Unpacking the Fallout from “Liberation Day”
April 10, 2025
Author’s Note: So once again the news is moving fast. I wrote this article yesterday, first as part of the Weekly Roundup, and then throwing up my hands in despair at the amount to cover I broke it off as a separate article for this morning. Then, last night (Moldova time) Donald Trump blinked and suspended his so-called reciprocal tariffs for 90 days. The NYTimes and others report that his advisors managed to convince him that serious turmoil in the bond markets meant that the US was heading towards a catastrophic financial crisis. As of this morning Trump has maintained all the tariffs (125% as of writing) on China while reducing all (or most?) other tariffs to 10% globally.
This article deals with the original tariff numbers for Moldova and what it means for the prospect of negotiations between Moldova and the United States. This is still relevant because the higher rates are only “paused” and because the underlying factors around negotiation have not changed. So with that update, please enjoy this article about the fallout from “Liberation Day” in Moldova.
In the days since the United States declared a global trade war, levying tariffs on every country as well as many penguins, Moldova has scrambled to understand what happened - and what it all means. Initially multiple articles speculated about whether or not Trump might be really angry at Moldova. They cited Trump’s singling out USAID spending in Moldova during last month’s address to congress as well as the fact that he levied higher tariffs on Moldova than any other country in the region.
Once there was a realization that the tariff rates had nothing to do with reciprocity and were based on a crude calculation of trade deficits, a number of new questions emerged - namely, how does this math actually work?
Unpacking the Numbers
As I explained in last week’s article, the US calculated the tariffs based on 2024 government data about the US-Moldova trade relationship. At the same time, Moldova does not have the same numbers - or even remotely similar numbers about the country’s trade with the US. Here’s a summary of the numbers from each country’s national statistics:
An analysis from think tank Expert-Grup explained the differences here based on how trade is calculated in a globalized world. Both the US and Moldova calculate their imports and exports using the same UN approved methodology - so it’s not about funny bookkeeping. The key is that when calculating trade, countries report their imports based on the "country of origin" of the goods being imported. But when they calculate their exports they report the "country of last known destination." Basically, when you import something you know where it came from, but when you export something you might not know where it will eventually wind up.
This means that a clearer picture of US-Moldova trade could be found, assuming that you trust both countries’ numbers, from comparing their reported imports from the other. That chart looks like this:
If we took these trade numbers, and plugged them into the Trump admin’s (deeply flawed and arbitrary) tariff calculator here’s what we would get:
That 5% value would then be halved resulting in 2.5% tariffs between the US and Moldova. Or, more specifically, Moldova would be included in the lowest tier of 10%.
Put simply, the US and Moldova have a fairly balanced trade relationship.
The Implications of Bad Math
Running through these formulas is not an attempt to say “ok, Moldova can simply present Trump with better math and negotiate a deal!” Small countries like Moldova probably never had a chance at real negotiations in the first place. What this math means though is that the entire conversation is starting from a place outside of reality - and there isn’t really much of a path back.
For example, The EU has offered to drop tariffs to zero on various goods if the US will reciprocate. Trump answered, no - and is demanding that the EU close their alleged $350 billion USD trade gap with the US in order to get the tariffs removed. Setting aside the fact that this supposed trade gap does not include services, the Moldova example shows just how impossible this is.
The United States says that there is an $88 million dollar trade imbalance between the US and Moldova while the numbers above show that it’s closer to $7 million. So even if Moldova wanted to reorient some purchasing (somehow) to close the real trade gap, it is extremely unlikely that the country can close the fictitious one. Math problems like this will be plaguing all countries that are trying to figure out how to placate Trump.
Reactions and Impact Analysis
Following “Liberation Day” Prime Minister Recean sought to calm worries by noting that only 2.5% of Moldova’s exports go to the US while "Three quarters of Moldovan exports go to EU countries, Great Britain, Iceland, Liechtenstein, Norway and Switzerland." He stated that the government will propose measures to support businesses that will be directly impacted and will continue to pursue a strategic relationship with the United States.
There are some questions about that 2.5% number though. Expert-Grup is now calculating that if you take into account goods exported from Moldova that indirectly wind up in America the United States accounts for around 5% of the country’s exports. That’s not huge, but not nothing either. In their recent report they write:
"Therefore, the increase in customs duties to a general tariff of 31% will have a major impact on about 5% of total Moldovan exports (the share of Moldovan exports that had the US as their final destination and after excluding classic re-exports from the country's total exports). Moreover, given that a large part of exports are not direct transactions, but through EU partners, who are limited partners in lohn operations (in the case of textiles, electrical equipment, etc.), a proportional decrease in exports to EU countries can be anticipated (the latter also having a 20% reciprocity tariff applied by the US)"
In the later part of that paragraph they identify the bigger problem for Moldova, namely EU-US relations. Marin Gospodarenko, Executive Director of the Centrul Analitic Economica explained this saying:
"We import a lot of goods from the EU, and if the cost of production there increases, then the price of the products will also increase and there will be imported inflation,"
Basically, if a US-EU trade war gets going that is going to cause prices to rise within the EU as vital inputs rise in price or more expensive domestic substitutes are used. This will have a knock-on effect in Moldova that will be larger than the direct impact of US tariffs.
