LONDON – The US heavily taxed imports for much of its history before largely abandoning the policy, beginning in the 1930s, as government leaders embraced the idea of free trade.
High tariffs made a comeback during the 2017-2021 presidency of Donald Trump, who adopted them in an effort to revitalise American manufacturing and to counter what the United States regards as China’s unfair trade practices. Trump’s successor Joe Biden kept the trend going.
Now, Trump, who on Nov 5 won his bid for a second term in the White House, says he will dramatically increase taxes on imports and put them at the centre of his economic policy.
His pledge has reignited a debate over whether tariffs are a valuable tool for competing with economic rivals or a policy weapon with a chequered past that is likely to backfire.
What is Trump proposing?
He is proposed raising tariffs to 60 per cent for goods imported from China and to 20 per cent for those brought in from the rest of the world.
The US currently imposes tariffs in those ranges and higher on select categories of goods, but to levy them at that level across the board would be a radical change.
Currently, for imported industrial goods, which make up 94 per cent of US merchandise imports by value, the country has a trade-weighted average tariff rate of 2 per cent, according to the Office of the US Trade Representative. Half of industrial goods enter the US duty free.
According to a Bloomberg Economics analysis released in October, Trump’s tariff proposals “would bring average US levies above 20 per cent, a level not seen since the early 20th century.”
Could Trump raise tariffs unilaterally?
Yes, although in some cases it would be necessary to