Tariffs in the first Trump administration
During his first term as President of the United States, Donald Trump enacted a series of tariffs involving protectionist trade initiatives against other countries, most notably China. It involved tariffs on foreign imports imposed by Trump. Since long before he became president in 2017, Trump had promoted tariffs on imports to retaliate against countries he believes are "ripping-off" the United States. Trump has insisted that foreign nations pay the tariffs he imposes; however, several economists say the reality is that American importers pay them.
In January 2018, Trump imposed tariffs on solar panels and washing machines of 30–50%. In March 2018, he imposed tariffs on steel and aluminum from most countries, which, according to Morgan Stanley, covered an estimated 4.1% of U.S. imports. In June 2018, this was extended to the European Union, Canada, and Mexico. The Trump administration separately set and escalated tariffs on goods imported from China, leading to a trade war.
Trading partners implemented retaliatory tariffs on U.S. goods. In June 2018, India planned to recoup trade penalties of $241 million on $1.2 billion worth of Indian steel and aluminum, but attempted talks delayed these until June 2019 when India imposed retaliatory tariffs on $240 million worth of U.S. goods. Canada imposed matching retaliatory tariffs on July 1, 2018. China implemented retaliatory tariffs equivalent to the $34 billion tariff imposed on it by the U.S. In July 2018, the Trump administration announced it would use a Great Depression-era program, the Commodity Credit Corporation, to pay farmers up to $12 billion, increasing the transfers to farmers to $ 28 billion in May 2019. The USDA estimated that aid payments constituted more than one-third of total farm income in 2019 and 2020.
Tariff negotiations in North America were relatively more successful, with the U.S. lifting the steel and aluminum tariffs on Canada and Mexico on May 20, 2019, joining Australia and Argentina in being the only nations exempted from the regulations. However, on May 30, Trump unilaterally announced his intention to impose a five percent tariff on all imports from Mexico beginning on June 10, with tariffs increasing to 10% on July1, and by another 5% each month for three months, "until such time as illegal migrants coming through Mexico, and into our Country, STOP", adding illegal immigration as a condition for U.S.-Mexico tariff negotiations. The move was seen as threatening the ratification of the United States–Mexico–Canada Agreement, the North American trade deal set to replace the North American Free Trade Agreement. The tariffs were averted on June 7 after negotiations.
A May 2019 analysis conducted by CNBC found Trump's tariffs are equivalent to one of the largest tax increases in the U.S. in decades. Studies have found that Trump's tariffs reduced real income in the United States, as well as adversely affecting U.S. GDP. Some studies also concluded that the tariffs adversely affected Republican candidates in elections. A study found that political donations had a notable impact on the likelihood of tariff exemptions.
President Trump's successor, President Biden, kept most of the tariffs in place, dropping tariffs on European steel while further expanding tariffs on goods such as EVs and semiconductors from China, resulting in more tax revenue being collected from tariffs under Biden than under the first Trump administration. - Politico, 15 May 2024
Background
The Republican Party was strongly pro-tariff from the days of Abraham Lincoln until the Cold War. Republicans passed record high tariffs in the 1920s and early 1930s, which were widely blamed for worsening the Great Depression. Donald Trump has argued that the GOP betrayed its roots by becoming in favor of free trade and has cited William McKinley in particular as an influence on his anti-free trade views. Trump adopted his current views on trade issues in the 1980s, saying Japan and other nations were taking advantage of the United States. During the 2016 presidential campaign, Trump repeatedly favored policy proposals that renegotiate trade agreements for the United States. His chief trade advisor during the campaign was Peter Navarro, who favored the use of tariffs, especially against China. During a meeting with the New York Times Editorial Board in January 2016, Trump said he would tax Chinese imports into the United States by 45%. Trump frequently criticized the North American Free Trade Agreement, calling it "the worst trade deal the U.S. has ever signed". He also called Trans-Pacific Partnership "the death blow for American manufacturing" and said it would "put the interests of foreign countries above our own".Policy
On November 21, 2016, in a video message, Trump introduced an economic strategy of "putting America first", saying he would negotiate "fair, bilateral trade deals that bring jobs and industry back on to American shores". On January 23, 2017, three days after becoming president, Trump withdrew the United States from the politically divisive Trans-Pacific Partnership believing the agreement would "undermine" the U.S. economy and sovereignty.Trump had also indicated a desire to end the North American Free Trade Agreement with Canada and Mexico. His administration renegotiated the terms of the agreement. Trump had threatened to withdraw from it if negotiations failed. He specifically criticized the Ford Motor Co., Carrier Corporation, and Mondelez International for having operations based in Mexico. In August 2015, in response to Oreo maker Mondelez International's announcement that it would move manufacturing to Mexico, Trump said he would boycott Oreos. The new deal increased the percentage of parts and manufacturing that must be done in North America for domestic automobiles, setting a minimum wage for some workers on auto parts, and expanding access for U.S. dairy sales to Canada.
