In light of high inflation and rising prices, the Biden administration announced it’s considering dropping its current tariffs on Chinese imports to ease inflationary pressures. While the Trump tariffs were intended to protect American industries, they have largely hurt the U.S. economy by burdening U.S. industry and workers. And they invited retaliatory tariffs, primarily from China, on U.S. exports, which have damaged the economy even more.
Historical evidence and recent studies show that 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. For example, the effects of higher steel prices, largely a result of the 2002 Bush steel tariffs, led to a loss of nearly 200,000 jobs in the steel-consuming sector, a loss larger than the total employment in the steel-producing sector at the time. It’s also worth noting that measures of trade flows, such as the trade balance, are accounting identities and should not be misunderstood to be indicators of economic health.
The Biden administration should provide relief to U.S. industries and workers by lifting the Trump tariffs, as they have failed in their objective to bring better trading practices and instead brought about economic damage. Further, the Biden administration should join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or sign bilateral trade agreements with other Asian-Pacific countries to continue to diversify U.S. supply chains, expand access to foreign markets, and promote U.S. economic growth. Learn more about Biden tariffs and trade proposals and explore our analysis of Trump trade war policies below.
The Trump administration imposed nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products, amounting to one of the largest tax increases in decades. The Biden administration has so far kept most of the Trump administration tariffs in place.
Former President Donald Trump’s proposed 10 percent tariff would raise taxes on American consumers by more than $300 billion a year—a tax increase rivaling the ones proposed by President Biden.
While the U.S. tariffs were intended to protect American industries, they have largely hurt the U.S. economy. Rather than pass on the tariffs to Chinese consumers, analysis shows that most U.S. firms simply bore the costs.
The Section 232 tariffs on imports of steel and aluminum raised the cost of production for manufacturers, reducing employment in those industries, raising prices for consumers, and hurting exports.
Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
As lawmakers today look for ways to boost American industry and reduce costs for consumers, they should pay attention to the mountains of evidence that the Trump-Biden tariffs have harmed American consumers and businesses.
Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
The bulk of economic evidence shows for most of the new tariffs imposed under the Trump administration, U.S. firms or consumers bore 100 percent, or even more, of the burden through lower profits or higher retail prices.
As lawmakers today look for ways to boost American industry and reduce costs for consumers, they should pay attention to the mountains of evidence that the Trump-Biden tariffs have harmed American consumers and businesses.
Of the many tax policies modeled in our new Options for Reforming America’s Tax Code 2.0, repealing the tariffs imposed under President Trump’s administration would be one of the simplest ways policymakers could boost economic growth.
As countries move closer to agreement on how the OECD Pillar 1 Amount A will work and which companies will be impacted by it, it is incredibly important for policymakers to continue to evaluate not just the intended effects but also the potential unintended consequences.
Get answers to some of the tax policy questions we hear most often from taxpayers, businesses, and journalists. Learn everything from the basics of who pays taxes and the difference between credits and deductions, to how taxes impact the economy and what constitutes sound tax policy. Discover additional resources to explore each question and topic in more depth.
Depending on your perspective, tariffs are either a great way to tax countries like China for their protectionist trade policies or they are a big reason why all those imported toys, clothing and holiday gifts cost more than you expected. You’ll learn what tariffs are, how they function, and how they can impact the domestic U.S. economy.
A multilateral solution to digital taxation would be preferable over DSTs and retaliatory measures, especially during these challenging economic times. DSTs are indeed distortionary taxes that can act as trade barriers. Retaliatory tariffs, however, only further weaken the U.S.-French trade relationship and will negatively impact both economies.
Biden has not specified how he would approach the Trump tariffs, though his advisers have said he will at least review them.