A total of $80 billion in additional taxes were levied by the Trump administration in numerous rounds of tariffs on $380 billion worth of goods (based on 2018 values), including solar panels, washing machines, and thousands of products from China. Other nations retaliated by introducing their own retaliatory levies. Except for limited exemptions or modifications to some steel and aluminum tariffs, as well as washing machine and solar panel levies, the Biden administration has mostly kept the tariffs in place.
We examine the effects of tariffs on the US economy using the Tax Foundation Taxes and Growth Model. Tariffs harm the economy by reducing production, creating fewer employment, and lowering income levels. Additionally regressive, tariffs disproportionately affect consumers with lower incomes.
The Trump-Biden tariffs, according to the Tax Foundation model, will result in a long-term GDP decline of 0.21 percent, a 0.14 percent increase in wages, and a loss of 166,000 full-time equivalent jobs.
Other nations responded by imposing retaliatory tariffs on American exports, which will, according to our estimates, further lower GDP by 0.04 percent and result in the loss of 29,000 full-time equivalent employment.
Tariffs Raise Prices and Reduce Economic Growth
Most economists concur that open trade results in higher economic output and income, whereas trade barriers result in lower economic output and income. Evidence from the past demonstrates that tariffs increase costs and decrease the quantities of goods and services available to American firms and consumers, which has a negative impact on income, employment, and economic activity.
Through a few different channels, tariffs might lower American production. One potential is that manufacturers and consumers may pay more as a result of a tariff. Tariffs may increase the price of components and raw materials, which would drive up the cost of finished items and lower output from the private sector. Lower salaries for employees and capital owners would follow from this. Similar to how increased consumer prices brought on by tariffs would lower the value of labor and capital income after taxes. Higher prices would discourage Americans from working and investing, resulting in reduced output because they would reduce the return on labor and capital.
As an alternative, the dollar might strengthen in response to tariffs, which would reduce any possible price increases for American consumers. However, the stronger currency would make it harder for exporters to sell their products on the international market, resulting in decreased profits for exporters. A smaller economy would result from this since it would diminish the output and incomes of the US economy for both employees and capital owners.
Tariffs Imposed by the United States
We calculated that the multiple rounds of tariffs implemented by the Trump administration resulted in an overall tax increase of close to $80 billion during the administration and had a negative impact on more than $380 billion worth of commerce at the time of implementation.
Except for the suspension of some tariffs on imports from the European Union, the replacement of tariffs with TRQs on imports of steel and aluminum from the European Union, the United Kingdom, and Japan, and the expiration of the tariffs on washing machines after a two-year extension, most tariffs have remained in place under the Biden administration.
Note that because tariffs reduce real income, which lowers other tax receipts, the overall money generated will be less than what the tariffs generate.
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
Currently, the United States imposes a 25% duty on around $250 billion of imports from China and a 7.5 percent levy on about $112 billion of those imports.
In August 2017, the United States Trade Representative launched an investigation into China under the Trump administration. The inquiry was completed in a report released in March 2018 that indicated China was engaging in unfair trade practices. President Trump announced duties on goods worth up to $60 billion the same day. A list of Chinese goods valued at $50 billion that would be subject to fresh 25 percent tariffs was immediately published by the administration. Stage one of the tariffs, which applied to $34 billion worth of Chinese imports, started on July 6, 2018, and stage two, which applied to the remaining $16 billion, started on August 23, 2018. These tariffs result in an additional $12.5 billion in taxes.
Stage three Section 301 tariffs of 10% were levied by the Trump administration in September 2018 on $200 billion worth of Chinese imports. This stage was supposed to rise to 25% starting in January 2019, however the increase was postponed until it could take effect in May 2019. Under the previous administration, more tariffs were also threatening against China:
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 an almost 15-year World Trade Organization (WTO) dispute with the European Union, the United States triumphed in October 2019. The WTO decision gave the US the right to slap tariffs of up to 100% on EU imports worth $7.5 billion. Aircraft will be subject to 10% tariffs starting on October 18, 2019, and agricultural and other products would be subject to 25% tariffs (our estimate utilizes the average of the two rates).
Under a deal made by the Biden administration, tariffs on the European Union were deferred starting in the summer of 2021 for a period of five years.
Section 201, Solar Panels and Washing Machines
As a consequence of a Section 201 inquiry, the Trump administration declared in January 2018 that it would start imposing tariffs on imports of washing machines for three years and imports of solar cells and modules for four years.
Based on the import values and quantities of four 8-digit HTS subheadings for 2018 that are listed on page 12 of this report, we estimate that the solar cell and module tariffs resulted in a $0.2 billion tax increase. Based on the import values and quantities of six 8-digit HTS subheadings for 2018, which are listed on page 8 of this report, we calculated that the washing machine tariffs amounted to a $0.4 billion tax increase.