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". No such act has been introduced in Congress, but Trump moved to impose tariffs on solar panels, washing machines, steel, and aluminum. The enforcement of the tariffs fell primarily within the purview of the Department of Commerce and Office of the United States Trade Representative.
Trump repeatedly promised to lower America's trade deficit, and argued for a renegotiation of trade deals and imposition of tariffs to that end. These efforts notwithstanding, during 2018 the trade deficit continued to increase.
In November 2018, Trump argued that the tariffs enriched the United States. He said the United States was gaining "Billions of Dollars" from "Tariffs being charged to China". He added, "If companies don't want to pay Tariffs, build in the U.S.A. Otherwise, let's just make our Country richer than ever before!" Fact-checkers and economists described the assertions made by Trump as false, with the Associated Press writing "Almost all economists say the president is wrong. That's because tariffs are taxes on imports. They can cause higher prices, reduce trade among countries and hurt overall economic growth as a result."
Legality
Article1, Section8 of the Constitution: "Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises." But Congress has repeatedly shifted its powers regarding tariffs to the president. Beginning in 1917 with the Trading with the Enemy Act of 1917, the president can impose any tariff while the nation is at war. The affected trade does not have to be connected to the ongoing war. Since 1974, the Trade Act of 1974 allows the president to impose a 15% tariff for 150 days if there is "an adverse impact on national security from imports." After 150 days, the tariff expires unless extended by Congress.In 1977, the International Emergency Economic Powers Act shifted powers even more towards the White House. The Trump administration claims that it gives the President the authority to raise tariffs without any limits during a national emergency of any kind. Legal scholar Gerard Magliocca disagreed because the IEEPA does not mention tariffs at all and transfers no authority of tariffs towards the President.
Enacted
Solar panels
On January 23, 2018, Trump imposed tariffs on solar panels produced outside the United States. The tariffs initially started at 30% and gradually fell to 15% over the next four years. The first 2.5 gigawatts of solar cells imported each year were exempted from the tariff.China was the world leader in solar panel manufacture. It decried the tariffs, with Zhong Shan, the Chinese Ministry of Commerce stating, "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."
In 2022, President Biden extended the now 15% tariff on solar panels another four years.
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. According to the U.S. International Trade Commission, imports of large residential washers increased "steadily" from 2012 to 2016, and domestic producers' financial performance "declined precipitously". In the first year, the tariffs started at 20% for the first 1.2 million units of imported finished washers, and 50% for all further imports. In the second year the tariff was 18/45% and in the third year 16/40%.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, which are both based in South Korea.
Two weeks before the tariff announcement, Samsung moved its production of washing machines to a new plant in Newberry South Carolina; they opened a second line in March 2018, doubling manufacturing capacity at the plant. In late 2018 LG opened its first washing machine manufacturing site located in the US, in Clarksville, Tennessee, as part of a "preemptive move to reduce logistics costs, tariffs and delivery time," subsequently adding a dryer line in 2023
In January 2021, President Biden extended the washing machine tariffs by two years to February 2023, when they expired. There is conflicting information about the effects of the washing machine tariffs. UBS analysts reported that US consumers were paying 42% more for washing machines in 2022 than in 2017, compared to a 3% rise over the same time period in Europe. An economic report from Duke University suggested washing machine prices changed little after the 2016 imposition of tariffs on washing machines from China as manufacturers could simply relocate to other export platform countries, but prices rose by ten per cent in the year after the 2018 imposition of the global tariffs on all imported washing machines, falling by 13 per cent after the tariffs expired in February 2023, suggesting a full passthrough of the cost of the tariffs to consumers. However an opinion piece in trade magazine IndustryWeek suggested that the price spike had been temporary, and that there had been no long term effect on prices.