The Trump tariffs are a series of tariffs imposed during the presidency of Donald Trump. In January 2018, Trump imposed tariffs on solar panels and washing machines,[1] and later the same year, he imposed tariffs on steel and aluminum.[2][3] On June 1, 2018, the United States imposed a 25% tariff on imports of steel, and a 10% tariff on aluminum, on the European Union, Canada, and Mexico.[3]
The tariffs angered trading partners, who are implemented retaliatory tariffs on U.S. goods.[4] Canadaimposed matching retaliatory on July 1, 2018.[5][6] China accused the U.S. of starting a trade war[7]and on July 6[8] implemented tariffs equivalent to the $34 billion tariff imposed on it by the U.S. Indiaplans to recoup trade penalties of $241 million on $1.2 billion worth of Indian steel and aluminium.[9]Other countries, such as Australia, are concerned of the consequences of a trade war.[8]
Morgan Stanley estimated that Trump's tariffs on steel, aluminum, washing machines, and solar panels, as of March 2018, covered 4.1% of U.S. imports.[10] The tariffs measures were poorly received by the vast majority of economists; almost 80% of 60 economists surveyed by Reutersbelieved that tariffs on steel and aluminum imports would be a net harm to the U.S. economy, with the rest believing that the tariffs would have little or no effect; none of the economists surveyed believed that the tariffs would benefit the U.S. economy.[11]
Contents
Background
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Average tariff rates (France, UK, US)
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Average Tariff Rates in US (1821–2016)
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U.S. Trade Balance and Trade Policy (1895–2015)
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Real GDP, Real Wages and Trade Policy in the US (1947–2014)
U.S. Balance of Trade Deficit by Country (2014)
Average Tariff Rates on manufactured products
During the 2016 presidential campaign, Trump repeatedly favored policy proposals that re-negotiate trade agreements for the United States. During a meeting with the New York Times Editorial Board in January 2016, Trump said that he would tax Chinese imports into the United States by 45%.[12] Trump frequently criticized the North American Free Trade Agreement calling it "the worst trade deal the U.S. has ever signed."[13] He also called Trans-Pacific Partnership "the death blow for American manufacturing" and that it would "put the interests of foreign countries above our own."[14]
On November 21, 2016, in a video message, Trump introduced an economic strategy of "putting America first", stating that he would negotiate "fair, bilateral trade deals that bring jobs and industry back onto American shores." On January 23, 2017, three days after becoming president, Trump withdrew the United States from the politically divisive Trans-Pacific Partnership believing that the agreement would "undermine" the U.S. economy and sovereignty.[15][16][17][18]
Trump has also indicated desire to end the North American Free Trade Agreement with Canada and Mexico. His administration has been in the process of renegotiating the terms of the agreement. Although vague on the exact terms he seeks in a renegotiated NAFTA, Trump threatened to withdraw from it if negotiations fail.[19] He has specifically criticized the Ford Motor Co.,[20] Carrier Corporation,[20] and Mondelez International for having operations based in Mexico.[20][21][22] In August 2015, in response to Oreo maker Mondelez International's announcement that it would move manufacturing to Mexico, Trump said that he would boycott Oreos.[22]
Similar to his approach to trade deals, Trump also pledged, as part of the Contract with the American Voter, to impose tariffs to discourage companies from laying off workers or relocating to other countries, through an "End the Offshoring Act".[23][24][25] No such act has been introduced in Congress,[26][27][28]but Trump has moved to impose tariffs on solar panels, washing machines, steel, and aluminum. The enforcement of the tariffs falls primarily within the purview of Department of Commerce and Office of the United States Trade Representative.
