Historical evidence and recent studies show that tariffs are taxes that raise prices and reduce available quantities of goods and services for US 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 Bush administration’s 2002 US 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.
We estimate Trump’s proposed tariffs and partial retaliation from all trading partners would together offset more than two-thirds of the long-run economic benefit of his proposed tax cuts. Explore our analysis of Trump trade war policies below.
We estimate the 25 percent tariffs on Canada and Mexico and 10 percent tariffs on China proposed to go into effect as early as February 1, 2025, would shrink economic output by 0.4 percent and increase taxes by $1.2 trillion between 2025 and 2034 on a conventional basis.
20 min read
President-elect Trump may want to impose tariffs to encourage investment and work, but his strategy will backfire. Tariffs will certainly create benefits for protected industries, but those benefits come at the expense of consumers and other industries throughout the economy.
5 min read
Lawmakers will need to pursue fiscal responsibility as they address the tax law expirations, but fiscal responsibility requires finding sound ways to pay for spending priorities. Tariffs don’t make the cut.
4 min read
If reelected, President Trump would drastically escalate the trade war he started during his first term. But what often goes unnoticed is President Biden’s role in continuing Trump’s first trade war. In fact, more tax revenue from the trade war tariffs has been collected under Biden than under Trump.
5 min read
The bulk of economic evidence shows for most of the new tariffs imposed under the Trump administration, US firms or consumers bore 100 percent, or even more, of the burden through lower profits or higher retail prices.
5 min read
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.
5 min read
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.
50 min read
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.
6 min read
We estimate Trump’s proposed tariffs and partial retaliation from all trading partners would together offset more than two-thirds of the long-run economic benefit of his proposed tax cuts.
12 min read
The OECD recently released a trove of new documents on a draft multilateral tax treaty. The U.S. Treasury has opened a 60-day consultation period for the proposal and is requesting public review and input.
7 min read
The assessment of the tariffs President-elect Donald Trump imposed in 2018 and 2019 is clear: the policies have had a negative effect on American’s welfare.
4 min read
Short FormPoliticians often bemoan the trade deficit, but their disdain for this economic statistic is largely misplaced. The trade deficit reflects deeper choices about how we use our money, and reducing it may require lowering our standard of living.
4 min read
What can Former President Trump’s previous tariff efforts—specifically the safeguards he authorized on imported washing machines in 2018—tell us about his most recent proposal for a 10 percent tariff on all imports?
6 min read
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.
4 min read
The United Nations (UN) is preparing to flex its muscles on international tax policy. Several developing countries say the OECD’s approach favors richer countries at their expense, and the UN hopes to fix this.
5 min read
Canada is planning to join the club of countries that, in the past 3 years, introduced a digital services tax (DST) despite U.S. opposition and concerns expressed by Canadian businesses.
4 min read
Sens. Kevin Cramer (R-ND) and Christopher Coons (D-DE) have recently introduced a bill laying the groundwork for a possible solution to the problem: a tax on the carbon content of imports. But it falls short of the optimal approach in several ways.
4 min read
The legislation follows from the bipartisan concern regarding tax policies adopted by other countries specifically targeting U.S. businesses or the U.S. tax base.
6 min read
The Carbon Border Adjustment Mechanism (CBAM) is a key aspect of the EU’s broader Fit for 55 package which aims to cut 55 percent of net greenhouse gas (GHG) emissions in the EU by 2030. The growing number of competing climate policies between the EU and U.S., such as tax provisions in the Inflation Reduction Act, could present policymakers on both sides of the Atlantic an opportunity to work together.
5 min read
When designed well, excise taxes discourage the consumption of products that create external harm and generate revenue for funding services that ameliorate social costs. The effectiveness of excise tax policy depends on the appropriate selection of the tax base and tax rate, as well as the efficient use of revenues.
83 min read
The overall U.S. tax and transfer system is overwhelmingly progressive, and understanding the extent—and source—of that progressivity is essential for lawmakers considering the trade-offs associated with each tax policy decision.
23 min read
Focusing on the “threat” to European industry caused by the Inflation Reduction Act rather than internal tax system flaws puts the EU at risk of slower economic growth and possibly losing some of its important industrial base. It is also contrary to the EU’s geopolitical goals.
4 min read
If the EU wants to strategically compete with economic powers like the United States or China, it needs principled, pro-growth tax policy that prioritizes efficient ways to raise revenue over geopolitical ambitions.
6 min read
Before EU policymakers rush to implement massive reforms, they should remember the goals of the Single Market, its international limitations, and the role of tax policy.
4 min read
The EU’s unilateral approach with carbon taxes, faster track on the global minimum tax, and threat of renewed efforts on DSTs means that U.S. policymakers face some hard choices. Policymakers on both sides of the Atlantic should keep in mind pro-growth tax and trade principles that promote a rules-based international order and increase opportunity.
7 min read
As it stands, Pillar One would usher in the end of many digital services taxes (though perhaps not all) at the cost of increased complexity (in an already complex and uncertain system).
4 min read
Even though tariffs are invisible, their effects clearly are not. They might be sold as a tool to strengthen the economy, but tariffs are just taxes that make everyone worse off.
A border-adjusted carbon tax that uses some of the revenue for pro-investment tax reform could improve U.S. more competitiveness while also addressing concerns with a carbon tax.
29 min read
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.
14 min read