Shipping containers will be found on February 3, 2025 at the Port of Montreal, Montreal, Canada.
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President Donald Trump imposed a wide range of tariffs on China on Tuesday, but the tariff threat lies on other major trading partners, including Canada, the European Union and Mexico.
That may be surprising: how tariffs have been put into practice throughout our history, and is Trump unique in his use?
“Three Rs” of customs
The United States has been using tariffs since its founding in the 18th century.
In fact, the Customs Act of 1789 was one of the first legislation passed by Congress.
Since then, the US has achieved three broad targets using tariffs, said Douglas Irwin, professor of economics at Dartmouth University and former president of the Economic History Association.
Irwin calls them “three RSs.” Revenues, restrictions (importing barriers to protect domestic industries), and interaction (negotiation chips to reduce transactions with other countries).
Using customs duties on revenue
Customs duties are taxes on US imports paid by entities importing foreign goods. These taxes will generate revenue to help fund the federal government.
Because of almost a third of the history of the nation (from its establishment to the Civil War), revenue motives were “highest importance” as drivers who impose import obligations, Irwin said. The federal government relied on tariffs of more than 90% of its revenue during that period, he said.
But things changed after the civil war, Irwin said. The United States began to impose other taxes, such as excise taxes, which made the state less dependent on tariffs.
According to Irwin, between 1860 and 1913, when the income tax was created, about half of federal revenue generated about half of federal revenue.
The size of the government grew significantly in the 1930s – creating new deal programs like Social Security – and later at Santa Clara University, which studied economic history for defence spending during World War II and the Cold War. Chris James Mitchner, a professor of economics, said Politics and Economics.
Today, “Taxes cannot generate enough revenue to fund government spending,” Mitchner said. “There is no way we can support the size of the US military in terms of tariff revenue.”
Limitations and Relationships
From civil war to Great Repression, the US mainly used tariffs as a restrictive measure to imports, sequestering the domestic market from foreign competition, Irwin said.
For example, the 1930 Customs Act, commonly known as Smoot Holy tariffs, collects protective tariffs on approximately 800-900 types of goods, accounting for approximately 25% of all goods imported into the US. It’s there.
The post-era that emerged, especially the post-World War II period, came to an age of “reciprocity.”
The United States helped to develop a general agreement on tariffs and trade in 1948. In 1948, it was the predecessor of the World Trade Organization, setting global rules for trade and was led into an era of low tariffs.
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That said, the US also used tariffs as a reverse negotiation tip before World War II.
For example, before the United States annexed Hawaii, it signed a free trade agreement with the Kingdom of Hawaii in 1875. The treaty granted the United States tax-free imports of Hawaiian sugar and other agricultural products in exchange. Later in a harbor known as Pearl Harbor.
How the president’s tariff power grew
Before World War II, US import taxes are fairly high, ranging from 20% to 50%, and sometimes reaching 60%, Irwin said. They were “very low” in 1950 or so, he said.
Mitchener said the average obligation for goods subject to tariffs was between about 2% and 4% in the 2010s before Trump’s first term.
“That’s what President Trump is trying to overturn, and this is this kind of low tariff since World War II,” Irwin said.
Before 1934, Andrew Wender Cohen, a history professor at Syracuse University, had the authority to control tariff rates and negotiations.
However, Democrats, known at the time as free trade parties, had a huge majority around the New Deal era, passed the Mutual Trade Agreement Act of 1934, and the right to negotiate tariffs in certain cases with the President. Cohen said he admitted.
“That’s when the president has gained much more important authority,” Cohen said.
That power, he said, accelerated after 1948 during the “transformation of the entire global economic order.”
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President Donald Trump is in the White House oval office on February 3, 2025.
Anna Moneymaker | Getty Images News | Getty Images
That said, Trump’s use of tariff policies is “very unusual” among modern US presidents, Cohen said.
For one, Trump “likes all three Rs” – revenue, restrictions, reciprocity, Irwin said.
In the campaign trajectory, for example, he suggested that tariffs could replace US income taxes to fund the government. He said during his campaign they would create jobs for US factories and threatened to use them to use them in strong arm Denmark to give up Greenland.
But there are trade-offs, Irwin said. For example, he said that restricting imports would deny some of the ability to generate revenue from tariffs, as the tariff base would decrease. (These additional obligations will cause businesses to either reduce imports or buy fewer people, for example.)
“You can’t achieve all three objectives at the same time,” he said.
Moreover, there was no previous president trying to link the US drug crisis to trade policy, as Trump did with fentanyl.
“It’s a novel,” Mitchner said.
Many presidents use tariffs. For example, George W. Bush, Ronald Reagan and Richard Nixon applied tariffs to protect the US steel industry, as Trump did in his first term, Irwin said.
“What’s unusual about Trump is that he’s not only choosing a particular industry he considers strategically important, but he’s blocking imports almost entirely with some of these countries.” Irwin said.
Trump, for example, charged a 10% extra charge on all Chinese products, threatening a 25% tariff on imports from Canada and Mexico.
“The president, who I remember recently, has never actually used tariffs in full or broad brush ways to achieve a variety of purposes,” Irwin said. “They stick to the rules that we belong to the WTO. This means keeping tariffs low as long as other countries keep tariffs low.”
Cohen agreed.
The Global Trade Treaty has established a mechanism by which states can file complaints about alleged unfair trade practices, as Trump signed in his first term, Cohen said I stated. He said that if trade rules are violated, the state can generally raise tariffs as a retaliation measure if they are violated, he said.
Trump’s recent unsolved tariff announcement is unique in this respect, he said.
“We can’t imagine any precedent,” Cohen said.
“Since 1934, the administrative department has had far more authority, but it has always been subject to certain terms of the contract,” he said.