Steel and aluminum
On March 1, 2018 Trump announced his intention to impose a 25% tariff on steel and a 10% tariff on aluminum imports.[29] In a tweet the next day, Trump asserted that "Trade wars are good, and easy to win."[30] On March 8, he signed an order to impose the tariffs effective after 15 days.[2] Canada and Mexico were temporarily exempted from the order under a carve-out provision, but became subject to the steel and aluminium tariffs later in an announcement on May 31, 2018 that included applying the same tariffs to the European Union.[2][31][32] On March 28, 2018 South Korea became the first country to be granted a permanent exemption from the steel tariff,[33][34] followed by Australia, Brazil, and Argentina on May 2, 2018.[35]
Legal basis and challenges
The legal basis cited in Trump's tariff order is Section 232 of the Trade Expansion Act of 1962 which under certain circumstances allows the president to impose tariffs based on the recommendation from the U.S. Secretary of Commerce if "an article is being imported into the United States in such quantities or under such circumstances as to threaten or impair the national security."[36] This section is rarely used,[36] and has never been invoked since the World Trade Organization was established in 1995.[37]
China initiated a WTO complaint against the U.S. steel and aluminum tariffs on April 9, 2018.[38] The EU opened a similar WTO case on June 1, 2018.[39]
On June 9, 2018, Trump tweeted a statement addressing Prime Minister of Canada Justin Trudeau in which he said that American tariffs targeting Canada "are in response to his [tariffs] of 270% on dairy!"[40] In the tweet, Trump did not cite national security, the legal basis for implementing the tariff.[41][42]
Economic and trade analysis
A survey of leading economists by the Initiative on Global Markets at the University of Chicago Booth School of Business showed a consensus that imposing new US tariffs on steel and aluminum will not improve Americans’ welfare.[43] Economists say that the tariffs will lead to more harm than gains, as the price for steel increases, which will harm consumers and Americans working in manufacturing industries that use steel (these jobs outnumber those who work in steel-producing sectors by 80 to 1).[44][45][46] The big winners of the tariffs are some American steel- and aluminum-producing industries; some of the producers (especially small- and middle-sized ones) who are reliant on foreign inputs may struggle as a result of the tariffs.[46][47][48] A study of the proposal indicated that it would lead to an estimated loss of 146,000 jobs.[49] Studies of the 2002 steel tariffs enacted by the Bush administration show that they caused more job losses than job gains.[44] Jobs losses could be even greater if other countries retaliate against the United States with their own tariffs on various American products.[50]
Scholars warned that the Trump administration's use of "national security" rationales[51] (these have not been commonly used by past administrations) for the tariffs could undermine the international trading order, as other states could use the same rationales for their own tariffs.[44][52][46][53] The WTO allows states to take actions necessary to ensure their national security, but this provision has been sparsely used, given that it could be abused.[54] Whereas national security reasons were cited for the tariffs, it has been noted that tariffs primarily harm American allies, not enemies; the United States imports very little steel and aluminum from China directly.[55] Trade experts furthermore noted that the United States already produces more than two-thirds of its own steel.[53]
Forty-five U.S. trade associations are urging Trump not to impose tariffs on China, warning it would be "particularly harmful" to the U.S. economy and consumers.[56]
Domestic political response
Domestically, reactions from elected officials often varied among regional lines rather than ideological lines.[57] The tariffs have seen widespread criticism from conservatives and Republicans.[58][59][60]However, the Republican-controlled Congress has thus far declined to take any action to counter Trump's imposition of tariffs.[61][62] Speaker Paul Ryan said that Congress would not pass any tariff legislation that Trump would veto.[61]
Reception was mixed among Democratic officials,[63] with Democrats from Rust Belt states voicing support for tariffs on steel and aluminum imports.[64]
The AFL-CIO, the largest labor union in the U.S., praised Trump for the tariffs, as did Democratic Ohio Senator Sherrod Brown, who said that the action would be a boon for "steel plants across Ohio." Many congressional Republicans expressed fear that the tariffs might damage the economy or lead to retaliatory tariffs from other countries. Speaker of the House Paul Ryan and Senate Majority Leader Mitch McConnell urged Trump to rethink his proposal or to target the tariffs more narrowly so as to avoid "unintended consequences and collateral damage."[65] House Minority Leader Nancy Pelosi, while calling for strategic and targeted actions against "trade cheaters," criticized Trump's rollout of the tariffs, calling it "chaotic" and that it was "maximizing the collateral damage to American workers, consumers and our international alliances."[66] The proposal drew comparisons to a tariff imposed by his Republican presidential predecessor, George W. Bush;[67] in 2002 the U.S. imposed heavy steel tariffs that were largely seen as ineffectual or even harmful to the U.S., and were withdrawn after 18 months.[68]
