Trump’s Tariff Trouble – Nothing New In American History
By Luke Collins
Donald Trump has been certainly busy since making his grand return to the White House on January 20th. He has only been in power for just over four weeks and journalists are already busy trying to keep up with what he is doing. His presidential agenda seems to be doing something controversial every day, then doing something controversial to distract from the previous controversial thing he did. This bombardment of controversial decisions leaves many Americans busy in keeping up with the news as well.
Since Trump has been in power, he has let his close ally and richest man in the world Elon Musk who heads DOGE shut down the US Agency for International Development (USAID) which provides relief to underdeveloped countries around the world including Ukraine, fire many government workers and allowing Elon access to millions of American’s personal information including Social Security numbers. [1] One aspect that many Americans are struggling to process is tariffs, how they work and how it will affect them and the rest of the world.
TARIFFS – A REVIVAL OF AN AMERICAN ICON
Tariffs are taxes charged on goods imported from other countries. The companies that import these products have to pay tax to the government and this raises the price of that product. A percentage is put on the tariff to show its value to the nation, for example Trump is placing a tariff of 10% on all Chinese goods imported to America. Tariffs are an attempt to reduce imports, promote self-sufficiency, raise revenue and exert political leverage. However, tariffs can also have unintended side-effects including raising the prices for the customers due to lack of competition, make domestic industries less efficient, generate tension through favouring of one industry or country over another, and can lead to harmful retaliatory trade wars which Trump seeks to wage now against China. [2]
Tariffs – and protectionism in general – have been a major part of American politics and economics since the The Tariff Act of 1789 until 1913 when President Woodrow Wilson replaced tariffs with income tax.
Donald Trump is no stranger to tariffs. He won the 2016 Presidential election on a similar promise to impose tariffs on Chinese and Mexican goods due to fears that these products were harming local businesses. His first administration imposed tariffs on many items to rebalance the trade deficit, by the 2019 fiscal year customs duties received had reached $72 billion. [3] Importantly, Trump suspended proposed tariffs on Mexico and Canada. Trump’s tariffs were a big part of his 2024 campaign that got him elected by the American people promising that his tariffs would boost the US economy, create jobs and lower prices, a message that was received well by Americans as inflation had increased during the Biden presidency leading to higher prices on consumer goods. Many economists warn that this time, Trump’s tariffs will be more wide-ranging and damaging for American consumers as after-tax income would be lower for consumers. [2]
Trump’s main tariff target in China are goods including toys, shoes and fashion although shipments worth less than $800 would be exempt. These tariffs will negatively affect companies manufacturing electronic devices such as Apple who make their iPhones in China and in 2024, it was reported that globally, 56% of electric batteries were from China. [4] Trump’s justification for high tariffs on Chinese goods is the country’s alleged role in supplying illegal drugs into the US with the White House stating the President was “taking bold action to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country”. [5] Where the tariffs will hit particularly hard is raw materials such as rubber and plastic which American firms need for finished products. China has voiced opposition to a trade war and has responded by introducing a 15% tariff on coal and natural gas imports from the US and a 10% tariff on crude oil and agricultural machinery. There has been little discussion between Trump and Chinese President Xi Jinping, so solutions do not yet seem particularly clear yet.
CANADA & MEXICO
Trump also vowed to hit Canada with a tariff of 25% linking them to the fentanyl crisis despite only being responsible for 1% of fentanyl imports into the US. Having resigned as Prime Minister in December, Trudeau would have hoped that his final few months as caretaker leader would be easy, but Trump’s tariffs have disrupted this. Trudeau has received praise for his handling of the Trump administration, and he has warned business leaders that Trump is determined to annex Canada. A recent Ipsos poll [6] showed that 80% of Canadians are fundamentally opposed to becoming America’s 51st state, the same poll finding that only 37% of Americans support tariffs on Canadian products. Trudeau’s retaliation to Trump’s tariffs was a 25% tariff on $30 billion worth of American goods which would later be applied to $125 billion worth of goods particularly targeting American beer, clothing, vegetables and orange juice. Trudeau stated that “We don’t want to be here, we didn’t ask for this, but we will not back down in standing up for Canadians”. [7] Canada supplies 50% of America’s aluminium, so Trump’s proposed 25% tariff on aluminium and steel entering the US would be costly to Canadians. Canadian energy is set to face a 10% tariff so oil consumers and trades would pay the price. The auto industry will also be affected hard by Trump’s tariffs as companies like General Motors rely on Canadian companies for parts and can increase the prices of new cars by $3000. [8] Trudeau’s resistance has caused Trump to pause the tariffs for 30 days as Trudeau has agreed to a $1.3 dollar border plan [9] to bring more troops to the border and stop the flow of fentanyl into the US, but it still needs to be seen whether or not the two nations can reach a deal.
