Just the Facts

Five Facts on Tariffs

By Emma Petasis
June 4, 2019 | Blog

President Trump recently announced he would be imposing higher tariffs on Mexico until they do more to stem the flow of immigrants into the U.S. These are the facts on tariffs.

1. Tariffs are a tax on imports.

Any goods or services imported from another country pay tariffs (or taxes) on the imports. Typically, the businesses themselves pay these tariffs, rather than the country they are imposed on. Customs and Border Protection collect tariffs at the ports of entry, and this money goes directly to the Treasury.[1]

2. Congress adopted the first tariff in 1789.

The Tariff Act of 1789 was one of the first pieces of legislation passed after the creation of the Constitution and signed into law by President George Washington. Created to both protect trade and raise revenue for the government, the act gives Congress the power “to lay and collect taxes, duties, imports and excises and to regulate commerce with foreign Nations.”[2] In the 1890s after the Civil War, Congress added to the legislation that tariffs can be adjusted in specific circumstances since industry was spreading throughout the nation.[3]

3. The Smoot-Hawley Tariff Act imposed extra-high tariffs during the Great Depression.

Raising the already high tariff rates by about 20%, the Act increased rates to their highest levels and prompted retaliation from abroad. By adopting a similar practice, the world economy and global trade suffered. Britannica reports that U.S. imports and exports to Europe and overall global trade fell by two-thirds during the four years the legislation was law.[4] The Reciprocal Trade Agreements Act would replace the Smoot-Hawley Tariff Act and reduce tariff levels and promote trade with other nations.[5]

4. President Bush and President Obama imposed tariffs to boost domestic industries.

The Bush steel tariffs in 2002 imposed tariffs on steel imports from Europe, Asia and South America in order to safeguard American steel workers. Bush ultimately reversed these tariffs after the European Union complained these tariffs violated international trade agreements, and threatened retaliation.[6] To boost the domestic tire industry, President Obama imposed a 35% tariff on tires imported from China in 2009. The Obama tire tariffs reduced the less expensive tire imports and saved American jobs in the tire plant industry.[7]

5. President Trump vows to raise tariffs on Mexico imports next week.

This week, President Trump announced a 5% tariff on goods imported from Mexico, beginning this month and going up in 5% increments each month until it reaches 25% in October. Done in an effort to penalize Mexico for not doing enough to stem the flow of migrants at the southern border, the tariffs will hurt Mexico’s economy since it will drive up the cost of Mexican goods. This will affect everything from produce, to auto parts, as Mexico is one of the United States’ largest trading partners.[8]

[1] https://www.washingtonpost.com/business/2019/05/31/guide-trumps-tariffs-what-they-are-how-they-work-who-theyll-hurt/?utm_term=.7ab05fc54f03

[2] https://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/tariff-act-1789

[3] https://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/tariff-act-1789

[4] https://www.britannica.com/topic/Smoot-Hawley-Tariff-Act

[5] Ibid.

[6] https://www.cbsnews.com/news/what-tariffs-has-the-u-s-tried-in-the-past-and-how-did-they-work-out/

[7] Ibid.

[8] https://www.washingtonpost.com/business/2019/05/31/guide-trumps-tariffs-what-they-are-how-they-work-who-theyll-hurt/?utm_term=.7ab05fc54f03

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