Learning from the First Trade War: Retaliation Hurts US Exporters

President Donald Trump has increased tariffs on Canada, Mexico, and China as well as reimposed national security tariffs on steel and aluminum imports from all US trading partners, including the European Union. In the last trade war, US trading partners responded to US-imposed tariffs with targeted retaliation, hitting ag producers as well as iconic American goods like Harley Davidson motorcycles, Levi’s blue jeans, Kentucky bourbon, and Tennessee whiskey. That retaliation harmed American exporters and made them less competitive globally. The same story is likely to play out in 2025, as US trading partners have already announced and imposed retaliatory tariffs targeting $190 billion of US exports, including agriculture, American whiskey, and more.

Agriculture exports, such as soybeans and pork, faced retaliation in response to the first trade war. China in particular imposed significant retaliatory tariffs on US ag exports, and halted imports of certain products altogether.

Retaliation against ag producers resulted in export losses totaling more than $27 billion in 2018 and 2019. According to estimates from the USDA, China accounted for 95 percent of the losses, the EU and Mexico accounted for less than 2 percent each, and the remaining was from countries including Canada, India, and Turkey.

To compensate ag producers for their lost exports due to the trade war, the US government provided direct payments to producers, adding up to $28 billion in relief across 2018 and 2019.

American whiskey exports also faced retaliation. The EU (then including the UK) placed 25 percent tariffs on whiskey exports, which remained in place until January 2022 in the EU and June 2022 in the UK, at which point the Biden administration reached agreements that also softened the US tariffs.

Prior to the retaliatory tariffs, American whiskey exports to the EU and UK totaled $702 million in 2018. Imports dropped by a combined 27 percent from 2018 to 2019 as tariffs went into effect and fell by another 15 percent from 2019 to 2020. Assuming (conservatively) exports would have instead remained flat, the tariffs resulted in $649 million of lost US whiskey exports to the EU and UK from across 2019, 2020, and 2021. Whiskey exports remained depressed below their pre-tariffTariffs are taxes imposed by one country on goods imported from another country. Tariffs are trade barriers that raise prices, reduce available quantities of goods and services for US businesses and consumers, and create an economic burden on foreign exporters. level until 2023.

Lost export sales translate to lost incomes for exporters, and not every sector that experiences losses receives government compensation. A renewed trade war will again bring harm to US exporters. Already, in response to the US-imposed national emergency IEEPA tariffs on China, Canada, and Mexico and national security Section 232 tariffs on steel and aluminum from all trading partners, China, Canada, and the European Union have announced or imposed the following retaliation as of March 13, targeting $190 billion of US exports in total:

• China IEEPA retaliation
  • 10 percent and 15 percent tariffs on $13.9 billion of US exports (including ag equipment and oil) effective on February 10
  • 10 percent and 15 percent tariffs on $19.5 billion of US exports (including agricultural products) effective on March 10
• Canada IEEPA retaliation
  • 25 percent tariffs on $20.8 billion of US exports effective on March 4
  • 25 percent tariffs on $86.7 billion of US exports scheduled for March 23
  • Planned 25 percent taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on electricity exports from Ontario to the US, currently suspended
• Canada Section 232 retaliation
  • 25 percent tariffs on $20.7 billion of US exports effective on March 13 (including steel and aluminum)
• European Union Section 232 retaliation
  • Lift suspension of previous tariffs, with rates of up to 50 percent, affecting $8 billion of US exports scheduled for April 1 (including whiskey)
  • Expand tariffs to an additional $20 billion of US exports scheduled for April 13

As we learned in the first trade war, retaliation will exact harm on US exporters by lowering their export sales—and the US-imposed tariffs will directly harm exporters too. US-imposed tariffs can burden exporters by increasing input costs, which acts like a tax on exports. Rather than boost the competitiveness of US businesses, a trade war will increase costs and invite harmful foreign retaliation, making it harder for US-based businesses to compete around the world.

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