Trump’s tariff math hits poor nations—and even penguin islands

Trump's tariff calculation is blunt and mechanical: take the US goods trade deficit with a country, divide it by that country’s exports to the US, and halve the result to produce a “reciprocal” tariff rate—never lower than 10%. The result? A 10% tariff for unpopulated Antarctic islands, and far higher rates for some of the world's poorest nations.

Madagascar, where GDP per capita is just over $500, now faces a 47% tariff on its modest $733 million in annual exports, mostly vanilla, metals, and apparel. Lesotho and Cambodia, with limited capacity to import from the US, are being hit with tariffs near 50%.

“The biggest losers are Africa and Southeast Asia,” said John Denton of the International Chamber of Commerce, warning the formula may further erode fragile economies already struggling with unfavorable trade terms.

Confusion Among Allies

Even wealthier US allies are questioning the math. The European Union is subject to a 20% tariff, four times its average rate, according to the World Trade Organization.

“It’s a colossal inaccuracy,” said Stefano Berni of Italy’s Grana Padano cheese consortium. “It now costs us three times as much to sell cheese in the US than it does for American cheese to enter Europe.”

White House officials defended the formula, claiming it accounts for tariff and non-tariff barriers, though many economists say it's nothing more than a simplistic ratio of trade imbalance, devoid of nuance.

“There is really no methodology there,” said Mary Lovely of the Peterson Institute. “It’s like prescribing medicine based on your weight divided by your age.”

Robert Kahn of Eurasia Group called the resulting figures “nonsense numbers,” warning they send a troubling signal that the U.S. is retreating from global alliances.

Remote Islands, High Tariffs

Trump’s tariff policy has also reached far-flung and often uninhabited places.

Heard Island and McDonald Islands (Australia): Despite no population, infrastructure, or trade ports, these Antarctic islands were assigned a 10% tariff. US data shows mysterious imports totaling $1.4 million in 2022—mostly "machinery."

Heard Island and McDonald Islands are a remote group of islands in the southern Indian Ocean, located about 4,100 kilometres (2,500 miles) south of Australia. These islands are part of the Australian Antarctic Territory, and they are known for their rugged terrain, unique ecosystems, and harsh environment. They are uninhabited, and their primary significance lies in their status as a protected nature reserve, as well as their scientific and environmental importance.

Norfolk Island (Australia): Population 2,188. Hit with a 29% tariff, despite local officials denying any exports to the US or barriers to US goods. “We’re all just confused,” said local administrator George Plant.

Norfolk Island is a small island in the Pacific Ocean, located about 1,400 kilometers (870 miles) east of Australia's east coast. It is an external territory of Australia and is known for its natural beauty, rich history, and unique culture. The island is part of a small group of islands that includes Phillip Island and Nepean Island. Norfolk Island is a popular tourist destination due to its stunning landscapes, diverse wildlife, and historic significance.

The economy of Norfolk Island is largely based on tourism, agriculture, and government services. The island produces a variety of crops, including pumpkins, potatoes, and flowers. Agriculture, however, is limited due to the island's small size and the challenges posed by its isolated location.

Tourism is a major source of income for the island. Norfolk Island’s historical sites, natural beauty, and unique culture attract visitors year-round.

In addition, the island has a small but thriving service sector that supports the tourism industry, including restaurants, accommodations, and souvenir shops. 

Tokelau (New Zealand territory): Population 1,500. A 10% tariff was imposed despite trade volume totaling around $500,000 annually.

Tokelau is a small group of islands in the Pacific Ocean, located about halfway between Hawaii and New Zealand. It is a dependent territory of New Zealand, with no formal government of its own, and it is known for its isolation and unique way of life. Tokelau consists of three atolls—Atafu, Fakaofo, and Nukunonu—each of which has its own distinct community but shares a common cultural and traditional heritage.

Tokelau's economy is primarily subsistence-based, with fishing and agriculture being the main economic activities. The islands are known for their coconut palms, and coconut-related products such as copra (dried coconut meat) are important exports. The islands also grow crops like taro, breadfruit, and bananas. However, due to limited land and resources, Tokelau relies on imports for many goods.

The New Zealand government provides financial assistance to Tokelau, and the territory is largely dependent on remittances from Tokelauan emigrants, as well as foreign aid and international cooperation. Tokelau is not widely known for industrial development, and its economy is largely based on local community activities and small-scale production.

