Taxes

Tracking the Economic Impact of U.S. Tariffs and Retaliatory Actions

Key Findings

  • The Trump administration imposed nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products, which is equivalent to one of the largest tax increases in decades. Based on 2021 import levels and country exemptions, the tariffs amounted to a $52.6 billion tax increase in 2021.
  • We estimate retaining the tariffs put in place under the Trump administration will reduce economic output, income, and employment.
  • The Biden administration has kept most of the Trump administration tariffs in place, except for a five-year suspension of tariffs that were part of a WTO aircraft dispute and replacement of certain steel and aluminum tariffs with tariff rate quotas.
  • We estimate the tariffs still in effect will reduce long-run GDP by 0.22 percent, wages by 0.14 percent, and employment by 173,000 full-time equivalent jobs. 

Related: Tariffs & Trade Research

Introduction

The Trump administration imposed and threatened several rounds of tariffs, and other countries responded to these measures. Using the Tax Foundation Taxes and Growth Model, we analyze the effects of imposed, threatened, and retaliatory tariffs on the United States economy. Tariffs damage economic well-being and lead to a net loss in production and jobs and lower levels of income. Tariffs also tend to be regressive, burdening lower-income consumers the most.

According to the Tax Foundation model, the tariffs imposed under the Trump administration and remaining in place under the Biden administration will reduce long-run GDP by 0.22 percent ($55.7 billion) and wages by 0.14 percent and eliminate 173,000 full-time equivalent jobs.

Other countries imposed retaliatory tariffs on U.S. exports, which we estimate will further reduce U.S. GDP by 0.04 percent ($9.4 billion) and eliminate 29,000 full-time equivalent jobs.

Tariffs Raise Prices and Reduce Economic Growth

Economists generally agree free trade increases the level of economic output and income, while conversely, trade barriers reduce economic output and income. Historical evidence shows tariffs raise prices and reduce available quantities of goods and services for U.S. businesses and consumers, which results in lower income, reduced employment, and lower economic output.

Tariffs could reduce U.S. output through a few channels. One possibility is a tariff may be passed on to producers and consumers in the form of higher prices. Tariffs can raise the cost of parts and materials, which would raise the price of goods using those inputs and reduce private sector output. This would result in lower incomes for both owners of capital and workers. Similarly, higher consumer prices due to tariffs would reduce the after-tax value of both labor and capital income. Because higher prices would reduce the return to labor and capital, they would incentivize Americans to work and invest less, leading to lower output.

Alternatively, the U.S. dollar may appreciate in response to tariffs, offsetting the potential price increase on U.S. consumers. The more valuable dollar, however, would make it more difficult for exporters to sell their goods on the global market, resulting in lower revenues for exporters. This would also result in lower U.S. output and incomes for both workers and owners of capital, reducing incentives for work and investment and leading to a smaller economy.

Tariffs Imposed by the United States

The Trump administration imposed several rounds of tariffs, which we estimated amounted to a total tax increase of nearly $80 billion during the administration. Under the Biden administration, most tariffs have stayed in place except for a suspension of certain tariffs on imports from the European Union and replacement of tariffs with TRQs on steel and aluminum from the European Union and United Kingdom and imports of steel from Japan. Based on 2021 import levels, a total of $52.6 billion of tariffs remains in place.

Note the total revenue generated will be less than what the tariffs generate, because tariffs reduce real income, which offsets some tariff revenue by lowering other tax revenues.

Section 232, Steel and Aluminum

  • In March 2018, President Trump announced the administration would impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum.

If 2018 imports equaled 2017 levels, the tariffs could have cost U.S. firms nearly $9 billion. For example, the value of imported steel totaled just over $29 billion in 2017. If the 25 percent tariff were levied on the same level of imported steel, the tax would total roughly $7.3 billion. Similarly, if a 10 percent tariff were applied to the $16.8 billion worth of aluminum imported in 2017, the tax would total nearly $1.7 billion. Several countries, however, have been excluded from the tariffs.

