May 23, 2019

Economic View: Trump’s Tariffs Haven’t Really Transformed Trade. Yet.

In March, the White House added a 25 percent tariff to about $31 billion worth of imported steel, and a 10 percent tariff to $17 billion of imported aluminum. (This does not apply to imports from Argentina, Australia and Brazil.) In July and August, Mr. Trump kicked off a trade war with China by imposing an extra 25 percent tariff on $50 billion worth of imports from the country. China retaliated, so Mr. Trump punched back, imposing an additional 10 percent tariff on $200 billion in Chinese goods.

I asked Chad Bown, a trade policy expert at the Peterson Institute for International Economics, a Washington think tank where I also serve as a nonresident senior fellow, for a back-of-the-envelope calculation of how consequential these changes would be.

He found that Mr. Trump’s actions would increase America’s annual tariff revenue by about $42 billion. That sounds like a big number and it has garnered major headlines. But if you consider the scale of international trade, the figure starts to seem more modest: Last year, Americans spent roughly $2.3 trillion on imports.

These numbers suggest the average tariff rate in 2018 will rise by about 1.8 percentage points, to about 3.2 percent. This means that Mr. Trump has already rolled tariffs back to roughly their level at the beginning of President Bill Clinton’s administration. Even so, average tariffs remain lower — by quite a large margin — than they have been through most of United States history.

It’s worth putting this in a global context. Even after these recent tariff increases, the United States will charge lower tariffs on average than most countries, although it has become notably more protectionist than major trading partners like Canada and the European Union.

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