On March 6, 2018, Gary Cohn, chair of the National Economic Council, announced his intention to resign; the announcement followed Trump's cancellation of a meeting with end-users of steel and aluminum that Cohn had arranged in an attempt to dissuade the president from the planned tariffs.[69]
A March 2018 Quinnipiac University poll showed widespread disapproval of the tariffs, with only 29% of Americans agreeing with a "25% tariff on steel imports and a 10% tariff on aluminum imports" if it raised their cost of living.[70]
Response from trade partners
China, Canada, and the European Union responded negatively to the initial announcement (which did not mention any temporary exemptions). Canada supplies 16% of U.S. demand for steel, followed by Brazil at 13%, South Korea at 10%,[71] Mexico at 9%, and China at 2%.[67]
Canadian retaliatory tariffs
Trump invoked national security grounds as justification for imposing tariffs on Canada. Canadian Prime Minister Justin Trudeau said that this was "absurd" and stated: "That Canada could be considered a national security risk to the United States is inconceivable...Let me be clear, these tariffs are totally unacceptable." He announced $16.6 billion in retaliatory tariffs, stating that "American people are not the target ... We hope eventually that common sense will triumph. Unfortunately the actions taken today by the United States government do not appear headed in that direction."[74]
Beginning on July 1, 2018, Canada will implement retaliatory tariffs on U.S. imports.[5] The value of the Canadian tariffs will match the value of the U.S. tariffs dollar-for-dollar and cover 299 U.S. goods, including steel, aluminum, and a variety of other products, including inflatable boats, yogurt, whiskies, candles, and sleeping bags.[6]
European Union retaliatory tariffs
Jean-Claude Juncker, the president of the European Commission, condemned U.S. steel and aluminum tariffs and announced that a legal challenge at the World Trade Organization would follow.[75] The EU filed the WTO challenge against the United States on June 1, once the tariffs took effect.[76]
European Union retaliatory tariffs took effect on June 22, 2018, imposing tariffs on 180 types of products, over 3 billion of U.S. goods. Affected products include steel and aluminum, agricultural goods (including orange juice and cranberry juice), clothing, washing machines, cosmetics, and boats.[77] European Commissioner for Trade Cecilia Malmström stated: "The rules of international trade, which we have developed ... with our American partners, cannot be violated without a reaction from our side. Our response is measured, proportionate and fully in line with WTO rules."[77] Among the U.S. manufacturers affected by the EU's responsive tariffs is Harley-Davidson, which announced that it would move some of their manufacturing out of the United States.[78]
Chinese retaliatory tariffs
China said that it will retaliate for the tariffs imposed on $50 billion of Chinese goods that come into effect on July 6.[8] China threatened to curb imports of U.S. soybeans.[79]
Mexican retaliatory tariffs
Solar panels
On January 23, 2018, news outlets announced that Trump had imposed tariffs on solar panelsproduced outside the United States. The tariffs initially start at 30% and will gradually fall to 15% in four years.[81][82] The first 2.5 gigawatts of solar cells imported each year will be exempted from the tariff.[83]
China is currently the world leader in solar panel manufacture, and China has decried the tariffs.[84]Zhong Shan, the Chinese Ministry of Commerce said in a statement, "With regard to the wrong measures taken by the United States, China will work with other W.T.O. members to resolutely defend our legitimate interests."[85]
Environmentalists and animal rights advocates have expressed concern that the new tariffs will hurt the growth of sustainable energy and the species which are on the endangered list due to climate change.[86]
Washing machines
On January 23, 2018, in conjunction with the tariffs placed on solar panels, the Office of the U.S. Trade Representative announced tariffs on washing machines.[83] According to the U.S. International Trade Commission (ITC), imports of large residential washers increased "steadily" from 2012 to 2016, and that domestic producers' financial performance "declined precipitously".[87] In the first year, the tariffs start at 20% for the first 1.2 million units of imported finished washers, and all subsequent washers within that year will have a 50% tariff. By the third year initial tariff will go down to 16-40%, following the same pattern.
