Half Julius Caesar, half Mattress Mick, Donald Trump has just declared economic war on the rest of the world, but what exactly did he say? Whisper it quietly, but in Ireland, given how bad things could have been, there must be a collective sigh of relief. At the start of the week there was a fear, not unreasonable, that tariffs might be applied to individual countries based on their specific trade surplus with the United States – a measure, in Trump’s head at least, that underlines the great rip-off America has been subjected to. Had this been the case, Ireland would have been destroyed because, per head of population, we have the world’s largest trade surplus with the US. [ What ‘dark and damaging scenarios’ could economies face in Ireland and worldwide?Opens in new window ] [ Donald Trump is nothing if not a showman but his instincts deserted him on ‘Liberation Day’Opens in new window ] Our trade surplus with the US is about $50 billion (€45 billion), or $73 billion of exports less $23 billion of imports. If you divide by our five-odd million population, this implies a trade surplus with the US of about $10,000 per head. In comparison, the Chinese trade surplus with the US is about $220 a head. To a trained economist these figures might mean little, but to a member of the Maga movement these are a red rag to a bull and yet more evidence of a criminal Irish unfairness against the average American Joe Six-Pack. Speaking of numbers, how did the White House arrive at this never-seen-before figure – the European Union’s 39 per cent tariff against the US? Most people are scratching their heads. We know that the actual average tariff rate between the EU and the US is about 2.5 per cent. So where did 39 per cent come from? It was from a formula that wouldn’t have passed on an Ordinary Level Leaving Certificate economics paper. Yes, you read this right, the most powerful economy in the world is trying to destroy the international economy based on a formula that wouldn’t even wash in a secondary-school economics examination. The country with the most Nobel Prize-winners in economics is calculating “protectionism” as the amount of exports to the US minus the amount of imports divided by that amount of exports. For the EU, we know that the US exports $370 billion but imports $605 billion, meaning a trade deficit of $235 billion. If you divide that $235 billion by $605 billion you get a figure of .39, which is where the magic 39 per cent comes from. This is economic nonsense, but it is what America is basing its entire trade policy on. Trump takes the 39 per cent figure, halves it as an act of his Caesarean munificence and, hey presto, we get a 20 per cent tariff. Now consider had Ireland been isolated rather than bundled with the rest of the EU. Ireland’s $50 billion trade surplus divided by our exports of $73 billion would have led to a number of 0.68 or 68 per cent, leading to tariffs of 34 per cent on everything made in Ireland destined for the US. Let’s count our blessings. What’s likely to happen? Without diminishing the severity of what has just happened, let’s consider the most likely outcome. Given the arbitrary nature of the tariff figure, it is highly likely that this is an opening gambit in a long negotiation that will see the average tariff figure come down. It means that prices in America will go up pretty swiftly because tariffs are collected by the importer of goods when they take delivery of those goods at the border. The onus is on the American importer to pay American tax, not on the foreign exporters. In all probability good customers, people and companies that have been working with each other for years might try to split the cost. This is how business is done. [ ‘The prices are already high for Irish goods here’: Irish-Americans brace themselves for tariffs’ impactOpens in new window ] Of course for multi-nationals that are largely trading with themselves, tariffs will require a bit of imaginative accountancy, at which we know they are expert. The next question is whether the EU reacts to the US immediately. Given that trade is two-way and Ireland is a trading entrepôt with goods regularly coming in and out consistently, we would prefer that the EU takes a pause and sits on its hands, at least initially. The US strategy might be to pick off the weaker and more exposed members of the EU in the months ahead by isolating, for example, Irish pharma, Italian wines, French luxury. The point is that any administration that makes up its own numbers to justify its actions isn’t in the business of dealing fairly and squarely, but is deploying voodoo economics as evidence of a wrong, rather than evidence of a fact. Such a government can do anything. The most important calculation will be whether Donald Trump proves to be transactional or transformational. If he reverts to type and this is a deal-making scenario where he can get a win, sell it to the American people and move on, then we are in for a short-term period of jitters. A transformational Trump has the stomach for the pain that America will have to go through as it rebuilds its industry. This could take time, but if Maga is a movement and not a slogan, a generational shift where Trump passes the baton to JD Vance, then this means that the world has entered a new era.