Christmas Island & Cocos (Keeling) Islands 

Each received 10% tariffs. Both have tiny populations and limited economic activity. Christmas Island’s phosphate exports largely go to Asia, and US trade is mostly machinery imports.

The Cocos (Keeling) Islands are a group of islands located in the Indian Ocean, about 2,750 kilometers northwest of Perth, Australia. They are an Australian external territory, and their strategic position lies roughly halfway between Australia and Sri Lanka. The islands are known for their tropical beauty, crystal-clear waters, and coral reefs, and they are sparsely populated, with fewer than 600 residents.

The economy of the Cocos (Keeling) Islands is relatively small, and most trade is focused on local industries such as coconut farming, fishing, and tourism. Coconuts are still grown on the islands, though plantation agriculture is much smaller than it was in the past. The islands’ natural resources, such as coconuts, fish, and marine life, continue to support the local economy.

Fishing, particularly tuna fishing, is another key economic activity. West Island has a small airport that connects to Australia, and tourism, particularly eco-tourism, plays an increasingly important role in the economy. Visitors are drawn to the islands’ pristine environment, and some visit for recreational fishing, diving, and experiencing the unique island lifestyle.

Trade between the Cocos (Keeling) Islands and the United States is relatively minimal, but it is a notable part of the islands' small economy. The US is an important market for certain industries on the islands, including shipbuilding, which involves exports of locally produced materials. The US Census Bureau reports that the Cocos Islands have an annual trade value of about $3 million with the United States. The trade primarily involves items related to the islands’ maritime and shipbuilding activities, such as equipment, supplies, and machinery.

Christmas Island is an Australian external territory located in the Indian Ocean, about 2,600 kilometers northwest of Perth, Australia. It is renowned for its rich biodiversity, unique wildlife, and lush tropical rainforests. The island is one of Australia's most remote territories, and its location makes it a significant ecological site, with many species that are found nowhere else on Earth.

The economy of Christmas Island has historically been centered around phosphate mining. The island is one of the world's largest producers of phosphate, which is used primarily in fertilizers. The phosphate mining industry has been a major economic driver for the island, although the industry has been facing challenges in recent years due to declining reserves and fluctuating global demand.

In addition to phosphate mining, tourism is an important contributor to the island's economy. The island's natural beauty, unique wildlife, and clear waters attract eco-tourists, divers, and nature enthusiasts. However, the island’s remote location and limited infrastructure make tourism relatively small-scale.

 

Svalbard and Jan Mayen (Norway)

Combined under one 10% tariff. Svalbard has 2,500 residents; Jan Mayen is uninhabited except for military staff. US imports from these territories are negligible.

Svalbard and Jan Mayen are two separate territories of Norway located in the Arctic and North Atlantic regions, respectively. Both are remote and sparsely populated, with distinct geographical and political characteristics.

Svalbard is an archipelago situated between mainland Norway and the North Pole, about 1,000 kilometres from Norway's northern coast. It consists of several islands, with Spitsbergen being the largest and most populated island. Svalbard has a population of around 2,500 people, mostly living in the main settlement of Longyearbyen. The region is known for its harsh Arctic climate, glaciers, and unique wildlife, including polar bears and Arctic foxes.

Svalbard is governed by the Svalbard Treaty, which grants citizens of signatory countries the right to live and work there, but it is not part of the European Union. Norway retains sovereignty over the territory but must ensure equal treatment of citizens from all countries. Svalbard has a special status, with no visa requirements, a tax-free economy, and relatively low taxes.

The economy of Svalbard is primarily based on research, tourism, mining, and fisheries. The region hosts several international research stations, particularly focused on climate change and Arctic studies. The coal mining industry once dominated the economy, but it has declined in recent years due to economic challenges and environmental concerns.

Jan Mayen is a volcanic island located in the Arctic Ocean, approximately 1,100 kilometres northeast of Iceland and 500 kilometres from the coast of Greenland. The island has no permanent population, but it is home to a Norwegian military and meteorological research station. Jan Mayen is known for its extreme isolation and harsh climate, with icy conditions and frequent storms.

The island is primarily used for military and scientific purposes. The Norwegian Armed Forces maintain a small station on the island, which is used for monitoring air traffic and conducting weather research. Jan Mayen's only notable feature is the Beerenberg volcano, the northernmost active volcano on Earth, which rises 2,277 meters above sea level.

Despite its lack of a civilian population, Jan Mayen is a territory of strategic importance to Norway due to its location in the Arctic, a region of growing geopolitical significance due to potential resource extraction and maritime routes. The island is also a site for scientific research on climate change and Arctic ecosystems.

