- 10-Year Revenue (Billions) $73.9
- Long-run GDP -0.21%
- Long-Run Wages -0.14%
- Long-Run FTE Jobs -166,000
- 10-Year Revenue (Billions) $0
- Long-run GDP -0.04%
- Long-Run Wages -0.02%
- Long-Run FTE Jobs -29,000
Source: Tax Foundation Taxes and Growth Model, March 2018
- The update adds a new column to the “Imports Affected by U.S. Tariffs” table, reflecting import data for calendar year 2022, data updates for prior years, and tariff-rate quotas that took effect in 2022 for certain steel and aluminum imports.
- Tariffs on washing machines expired in February 2023 after an initial three-year period and a two-year extension. The Biden administration provided a two-year suspension of solar panel tariffs for four Southeast Asian nations beginning in 2022. The update adjusts the revenue and economic results for imposed tariffs.
- 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.
- The Trump administration imposed nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019, amounting to one of the largest 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. increases in decades.
- The Biden administration has kept most of the Trump administration tariffs in place, except for a five-year suspension of WTO aircraft dispute tariffs, replacement of certain steel and aluminum tariffs with tariffTariffs are taxes imposed by one country on goods or services imported from another country. Tariffs are trade barriers that raise prices and reduce available quantities of goods and services for U.S. businesses and consumers. rate quotas, and the expiration of washing machine tariffs.
- We estimate the tariffs still in effect will reduce long-run GDP by 0.21 percent, wages by 0.14 percent, and employment by 166,000 full-time equivalent jobs.
The Trump administration imposed several rounds of tariffs, amounting to an $80 billion tax increase on $380 billion worth of imports (based on 2018 values), ranging from thousands of products from China to steel and aluminum and washing machines and solar panels. Other countries responded by imposing retaliatory tariffs of their own. The Biden administration has retained most of the tariffs, save for narrow exemptions or changes to certain steel and aluminum tariffs and washing machine and solar panel tariffs.
Using the Tax Foundation Taxes and Growth Model, we analyze the effects of 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 Trump-Biden tariffs will reduce long-run GDP by 0.21 percent, wages by 0.14 percent, and employment by 166,000 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 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 and affected more than $380 billion worth of trade at the time of implementation.
Under the Biden administration, most tariffs have stayed in place except for the suspension of certain tariffs on imports from the European Union, the replacement of tariffs with TRQs on steel and aluminum from the European Union and United Kingdom and imports of steel from Japan, and the expiration of the tariffs on washing machines after a two-year extension.
Note the total revenue generated will be less than what the tariffs generate, because tariffs reduce real income, which lowers 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.
The value of imported steel totaled $29.4 billion and the value of imported aluminum totaled $17.6 billion in 2018. Based on 2018 levels, the steel tariffs would have amounted to $9 billion and the aluminum tariffs to $1.8 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 took effect April 1, 2022. Based on 2018 import levels, the TRQs will reduce tariff revenue by approximately $0.4 billion.
- TRQs for the UK took 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 $2.7 billion of the $74 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 had already taken effect, while stage 4b was 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 to reduce the stage 4a tariffs from 15 percent to 7.5 percent in January 2020.
Section 301 tariffs on China currently remain in place under the Biden administration and account for $71 billion of the $74 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 authorized the United States to impose tariffs of up to 100 percent on $7.5 billion worth of EU goods. Beginning October 18, 2019, 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 imports for three years and solar cell and module imports for four years as the result of a Section 201 investigation.
We estimate the solar cell and module tariffs amounted 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. We estimated the washing machine tariffs amounted 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.
In 2021, the Trump administration extended the washing machine tariffs for two years through February 2023, and they have now expired. In 2022, the Biden administration extended the solar panel tariffs for four years, though later provided temporary two-year exemptions for imports from four Southeast Asian nations beginning in 2022, which account for a significant share of solar panel imports.
According to the Tax Foundation model, the Trump-Biden tariffs would reduce long-run GDP by 0.21 percent, wages by 0.14 percent, and employment by 166,000 full-time equivalent jobs. Note we do not show the solar panel tariffs because of their small magnitude.
|Total||Section 232 – Steel and Aluminum||Section 301 – China (25% on $250; 7.5% on $112)|
|Source: Tax Foundation Taxes and Growth Model, March 2018.|
The 0.21 percent reduction in long-run GDP is about 12 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.
|Tariff and Effective Date||2017||2018||2019||2020||2021||2022||Tariff Rate|
|Section 232 Steel (March 2018)||$15.9||$15.5||$11.4||$7.2||$13.7||$9.5||25%|
|Section 232 Aluminum (March 2018)||$9.0||$9.6||$8.4||$5.2||$7.6||$9.8||10%|
|Section 232 Derivative Steel Articles (February 2020)||$0.4||$0.5||$0.5||$0.4||$0.5||$0.6||25%|
|Section 232 Derivative Alumininum Articles (February 2020)||$0.2||$0.3||$0.2||$0.2||$0.3||$0.3||10%|
|Section 301, List 1 (July 2018)||$31.9||$30.3||$22.0||$20.1||$24.1||$26.1||25%|
|Section 301, List 2 (August 2018)||$13.8||$14.8||$8.5||$9.6||$10.3||$10.7||25%|
|Section 301, List 3 (September 2018, increased May 2019)||$187.6||$206.1||$126.4||$112.3||$125.7||$118.0||10% in 2019, then 25%|
|Section 301, List 4A (September 2019, lowered January 2020)||$101.9||$112.2||$113.9||$101.4||$104.7||$102.0||15% in 2019; then 7.5%|
|Section 301, List 4B (Suspended)||$151.2||$160.0||$160.0||$165.5||$205.8||$147.1||Suspended|
|Total Imports Affected by Tariffs||$276.4||$290.7||$256.4||$286.8||$276.9|
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 totals exclude imports from Japan, the EU, and the UK, and aluminum totals exclude imports from the EU and the UK as respective imports are now subject to tariff-rate quotas (TRQs). Excluding all imports for TRQs overstates the savings from TRQs because tariffs still apply when imports exceed historical levels.
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.
|Jurisdiction||U.S. Exports (billions, 2018)||Tariff Rate||Estimated Levy (billions)|
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.
|Stage||U.S. Exports (billions, 2018)||Tariff Rate||Estimated Levy (billions)|
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.
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.
|Total||Section 232 Retaliation||Section 301 Retaliation|
|Tariff Revenue (billions of 2018 dollars)||$0||$0||$0|
|GDP (billions of 2018 dollars)||-$9.4||-$1.1||-$8.3|
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.
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