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1. The Regressive Nature of the U.S. Tariff Code: Origins and Implications

Author:
Lydia Cox
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Tariffs are often thought of as taxes that fall uniformly across goods or industries. In reality, however, the U.S. tariff schedule is extremely complex—the modern‐​day tariff code comprises 4,394 pages of tariffs on 19,347 varieties of goods. As a result, there is a lot of variation in tariff rates, even within narrowly defined categories of goods. We study this complexity through the lens of a little‐​known but consequential pattern in the modern U.S. tariff schedule: tariff rates are systematically higher on low‐​value versions of goods relative to their high‐​value counterparts. For example, the tariff on a $400 handbag made of reptile leather is 5.3 percent, while the tariff on an $8 plastic‐​sided handbag is 16 percent. Through a comprehensive analysis of U.S. tariffs over the past 100 years, we show that this regressive pattern is, and has been, a systematic feature of tariffs for decades. Our findings are emblematic of a more fundamental feature of U.S. tariff policy: tariffs set to meet policy objectives of the past have persisted through vast changes in the economic landscape and, despite their historical origins, are still affecting consumers today.
Topic:
Economics, Tariffs, and Trade Policy
Political Geography:
North America and United States of America

2. Biden and Trade at Year One: The Reign of Polite Protectionism

Author:
James Bacchus
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
As a presidential candidate, Joe Biden promised a change from the go‐​it‐​alone, my‐​way‐​or‐​the‐​highway approach to trade policy of Donald Trump. Disappointingly, during the first year of his presidency, Biden has instead largely embraced the failed Trump policy of unilateralism and protectionism in trade. He and his administration have done so politely, without Trump’s bluster and bombast. Yet, the results have been mostly the same: a turn toward more trade protection and managed trade, toward a proposed industrial policy that would add more restrictions on trade, and toward a destructive unilateralism that threatens to continue undermining the multilateral trading system overseen by the World Trade Organization. If Biden continues to pursue this misguided trade policy, American recovery and prosperity are at risk. There is still time—at least three years—for him to end this reign of polite protectionism by framing and pursuing a new trade policy that will benefit all Americans: a policy that will achieve more trade liberalization, stop managed trade, halt trade‐​restrictive industrial policy, renew trade multilateralism, and give restored and unflinching support to the international rule of law in trade.
Topic:
Tariffs, Trade, Donald Trump, Protectionism, and Joe Biden
Political Geography:
China, Asia, North America, and United States of America

3. Tariffs and Monetary Policy: A Toxic Mix

Author:
Michael D Bordo and Mickey D. Levy
Publication Date:
01-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The ratcheting up of tariffs and the Fed’s discretionary conduct of monetary policy are a toxic mix for economic performance. Escalating tariffs and President Trump’s erratic and unpredictable trade policy and threats are harming global economic performance, distorting monetary policy, and undermining the Fed’s credibility and independence. President Trump’s objectives to force China to open access to its markets for international trade, reduce capital controls, modify unfair treatment of intellectual property, and address cybersecurity issues and other U.S. national security issues are laudable goals with sizable benefits. However, the costs of escalating tariffs are mounting, and the tactic of relying exclusively on barriers to trade and protectionism is misguided and potentially dangerous. The economic costs to the United States so far have been relatively modest, dampening exports, industrial production, and business investment. However, the tariffs and policy uncertainties have had a significantly larger impact on China, accentuating its structural economic slowdown, and are disrupting and distorting global supply chains. This is harming other nations that have significant exposure to international trade and investment overseas, particularly Japan, South Korea, and Germany. As a result, global trade volumes and industrial production are falling. Weaker global growth is reflected in a combination of a reduction in aggregate demand and constraints on aggregate supply.
Topic:
International Trade and Finance, Monetary Policy, Economic Growth, Tariffs, and Industry
Political Geography:
Japan, China, Europe, Asia, South Korea, Germany, North America, and United States of America

4. The U.S.-China Trade War: Is There an End in Sight?

Author:
Simon Lester and Huan Zhu
Publication Date:
01-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Donald Trump was a trade “hawk” long before he became president. In the late 1980s, he went on the Oprah Winfrey show and complained about Japan “beating the hell out of this country” on trade (Real Clear Politics 2019). As president, he has continued with the same rhetoric, using it against a wide range of U.S. trading partners, and he has followed it up with action (often in the form of tariffs). While many countries have found themselves threatened by Trump’s aggressive trade policy, his main focus has been China. As a result, the United States and China have been engaged in an escalating tariff, trade, and national security conflict since July 2018, when the first set of U.S. tariffs on China went into effect and China retaliated with tariffs of its own. In this article, we explore the U.S.-China economic conflict, from its origins to the trade war as it stands today. We then offer our thoughts on where this conflict is heading and when it might end.
Topic:
Economics, International Trade and Finance, Tariffs, Trade Wars, and Donald Trump
Political Geography:
China, Asia, North America, and United States of America

5. Assessing President Trump’s Trade Priorities

Author:
Daniel Griswold
Publication Date:
01-2019
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
President Trump has delivered on his promise to shake up Washington, arguably nowhere more so than in the policy space of international trade. President Trump’s trade agenda has challenged more than seven decades of bipartisan policy commitment to seeking lower trade barriers at home and abroad through negotiated agreements. While President Trump pays lip service to pursuing free trade and eliminating tariffs, his trade policies so far have been marked by higher U.S. duties on a range of products, from washing machines to steel. Under Section 301 of the Trade Act of 1974, the administration has imposed duties on $250 billion of imports from China, with those duties set to escalate in 2019 absent an agreement with China. And under Section 232 of the Trade Expansion Act of 1962, the president is threatening to impose a 25 percent duty on imported automobiles in the name of national security. The Trump administration has renegotiated existing trade agreements with Canada, Mexico, and South Korea, but its modifications are as likely to restrict trade as expand it. One of the president’s first actions after assuming office was to withdraw the United States from the pending Trans-Pacific Partnership, which would have eliminated almost all duties with 11 trading partners around the Pacific Rim, including Japan.
Topic:
Economy, Tariffs, Trade, and Donald Trump
Political Geography:
North America and United States of America