  • Early on, the U.S. reached agreements to permanently exclude Australia from steel and aluminum tariffs, use quotas for steel imports from Brazil and South Korea, and use quotas for steel and aluminum imports from Argentina.
  • In May 2019, President Trump announced that the U.S. was lifting tariffs on steel and aluminum on Canada and Mexico.
  • In 2020, President Trump expanded the scope of steel and aluminum tariffs to cover certain derivative products, totaling approximately $0.8 billion based on 2018 import levels.
  • In August 2020, President Trump announced that the U.S. was reimposing tariffs on aluminum imports from Canada. The U.S. imported approximately $2.5 billion worth of non-alloyed unwrought aluminum, resulting in a $0.25 billion tax increase.
  • In September 2020, the U.S. eliminated the 10 percent tariff on Canadian aluminum that had been reimposed in August 2020.
  • In 2021 and 2022, the Biden administration reached deals to replace certain steel and aluminum tariffs with tariff rate quota systems, whereby certain levels of imports will not face tariffs, but imports above the thresholds will.
    • TRQs for the European Union took effect January 1, 2022. Based on 2018 import levels, the TRQs will reduce tariff revenue by approximately $1.7 billion.
    • TRQs for Japan take effect April 1, 2022. Based on 2018 import levels, the TRQs will reduce tariff revenue by approximately $0.4 billion.
    • TRQs for the UK take effect on June 1, 2022. Based on 2018 import levels, the TRQs will reduce tariff revenue by approximately $0.1 billion.
    • Though the agreements on steel and aluminum tariffs will reduce the cost of tariffs paid by some U.S. businesses, a quota system similarly leads to higher prices, and further, retaining tariffs at the margin continues the negative economic impact of the previous tariff policy.

Tariffs on steel and aluminum and derivative goods currently remain in place for several countries under the Biden administration and account for $3 billion of the $75 billion in tariff revenue, based on 2018 import values.

Section 301, Chinese Products

The United States is currently imposing a 25 percent tariff on approximately $250 billion of imports from China and a 7.5 percent tariff on approximately $112 billion worth of imports from China.

Under the Trump administration, the United States Trade Representative began an investigation of China in August 2017, which concluded in a March 2018 report that found China was conducting unfair trade practices. The same day, President Trump announced tariffs on up to $60 billion of imports. The administration soon published a list of about $50 billion worth of Chinese products to be subject to a new 25 percent tariff. Stage one of the tariffs began July 6, 2018, on $34 billion worth of Chinese imports, and stage two, the remaining $16 billion, went into effect August 23, 2018. These tariffs amount to a $12.5 billion tax increase.

The Trump administration imposed stage three of Section 301 tariffs in September 2018—10 percent on $200 billion worth of goods from China. This stage was scheduled to increase to 25 percent beginning in January 2019, but the increase was delayed until it was allowed to go into effect in May 2019. Other tariffs threatened on China under the previous administration include:

  • In August 2019, the administration announced plans to impose a new 10 percent tariff on approximately $300 billion worth of additional Chinese goods beginning on September 1, 2019. The administration followed this announcement with a schedule change and certain exemptions—imposing stage 4a, a 10 percent tariff on $112 billion of imports starting September 1, 2019, and stage 4b, on $160 billion on December 15, 2019.
  • Then on August 23, the administration decided that stage 4 tariffs would be 15 percent rather than the previously announced 10 percent—stage 4a has taken effect, while stage 4b is scheduled to go into effect on December 15, 2019.
  • In December 2019, the administration reached a “Phase one” trade deal with China and agreed to postpone indefinitely the stage 4b tariffs of 15 percent on approximately $160 billion worth of goods that were scheduled to take effect December 15 and in early 2020 reduce the stage 4a tariffs from 15 percent to 7.5 percent.

Section 301 tariffs on China currently remain in place under the Biden administration and account for $71 billion of the $75 billion in tariff revenues, based on 2018 import values.

WTO Dispute, European Union

In October 2019, the United States won a nearly 15-year-long World Trade Organization (WTO) dispute against the European Union. The WTO ruling authorizes the United States to impose tariffs of up to 100 percent on $7.5 billion worth of EU goods. Beginning October 18, tariffs of 10 percent were to be applied to aircrafts and 25 percent on agricultural and other products (our estimate uses the average of the two rates).

Tariffs on the European Union were suspended in summer 2021 for five years under an agreement reached by the Biden administration.

Section 201, Solar Panels and Washing Machines

In January 2018, the Trump administration announced it would begin imposing tariffs on washing machine and solar cell and module imports as the result of a Section 201 investigation.