The tariffs came after a petition was filed by Whirlpool, a U.S.-based washing machine manufacturer facing tough competition from LG Electronics and Samsung both based in South Korea.[88]
In 2016, China exported $425 million worth of washers to the United States, followed by Mexico with $240 million, and South Korean companies $130 million.[87] Samsung and LG are among the top exporters of washers to the United States. Two weeks before the tariff announcement, Samsung had moved its production of washing machines to a new plant in South Carolina. In response Samsung said U.S. consumers will "pay more, with fewer choices." Mexican officials said they would respond to the tariffs during the ongoing NAFTA renegotiations.[89]
Chinese products
On March 22, 2018, Trump signed a memorandum under the Section 301 of the Trade Act of 1974, instructing the United States Trade Representative (USTR) to apply tariffs of $50 billion on Chinese goods. Trump stated that the tariffs would be imposed due to Chinese theft of U.S intellectual property.[90] Trump said that his planned tariffs on Chinese imports would make the United States "a much stronger, much richer nation."[91] However, the steps toward imposing the tariffs led to increased concerns of a global trade war.[90]
The Dow Jones Industrial Average fell 724 points, or 2.9%, after the tariffs were announced due to concerns over a trade war.[92] Corporations that traded with China, such as Caterpillar Inc.and Boeingsuffered large losses in their stock price.[93]
In response, the Ministry of Commerce of the People's Republic of China announced plans to implement its own tariffs on 128 U.S. products. 120 of those products, such as fruit and wine, will be taxed at a 15% duty while the remaining 8 products, including pork, will receive a 25% tariff.[94][95]China implemented their tariffs on April 2, 2018.[96][97]
On April 3, 2018, the U.S. Trade Representative's office published an initial list of 1,300+ Chinese goods to impose levies upon, including products like flat-screen televisions, weapons, satellites, medical devices, aircraft parts and batteries.[98][99][100] Chinese Ambassador Cui Tiankai responded by warning the US that they may fight back, saying "We have done the utmost to avoid this kind of situation, but if the other side makes the wrong choice, then we have no alternative but to fight back."[101]
On April 4, 2018, China's Customs Tariff Commission of the State Council decided to announce a plan of additional tariffs of 25% on 106 items of products including automobiles, airplanes, and soybeans.[102] Soybeans are the top U.S. agricultural export to China.[103][104]
The increased tit-for-tat tariff announcements stoked fears that the two countries are inching closer to a trade war.[105][106][107] On April 4, 2018, President Trump responded to speculation tweeting: "We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!"[108] The next day Trump directed the USTR to consider $100 billion in additional tariffs.[109][110]
On May 9, 2018, China cancelled soybean orders exported from United States to China. Zhang Xiaoping, Chinese director for the U.S. Soybean Export Council, said that Chinese buyers simply stopped buying from the U.S.[111]
On June 15, Donald Trump released a list of $34 billion of Chinese goods to face a 25% tariff, starting on July 6. Another list with $16 billion of Chinese goods was released, with an implementation date of July 20.[112]
KORUS
On March 28, 2018 the United States and South Korea announced major changes to the bilateral United States–Korea Free Trade Agreement (KORUS FTA) in response to the numerous tariffs and the proposed North Korean-United States diplomatic meeting.[113] The 25 percent tariff on South Korean trucks will be extend until 2041, adding twenty years to the current 2021 target phase out date. No South Korean auto manufacturer exports trucks to the United States. The United States will partially exempt South Korea from its steel and aluminum tariffs.[114][115]
Proposed tariffs
Automobiles
During the campaign, Trump said he would impose tariffs — in the range of 15 to 35% — on companies that move their operations to Mexico.[21] Trump proposed a 35% tariff on "every car, every truck and every part manufactured in Ford's Mexico plant that comes across the border."[116] Tariffs at that level would be far higher than the international norms (which are around 2.67% for the U.S. and most other advanced economies and under 10% for most developing countries).[117]
After the European Union threatened to impose retaliatory tariffs should a tariff on steel and aluminum be imposed, on March 3, 2018 Trump countered with a threat to impose tariffs on European car manufacturers.[118]
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