. It is considered likely that job losses will also be widespread.

The incident highlights the risks of using AI in policymaking without proper oversight or expertise, raising broader concerns about the ethics and role of technology in shaping critical economic decisions.

System 🤖

Documents 📃

United States Trade Representative. Reciprocal Tariff Calculations

Operator:
Developer: Anthropic; Google; OpenAI; xAI
Country: Algeria; Angola; Bangladesh; Bosnia and Herzegovina; Botswana; Brunei; Cambodia; Cameroon; Chad; China; Côte d'Ivoire; Democratic Republic of the Congo; Equatorial Guinea; European Union; Falkland Islands; Fiji; Guyana; India; Indonesia; Iraq; Israel; Japan; Jordan; Kazakhstan; Laos; Lesotho; Libya; Liechtenstein; Madagascar; Malawi; Malaysia; Mauritius; Moldova; Mozambique; Myanmar; Namibia; Nauru; Nicaragua; Nigeria; North Macedonia; Norway; Pakistan; Philippines; Serbia; South Africa; South Korea; Sri Lanka; Switzerland; Syria; Taiwan; Thailand; Tunisia; USA; Vanuatu; Venezuela; Vietnam; Zambia; Zimbabwe
Sector: Multiple; Politics
Purpose: Calculate tariff rates
Technology: Generative AI; Machine learning
Issue: Accountability; Accuracy/reliability; Employment; Transparency

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Type: Issue
Published: April 2025