We estimated the solar cell and module tariffs amount to a $0.2 billion tax increase based on 2018 import values and quantities of four 8-digit Harmonized Tariff Schedule subheadings, given on page 12 of this report. The United States imported 6.8 billion watts worth a value of $4.9 billion in 2018 under the four subheadings. The Biden administration extended the solar panel tariffs at a rate of 14.75 percent on imports above a 5 gigawatt exemption.

We estimated the washing machine tariffs amount to a $0.4 billion tax increase based on 2018 import values and quantities of six 8-digit Harmonized Tariff Schedule subheadings, given on page 8 of this report. The United States imported $1.3 billion worth of machines and $114 million worth of parts in 2018. For most of 2022, a tariff of 14 percent applies to in-quota washing machines and parts and a tariff of 30 percent applies to all subsequent washing machines and parts.

Tariffs on solar panels and washing machines currently remain in place under the Biden administration and account for $0.6 billion of the $75 billion in tariffs revenues, based on 2018 import values.

Model Results

According to the Tax Foundation model, the tariffs imposed under the Trump administration and left in place under the Biden administration would reduce long-run GDP by 0.22 percent ($56.7 billion) and wages by 0.14 percent and eliminate 173,000 full-time equivalent jobs.

Table 1: Impact of Remaining Trump Administration Tariffs
  Total Section 232 – Steel and Aluminum Section 301 – China (25% on 34, 16, 200; 7.5% on 112) Solar Panels and Washing Machines
Tariff Revenue $74.7 $2.9 $71.2 $0.6
Long-run GDP -0.22% -0.01% -0.21% 0.00%
GDP ($2018) -$55.7 -$3.6 -$51.7 -$0.4
Wages -0.14% -0.01% -0.13% 0.00%
FTE Jobs -173,000 -11,000 -160,000 -1,000

Note: Totals may not add due to rounding.

Source: Tax Foundation Taxes and Growth Model, March 2018.

The 0.22 percent reduction in long-run GDP is about 13.5 percent of the total long-run impact of the Tax Cuts and Jobs Act, which we estimated to raise GDP by 1.7 percent in the long run.

Trade Volumes Since Tariffs Were Imposed

Since the tariffs were imposed, imports of affected goods have fallen, even before the onset of the COVID-19 pandemic. Some of the biggest drops are the result of decreased trade with China, as affected imports decreased significantly after the tariffs. Reduced trade means fewer options for U.S. consumers and higher prices.

Table 2. Import Volumes of Goods Affected by Tariffs
Tariff and Effective Date 2017 imports, billions  2018 imports, billions  2019 imports, billions  2020 imports, billions  2021 imports, billions  Tariff Rate
Section 232 Steel (March 2018) $15.9 $15.5 $11.4 $7.2 $13.7 25%
Section 232 Aluminum (March 2018) $9.0 $9.6 $8.4 $5.2 $7.6 10%
Section 232 Derivative Steel Articles (February 2020) $0.4 $0.5 $0.5 $0.4 $0.4 25%
Section 232 Derivative Aluminum Articles (February 2020) $0.2 $0.3 $0.2 $0.2 $0.3 10%
Section 301, List 1 (July 2018) $31.9 $30.3 $22.7 $20.9 $24.7 25%
Section 301, List 2 (August 2018) $13.8 $14.8 $8.6 $9.8 $10.4 25%
Section 301, List 3 (September 2018; increased May 2019) $187.6 $206.1 $126.9 $112.8 $126.4 25%
Section 301, List 4A (September 2019; lowered January 2020) $101.9 $112.2 $114.7 $103.2 $105.3 15% in 2019; then 7.5%
Section 301, List 4B (Never went into effect) $151.2 $160.0 $159.6 $164.4 $206.3 Suspended

Note: Steel totals exclude imports from Argentina, Australia, Brazil, South Korea, Canada, and Mexico. Aluminum totals exclude imports from Argentina, Australia, Canada, and Mexico. Beginning in 2022, steel and aluminum imports from the EU and UK will be subject to tariff-rate quotas as well as steel imports from Japan. TRQs will be reflected in the table when 2022 import volumes become available in 2023.

Source: Federal Register notices; Tom Lee and Jacqueline Varas, “The Total Cost of U.S. Tariffs,” American Action Forum, Mar. 24, 2022, https://www.americanactionforum.org/research/the-total-cost-of-tariffs/; data retrieved from USITC DataWeb; author calculations.

Retaliatory Tariffs Imposed and Threatened

Several jurisdictions have proposed and imposed retaliatory tariffs against the United States as laid out in the accompanying tables.