The washing machine tariffs were extended by the Trump administration in 2021 for an additional two years, ending in February 2023; they are currently no longer in effect. The Biden administration maintained the tariffs on solar panels for a further four years in 2022, but later granted temporary two-year exemptions for imports from four Southeast Asian countries, which make up a sizable portion of solar panel imports, starting in 2022.
Model Results
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) | |
|---|---|---|---|
| Tariff Revenue | $73.9 | $2.7 | $71.2 |
| Long-run GDP | -0.21% | -0.01% | -0.21% |
| GDP ($2018) | -$53.6 | -$2.0 | -$51.7 |
| Wages | -0.14% | -0.01% | -0.13% |
| FTE Jobs | -166,000 | -6,000 | -160,000 |
Source: Tax Foundation Taxes and Growth Model, March 2018. |
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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 imports, billions | 2018 imports, billions | 2019 imports, billions | 2020 imports, billions | 2021 imports, billions | Tariff Rate |
|---|---|---|---|---|---|---|
| Section 232 Steel (March 2018) | $15.9 | $15.5 | $11.4 | $7.2 | $13.7 | 25% |
| Section 232 Aluminum (March 2018) | $9.0 | $9.6 | $8.4 | $5.2 | $7.6 | 10% |
| Section 232 Derivative Steel Articles (February 2020) | $0.4 | $0.5 | $0.5 | $0.4 | $0.4 | 25% |
| Section 232 Derivative Aluminum Articles (February 2020) | $0.2 | $0.3 | $0.2 | $0.2 | $0.3 | 10% |
| Section 301, List 1 (July 2018) | $31.9 | $30.3 | $22.7 | $20.9 | $24.7 | 25% |
| Section 301, List 2 (August 2018) | $13.8 | $14.8 | $8.6 | $9.8 | $10.4 | 25% |
| Section 301, List 3 (September 2018; increased May 2019) | $187.6 | $206.1 | $126.9 | $112.8 | $126.4 | 25% |
| Section 301, List 4A (September 2019; lowered January 2020) | $101.9 | $112.2 | $114.7 | $103.2 | $105.3 | 15% in 2019; then 7.5% |
| Section 301, List 4B (Never went into effect) | $151.2 | $160.0 | $159.6 | $164.4 | $206.3 | Suspended |
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 and aluminum imports from the EU and UK will be subject to tariff-rate quotas as well as steel imports from Japan. TRQs will be reflected in the table when 2022 import volumes become available in 2023. 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. |
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Retaliatory Tariffs Imposed and Threatened
As seen in the preceding tables, several jurisdictions have suggested and enacted retaliatory tariffs on the United States.
The current countermeasures to Section 232 steel and aluminum tariffs target American goods worth more than $6 billion, with a total tax of about $1.6 billion. News articles served as the foundation for the tariff income for Turkey, India, Russia, and Canada. The retaliatory tariffs imposed by Canada, Mexico, and the EU under Section 232 have been removed.
| Jurisdiction | U.S. Exports (billions, 2018) | Tariff Rate | Estimated Levy (billions) |
|---|---|---|---|
| China | $2.5 | 15-25% | $1.0 |
| Turkey | $1.7 | 4-70% | $0.3 |
| India | $1.4 | 10-50% | $0.2 |
| Russia | $0.4 | 25-40% | $0.1 |
| Total | $6.1 | $1.6 | |
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. |
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China has imposed three rounds of tariffs on more than $106 billion worth of American goods in retaliation for the United States' Section 301 penalties, amounting to an estimated charge of around $11.6 billion. Because they were eliminated under Phase 1 of the U.S.-China trade agreement, the stage 4b tariffs should be noted that they are not included in the examination of economic effects. The agreement also led to a decrease in Stage 3 and Stage 4a tariffs.
| Stage | U.S. Exports (billions, 2018) | Tariff Rate | Estimated Levy (billions) |
|---|---|---|---|
| Stage 1 | $12.9 | 25% | $3.2 |
| Stage 2 | $11.6 | 25% | $2.9 |
| Stage 3 | $59.7 | 2.5%/5%/5-25% | $4.5 |
| Stage 4a | $25.5 | 2.5-5% | $1.0 |
| Stage 4b* | $41.8 | 5-10% | $3.1 |
| Total | $109.7 | $11.6 | |
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. |
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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.
Model Results
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 |
| Long-run GDP | -0.04% | 0.00% | -0.03% |
| GDP (billions of 2018 dollars) | -$9.4 | -$1.1 | -$8.3 |
| Wages | -0.02% | 0.00% | -0.02% |
| FTE Jobs | -29,000 | -4,000 | -26,000 |
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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Timeline of Activity
July 7, 2023
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.
April 1, 2022
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.