Both Svalbard and Jan Mayen have limited economic activities due to their remote locations and small populations. Svalbard's economy is mainly driven by research, tourism, and fishing, while Jan Mayen's economy is focused on military and meteorological functions.

In terms of trade, both territories have minimal exchanges with other countries. However, Norway maintains sovereignty over both Svalbard and Jan Mayen and conducts trade on their behalf. Svalbard, with its research infrastructure and mining activities, may see some trade, while Jan Mayen remains largely isolated with no direct trade relations due to its lack of permanent inhabitants and infrastructure.

British Indian Ocean Territory: Hosts the joint US-UK military base on Diego Garcia. Receives US military exports but little else. Still, a 10% tariff was imposed.

The British Indian Ocean Territory (BIOT) is a British Overseas Territory located in the central Indian Ocean, approximately halfway between Africa and Indonesia. It consists of over 1,000 islands, most of which are uninhabited. The total area of the territory is about 60 square kilometres. The largest and most significant island in the territory is Diego Garcia, which hosts a joint British–U.S. military base.

Diego Garcia, the only inhabited island in the territory, serves as a strategic military base for the United Kingdom and the United States. The base is used for a variety of military operations, including naval and air force activities, and plays a key role in the region's security. There is no permanent civilian population on Diego Garcia, as the islands are primarily used for military purposes. However, it does host about 4,000 military personnel and support staff.

The British Indian Ocean Territory has minimal trade with other countries, as it is primarily a military outpost. US government data indicates that the US exports millions of dollars' worth of goods to the territory, most likely military equipment. Imports from the British Indian Ocean Territory are minimal, as there is little civilian production or infrastructure.

Falkland Islands

The Falkland Islands are a British Overseas Territory located in the South Atlantic Ocean, about 480 kilometers from the coast of Argentina. The islands consist of two main islands, East Falkland and West Falkland, along with over 700 smaller islands. The total land area is around 12,200 square kilometres, and the population is approximately 3,600 people. The capital city is Stanley, located on East Falkland.

The Falkland Islands' economy relies heavily on fishing, agriculture (especially wool production from sheep farming), and tourism. Fishing, particularly the harvesting of squid and finfish, is the most significant contributor to the territory's economy. The islands also export wool, which is produced from sheep farming. In recent years, tourism has been growing, with visitors attracted by the islands' wildlife, such as penguins and sea lions, and their historical significance, especially in relation to the Falklands War of 1982.

The US has a long history of trade with the Falkland Islands, but the relationship is generally characterized by a trade deficit, meaning the US imports more from the islands than it exports. In the most recent year, US imports from the Falklands exceeded exports by around $18.7 million, which was a decrease from the previous year.

The US has imposed a retaliatory tariff of 41% on goods from the Falkland Islands. This action was in response to claims that the Falklands imposed a highly effective tax on US goods, reportedly around 82%. The tariffs have raised questions, particularly since the US imports mainly seafood and wool from the islands, while the exports are usually low-value goods.

Saint Pierre and Miquelon

Saint Pierre and Miquelon is a French overseas territory located in the North Atlantic Ocean, near the coast of Canada. The area spans approximately 242 square kilometers and has a population of around 5,700 people, with the capital city being Saint-Pierre. The primary language spoken is French, and the currency used is the Euro.

The economy of Saint Pierre and Miquelon is largely based on fishing, particularly cold-water species such as cod and other fish. Tourism also plays a significant role in the local economy. However, trade with the United States is relatively minimal, with imports from the territory totaling approximately $3.4 million in 2024. According to US data, Saint Pierre and Miquelon impose a 99% tariff on US goods, which led to a retaliatory 50% tariff imposed by the United States. Local authorities have denied imposing such high tariffs, stating that there are no significant trade barriers.

The territory maintains stronger trade relations with Canada and France, with exports primarily consisting of seafood products. Imports mainly include fuel and consumer goods.

 

 

What’s the Endgame?

The administration hasn’t clearly identified what specific changes in foreign trade policies would reduce these tariffs, raising doubts about whether they’re intended as negotiating leverage or simply punitive.

Stephen Adams, a former European trade adviser, said the policy “raises the practical question of whether there’s any scope to negotiate this away.”

So far, there’s no clear path to appeal or explanation for how penguin-inhabited glaciers and cash-strapped countries ended up on Washington’s economic hit list.