Current retaliation against Section 232 steel and aluminum tariffs target more than $6 billion worth of American products for an estimated total tax of approximately $1.6 billion. Tariff revenues for Turkey, India, Russia, and Canada were based on news reports. Mexico, Canada, and the European Union have canceled their Section 232 retaliatory tariffs.

Table 3. Section 232 Steel and Aluminum Retaliation
Jurisdiction U.S. Exports (billions, 2018) Tariff Rate Estimated Levy (billions)
China $2.5 15-25% $1.0
Turkey $1.7 4-70% $0.3
India $1.4 10-50% $0.2
Russia $0.4 25-40% $0.1
Total $6.1   $1.6

Note: Mexico, Canada, and the European Union canceled their Section 232 retaliatory tariffs.

Source: Congressional Research Service, “Escalating U.S. Tariffs: Affected Trade,” last updated Jan. 29, 2020, https://fas.org/sgp/crs/row/IN10971.pdf ; author calculations; tariff announcements. 

China has responded to the United States’ Section 301 tariffs with several rounds of tariffs on more than $106 billion worth of U.S. goods, for an estimated tax of nearly $11.6 billion. Note the stage 4b tariffs are not included in the analysis of economic effects due to their cancellation under Phase 1 of the U.S.-China trade deal. The deal also resulted in a reduction of tariffs under Stage 3 and 4a. 

Table 4. Section 301 Retaliation
Stage U.S. Exports (billions, 2018) Tariff Rate Estimated Levy (billions)
Stage 1 $12.9 25% $3.2
Stage 2 $11.6 25% $2.9
Stage 3 $59.7 2.5%/5%/5-25% $4.5
Stage 4a $25.5 2.5-5% $1.0
Stage 4b* $41.8 5-10% $3.1
Total $109.7   $11.6

Note: Tariff revenues were calculated by averaging the tariff rates and multiplying by the affected amount of U.S. goods.

Source: Congressional Research Service, “Escalating U.S. Tariffs: Affected Trade,” last updated Jan. 29, 2020, https://fas.org/sgp/crs/row/IN10971.pdf; author calculations.

We estimate the retaliatory tariffs stemming from Section 232 and Section 301 actions total to approximately $13.2 billion in tariff revenues. Retaliatory tariffs, however, are not paid to the United States government, but to the governments of the countries which impose the tariffs, so they do not increase U.S. revenue.

Model Results

We estimate the retaliatory tariffs will reduce U.S. GDP by 0.04 percent ($9.4 billion) and reduce full-time employment by 29,000 full-time equivalent jobs. Unlike the tariffs imposed by the United States, which raise federal revenue, tariffs imposed by foreign jurisdictions raise no revenue for the U.S. but result in lower U.S. output.

Table 5: Impact of Retaliatory Tariffs
  Total Section 232 Retaliation Section 301 Retaliation
Tariff Revenue (billions of 2018 dollars) $0 $0 $0
Long-run GDP -0.04% 0.00% -0.03%
GDP (billions of 2018 dollars) -$9.4 -$1.1 -$8.3
Wages -0.02% 0.00% -0.02%
FTE Jobs -29,000 -4,000 -26,000

Note: Totals may not add due to rounding. Tariff revenue is $0 because retaliatory tariffs are not paid to the U.S. government.

Source: Tax Foundation Taxes and Growth Model, March 2018.

Timeline of Activity

April 1, 2022

The Biden administration has reached deals to replace steel and aluminum tariffs with tariff rate quotas for the European Union and United Kingdom and steel tariffs with tariff-rate quotas for Japan. The deals also eliminate tariffs on derivative goods from the same jurisdictions and will bring an end to related retaliatory tariffs. The update adjusts revenue and economic estimates for imposed and retaliatory tariffs and adds a new table illustrating how import levels of affected goods have changed since 2017.

October 19, 2021

Under President Biden, the U.S. will suspend tariffs on aircrafts and other goods from the E.U. under a five-year pause in the ongoing Boeing-Airbus dispute. We have reorganized the layout of the tracker.

September 18, 2020

U.S. to eliminate tariffs on $2.5 billion worth of Canadian aluminum that had been imposed on August 16, 2020, to avoid Canadian retaliatory tariffs.

August 13, 2020

U.S. to reimpose tariffs on $2.5 billion worth of Canadian aluminum on August 16, 2020, and Canada to impose retaliatory tariffs.