October 19, 2021
Under President Biden, the U.S. will suspend tariffs on aircrafts and other goods from the E.U. under a five-year pause in the ongoing Boeing-Airbus dispute. We have reorganized the layout of the tracker.
September 18, 2020
U.S. to eliminate tariffs on $2.5 billion worth of Canadian aluminum that had been imposed on August 16, 2020, to avoid Canadian retaliatory tariffs.
August 13, 2020
U.S. to reimpose tariffs on $2.5 billion worth of Canadian aluminum on August 16, 2020, and Canada to impose retaliatory tariffs.
February 14, 2020
U.S. reduces tariffs on $120 billion of Chinese goods by half to 7.5% and China reduces tariffs on approximately $75 billion of US goods in half to 2.5% and 5%.
December 16, 2019
U.S. postpones indefinitely the scheduled tariff of 15% on $160 billion worth of goods from China and announces plans to decrease the 15% tariff on $120 billion worth of goods from China to 7.5% (date unknown, will be included in the model when the decrease takes effect). China took corresponding measures and canceled their schedule tariff increase.
December 5, 2019
U.S. concludes Section 301 investigation into France's Digital Services Tax, threatens tariffs on $2.4 billion French products.
Our analysis now includes tariffs on solar panels and washing machines.
October 18, 2019
U.S. imposes 10% and 25% tariffs on $7.5 billion European Union goods under WTO ruling.
October 15, 2019
U.S. postpones scheduled tariff hike from 25% to 30% on $250 billion worth of goods from China.
October 3, 2019
U.S. announces 10% and 25% tariffs on $7.5 billion European Union goods under WTO ruling, with the authority to raise the tariffs to 100%.
September 12, 2019
U.S. delays tariff increase from 25% to 30% on $250 billion worth of Chinese goods from Oct. 1 until Oct. 15.
August 26, 2019
U.S. announces the 25% tariff on $250 billion of Chinese goods would increase to 30 percent, effective Oct. 1, after a comment period.
August 23, 2019
China announces additional tariffs on $75 billion of U.S. imports, from 5-10%, and will resume tariffs on U.S. cars and car parts suspended earlier in 2019. Tariffs to begin Sept. 1 and end Dec. 15.
U.S. announces 10% tariff on $300 billion of Chinese goods to increase to 15%, some beginning Sept. 1, others on Dec. 15.
August 13, 2019
U.S. announces 10% tariff on $300 billion of Chinese goods would be delayed from Sept. 1 until Dec. 15.
August 1, 2019
U.S. announces 10% tariff on $300 billion Chinese goods, to be levied on Sept. 1, lowered from the previously announced 25% on $325 billion.
July 20, 2019
U.S. confirms announced July 5 plans to impose tariffs on all Chinese imports, roughly $500 billion of goods, modeled as a 10% tariff.
July 5, 2019
U.S. again threatens additional tariffs on Chinese imports if China further retaliates, increasing threats from levies on $200 billion and another $200 billion to $200 billion and $300 billion.
June 10, 2019
U.S. “indefinitely suspended” previously announced tariffs against Mexican products, set to begin at a 5% rate in June and gradually rise to 25%.
May 31, 2019
U.S. threatens 5% tariff beginning June 10 on $346.5 billion of imports from Mexico until illegal immigration across the southern border stops. It would rise to 10% on July 1; 15% on Aug. 1; 20% on Sept. 1; and 25% on Oct. 1.
May 22, 2019
U.S. announces it will lift steel and aluminum tariffs on Canada and Mexico, and those nations will lift their retaliatory tariffs.
May 10, 2019
U.S. announces it will raise tariffs on $200 billion of imports from China from 10% to 25%, with threats to impose an additional 25% on $325 billion of goods.
August 29, 2018
Tax Foundation separated our automobile tariff estimate to show auto imports from Canada, and made slight estimate adjustments to correct for rounding.
August 16, 2018
U.S. doubles the tariffs on steel and aluminum imports from Turkey, which responds by doubling its tariffs on 22 U.S. products.
August 8, 2018
U.S. threatens a 10% tariff on $200 billion of Chinese goods if China retaliates for the previous 10% tariff, and that would extend to an additional $200 billion of goods. This would amount to a $40 billion tax increase.
August 1, 2018
U.S. considers increasing the proposed 10% tariff to 25% on $200 billion of Chinese imports. That would be a $30 billion tax increase.
July 20, 2018
U.S. reaffirms plans to impose tariffs on all Chinese imports (roughly $500 billion).
July 13, 2018
Russia will begin placing tariffs on U.S. goods, worth about $87.6 million. (Slight adjustments were made to our estimates to correct for rounding.)
July 6, 2018
U.S. announces readiness to target an additional $200 billion in Chinese imports, and an additional $300 billion after that—an increase of $100 billion from previous threats.
June 28, 2018
Turkey will begin placing tariffs on U.S. goods, worth about $266.5 million.
