Definition of a tariff: A tax imposed by one nation on another nation’s goods.
What is the purpose of a tariff? Tariffs have three purposes: to raise money for the government, to protect a nation’s own industries and products, and to punish a nation for some behavior.
What is the history of American tariffs? When the government was small and mainly rural, tariffs were the main source of tax revenue. As the U.S. grew both economically and industrially in the late 19th century and early 20th century, more revenue was needed to pay government bills. That’s when income tax was instituted by the ratification of the 16th Amendment in 1913.
The Great Depression of the 1930s brought about the concept that the government should provide for the needs of all people, not just protect farmers and/or industrialists from competition. The 1930s saw the creation of Social Security Insurance, welfare for the poor, and the protection and support of unionization. Two world wars and the rise of the U.S. as a superpower saw the need to provide for greater defense spending, raising the need for more taxes.
The imposition of the Smoot-Hawley Tariff of 1930 to protect American industries, passed by Congress and signed by President Herbert Hoover, helped to spread the U.S. depression to Europe, deepening pain and suffering worldwide. Eventually, Europe’s depression and damage brought by World War I helped to bring about the rise of fascism in Italy, Germany, and Japan. World War II became the last domino to fall.
When tariffs were imposed on other nations, those punished nations retaliated against us with tariffs of their own. What you give to others you tend to give to yourself. This is the danger of turning inward and seeking self-sufficiency.
In the late 20th century and 21st century, tariffs became a tool to punish economic rivals who dumped their cheaper products on the U.S. market, thus destroying domestic industries. Too much interdependence and globalism make the U.S. more vulnerable to economic and political upheaval abroad.
Currently, China has become the chief object of the U.S. government concern, especially its industries: solar panels, EV automobiles, and aluminum and steel. This “dumping” forced American companies to fold, putting thousands of Americans out of jobs.
President Donald Trump, taking an “America First” stance toward trade, began to impose tariffs on Chinese goods. “The former president and current Republican nominee asserts that tariffs — basically import taxes —will create more factory jobs, shrink the federal deficit, lower food prices and allow the government to subsidize childcare.” Trump advocates a 60% tariff on Chinese goods and 20% tariffs for all the other countries who send goods to the U.S.
“Vice President Kamala Harris has dismissed Trump’s tariff threats as unserious. Her campaign has cited a report that found that Trump’s 20% universal tariff would cost a typical family nearly $4,000 a year.” Harris is right, tariffs are a form of sales taxes upon the American consumer. Tariffs can increase inflation and decrease prosperity.
“But the Biden-Harris administration itself has a taste for tariffs. It retained the taxes Trump imposed on $360 billion in Chinese goods. And it imposed a 100% tariff on Chinese electric vehicles” (AP).
Tariffs have become a national security tool to protect American producers from “unfair competition” and to bolster U.S. self-sufficiency. This became especially important during the COVID-19 epidemic when we found that we had become too dependent on other countries for our national security and for products like semi-conductors—computer chips— and basic medical supplies like rubber gloves and masks.
The use of tariffs requires wisdom and careful use by our government leaders. Too many and too severe tariffs weaken trust among nations and invite retaliation. Too few tariffs—too much free trade—make nations vulnerable in times of stress and crisis.
Tariffs are a governmental tool to protect American products and industries. Like any tool, skill is required when using them. Someone who sees every problem as a nail uses a hammer even when another tool is required.
We must choose leaders who can think in nuanced ways. Consider this when voting for our next president and members of Congress in November.