February 14, 2020

U.S. reduces tariffs on $120 billion of Chinese goods by half to 7.5% and China reduces tariffs on approximately $75 billion of US goods in half to 2.5% and 5%.

December 16, 2019

U.S. postpones indefinitely the scheduled tariff of 15% on $160 billion worth of goods from China and announces plans to decrease the 15% tariff on $120 billion worth of goods from China to 7.5% (date unknown, will be included in the model when the decrease takes effect). China took corresponding measures and canceled their schedule tariff increase.

December 5, 2019

U.S. concludes Section 301 investigation into France’s Digital Services Tax, threatens tariffs on $2.4 billion French products.

Our analysis now includes tariffs on solar panels and washing machines.

October 18, 2019

U.S. imposes 10% and 25% tariffs on $7.5 billion European Union goods under WTO ruling.

October 15, 2019

U.S. postpones scheduled tariff hike from 25% to 30% on $250 billion worth of goods from China.

October 3, 2019

U.S. announces 10% and 25% tariffs on $7.5 billion European Union goods under WTO ruling, with the authority to raise the tariffs to 100%.

September 12, 2019

U.S. delays tariff increase from 25% to 30% on $250 billion worth of Chinese goods from Oct. 1 until Oct. 15.

August 26, 2019

U.S. announces the 25% tariff on $250 billion of Chinese goods would increase to 30 percent, effective Oct. 1, after a comment period.

August 23, 2019

China announces additional tariffs on $75 billion of U.S. imports, from 5-10%, and will resume tariffs on U.S. cars and car parts suspended earlier in 2019. Tariffs to begin Sept. 1 and end Dec. 15.

U.S. announces 10% tariff on $300 billion of Chinese goods to increase to 15%, some beginning Sept. 1, others on Dec. 15.

August 13, 2019

U.S. announces 10% tariff on $300 billion of Chinese goods would be delayed from Sept. 1 until Dec. 15.

August 1, 2019

U.S. announces 10% tariff on $300 billion Chinese goods, to be levied on Sept. 1, lowered from the previously announced 25% on $325 billion.

July 20, 2019

U.S. confirms announced July 5 plans to impose tariffs on all Chinese imports, roughly $500 billion of goods, modeled as a 10% tariff.

July 5, 2019

U.S. again threatens additional tariffs on Chinese imports if China further retaliates, increasing threats from levies on $200 billion and another $200 billion to $200 billion and $300 billion.

June 10, 2019

U.S. “indefinitely suspended” previously announced tariffs against Mexican products, set to begin at a 5% rate in June and gradually rise to 25%.

May 31, 2019

U.S. threatens 5% tariff beginning June 10 on $346.5 billion of imports from Mexico until illegal immigration across the southern border stops. It would rise to 10% on July 1; 15% on Aug. 1; 20% on Sept. 1; and 25% on Oct. 1.

May 22, 2019

U.S. announces it will lift steel and aluminum tariffs on Canada and Mexico, and those nations will lift their retaliatory tariffs.

May 10, 2019

U.S. announces it will raise tariffs on $200 billion of imports from China from 10% to 25%, with threats to impose an additional 25% on $325 billion of goods.

August 29, 2018

Tax Foundation separated our automobile tariff estimate to show auto imports from Canada, and made slight estimate adjustments to correct for rounding.

August 16, 2018

U.S. doubles the tariffs on steel and aluminum imports from Turkey, which responds by doubling its tariffs on 22 U.S. products.

August 8, 2018

U.S. threatens a 10% tariff on $200 billion of Chinese goods if China retaliates for the previous 10% tariff, and that would extend to an additional $200 billion of goods. This would amount to a $40 billion tax increase.

August 1, 2018

U.S. considers increasing the proposed 10% tariff to 25% on $200 billion of Chinese imports. That would be a $30 billion tax increase.

July 20, 2018

U.S. reaffirms plans to impose tariffs on all Chinese imports (roughly $500 billion).

July 13, 2018

Russia will begin placing tariffs on U.S. goods, worth about $87.6 million. (Slight adjustments were made to our estimates to correct for rounding.)

July 6, 2018

U.S. announces readiness to target an additional $200 billion in Chinese imports, and an additional $300 billion after that—an increase of $100 billion from previous threats.

June 28, 2018

Turkey will begin placing tariffs on U.S. goods, worth about $266.5 million.

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