Aside: I really hate "elasticity." We already have a term for it, it's just a slope of a linear curve.
Explanation: What the equation is saying is the tariff level they chose is equal to the exports minus imports (trade deficit when less than zero) divided by the slope of the import demand curve (so the relative change in demand for imports in response to a unit change in import prices, the measurement of which is apparently an exercise for the reader) times the slope of the price/tariff curve (so the change in overall prices in response to a unit change in tariff rates) times the value of imports.
Someone calls out the Poindexter who came up with this equation for just setting the tariff rates at the trade deficit divided by total imports, he says no and posts the equation I just went over, then it turns out that they chose 4 for the first elasticity and 0.25 for the second (how? Divine inspiration?), so the elasticities exactly cancel each other out and we're left with trade deficit divided by value of imports.
So essentially what they're assuming they can do is charge US buyers of imported goods (ie everyone) the balance of the trade deficit and that'll fix... Something? The base level reasoning is that it makes imported goods more expensive and so offshore manufacturing repatriates, yada yada yada (the challenges associated therewith being obvious), but I have no clue what they're attempting to wrap it up in to make it seem smarter.
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