Economic expert Veaceslav Ioniță made one more point about the US-Moldova trade relationship that is important. He noted:
"A few years ago, exports to the United States amounted to about $20 million and have already grown to almost $90 million. Our wings were torn off before we could fly. It would seem that this is a small amount compared to the total export of $3.5 billion, but it was a fast-growing market, it grew in a situation when we had a decline in exports. The structure of exported goods is also important. If, for example, we exported auto parts to the Czech Republic, then to the United States we mainly exported our Moldovan products,"
In essence, he is saying that while the US wasn’t a major market for Moldova it was a rapidly growing one. Further, a lot of Moldova’s exports to the EU are from factories where Moldova’s only real value-add is cheap labor and proximity to larger factories in the Czech Republic or Germany. Losing a market for Moldova’s local products, wine, agriculture products, etc will have a painful impact.
Aside: Did the Moldovan Stock Market Collapse? Nope! But that’s because it isn’t functional. I wrote about how Moldova’s market (doesn’t) work back in 2021 if you’re interested:
The New Moldova-American Relationship
These tariffs are just one more head-spinning development in what is a rapidly shifting bilateral relationship. A few months ago the United States was seen as one of the most critical partners for Moldova and among the most reliable long term relationships that the country had. Now, the US Embassy keeps up a steady drumbeat of terrifying anti-immigration posts and almost every aspect of the official Moldovan-American relationship has been curtailed, canceled or tariffed.
The Moldovan government is continuing to invest in this relationship as they seek to suss out what the United States really wants from it. Moldova opened 2 new consulates in the United States last month in order to expand diplomatic contacts and services for the diaspora there. While in the US for the opening of the consulates Speaker of Parliament Grosu met with officials in DC and later expressed optimism about the restarting of some USAID projects. He would not speak to details saying: “I don't want to give you the names of the projects, but they are good projects, in priority areas” and going on to note that it would be the donor who makes any announcements. This is just one of multiple recent diplomatic trips to the US where officials are trying to better understand the new administration.
The Moldovan government also continues to move forward with a program of preparing to turn over the old Republican Stadium to the US government for the construction of a new embassy1.
Will Moldova Take Deportees?
This week, the Wall Street Journal reported that the US is looking for more countries that are willing to take deportees in addition to El Salvador. In their article they list Moldova alongside Libya, Rwanda, Benin, Eswatini, Mongolia, and Kosovo as potential destinations2. According to this reporting the US is trying to entice these countries with financial or political benefits in order to strike a deal. Clearly, tariff rates might be the kind of thing discussed in such a setting.
Prime Minister Recean has confirmed that they are in talks with the US about receiving deported Moldovan citizens saying:
"The US has asked all partner countries, including the Republic of Moldova, to facilitate the transport and return home of citizens from their countries of origin who have violated the stay regime in the US. Yes, we have confirmed that the Republic of Moldova will facilitate the return of our citizens, not other nationalities, to facilitate their return to the Republic of Moldova,"
If there were talks under way about Moldova taking shipments of rendered3 individuals from the United States, they may have been undermined by the recent scandal in which serial killers were released from the country’s most secure prison. Or maybe not, it isn’t clear that the US administration has any goals other than to clear people out of the US itself.
…and that’s really the crux of the issue. It isn’t really clear what the United States wants from other countries right now. It isn’t clear how you can negotiate trade deals when one side uses made up numbers and nonsensical equations. It isn’t clear what strategy the US is pursuing in trade or foreign affairs. In Moldova, just like the rest of the world, we now live in a place of far greater uncertainty than we did mere months ago - and there’s no indication that that will change anytime soon.
It seems incredibly unlikely that this embassy will be built in the current climate of austerity. As I’ve written before, there is a real question as to whether the United States will maintain any diplomatic presence in Moldova if events stay on the current trajectory.
No, in answer to your question, it does not feel good to be on that list.
I believe in the power of words and it is not honest to say that people were “deported” to a prison in El Salvador. These people had no right of due process, no day in court and nothing other than flimsy accusations and pictures of tattoos to legally justify what happened to them. We have a word for this - rendition.
Moldova’s prisons are notoriously bad. If the country accepted rendered individuals from the United States it would likely be a PR disaster on a completely unheard of scale - and that’s saying something for a country with well known problems in the legal system and its own history of extra-judicial renditions. For all these reasons, as well as EU commitments, it is highly unlikely that Moldova would go down this path.