Trump has repeatedly attacked Mexico in the past, he was elected on the promise to stop the ‘border crisis’, blaming Mexican gangs for smuggling fentanyl into the country, labelling Mexican cartels as ‘terrorist groups’. The 25% tariffs would have a detrimental effect on Mexican goods such as fruit and beer and would hurt the economy as the USA is their most important foreign market. Trump’s threat of tariffs has been one of the first tests of recently elected President Claudia Sheinbaum who has responded well, threatening unspecified retaliatory tariffs while encouraging Mexicans to keep “cool heads”. [10] Trump’s pause of tariffs represents a great victory for Sheinbaum who did agree to send troops to the border to stop fentanyl smuggling but she also got Trump to promise to stop the flow of weapons going into Mexico.
THE TRANSATLANTIC THEATRE
One question many people have is will Trump’s tariffs affect this part of the world. Trump’s 25% tariff on aluminium and steel imports is worrying for the UK steel industry as the US accounts for 10% of UK steel imports which UK Steel described as a “devastating blow”. [11] Trump appears hesitant on placing tariffs on the UK stating that he has a good working relationship with Keir Starmer and that a deal could be worked out, but he has vowed to impose tariffs on the EU. European Commission President Ursula von der Leyen warned “unjustified tariffs on the EU will not go unanswered”. [12]
In terms of Ireland, a new KPMG report outlined that Trump’s tariffs could directly affect a third of Irish exports [13], and that Trump’s proposal to lower corporation tax would reduce Ireland’s corporation tax income. Although less than a tenth the population, America import more from Ireland than they do from the UK, which is part of the reason why recently appointed Taoiseach Micheál Martin commented that Trump’s tariffs will “harm citizens no matter where”. [14] America is the top country for Irish goods exports buying $54b worth of Irish products, with Foreign Minister Simon Harris stressing the importance of working with the Trump administration having spent his time as Taoiseach warning of the implications of Trump’s tariffs. The Windsor Framework which was negotiated as a post-Brexit trading agreement means that Northern Ireland is still under EU trading regulations while being in the UK, which may lead to an awkward situation in which Britain excluding Northern Ireland is exempt from Trump’s tariffs.
Most economists agree that these tariffs will not stop inflation, and it was reported to have risen by 3% in this last week, as importers will pay the tax which will raise the price for consumers. CNN reported this could add a $272 billion a year tax burden [15] and the Peterson Institute has concluded that Trump’s tariffs would cost a US household over $1,200 a year. [16] While the full extent of Trump’s tariffs is still yet to be realised, his trade belligerents can at least catch their breaths for now and hope things don’t get much more frictional from here.
References
[1] Gibson, K., “Elon Musk’s access to Treasury’s payment system is raising alarms. Here’s what to know”. CBS News, 5th Feb 2025. https://www.cbsnews.com/news/musk-treasury-social-security-access-federal-payment-system-trump/
[2] York, E., “Trump Tariffs: Tracking the Economic Impact of the Trump Trade War”. Tax Foundation, 13 Feb 2025. https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/
[3] “U.S. collected nearly 73% more duties in fiscal 2019 as trade wars raged”. Reuters, 31 Jan 2020. https://www.reuters.com/article/economy/us-collected-nearly-73-more-duties-in-fiscal-2019-as-trade-wars-raged-idUSKBN1ZU014/
[4] “China Is Dominating The Global Electric Vehicle Battery Market”. Oilprice.com, 9 Oct 2022. https://oilprice.com/Energy/Energy-General/China-Is-Dominating-The-Global-Electric-Vehicle-Battery-Market.html
[5] “Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China”. The White House, 1 Feb 2025. https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/
[6] “Four in ten (43%) Canadians age 18-34 would vote to be American if citizenship and conversion of assets to USD guaranteed”. Ipsos, 16 Jan 2025. https://www.ipsos.com/en-ca/43-percent-canadians-would-vote-be-american-if-citizenship-and-conversion-assets-usd-guaranteed
[7] Tasker, J.P., “Trudeau hits back at the U.S. with big tariffs after Trump launches a trade war”. CBC News, 1 Feb 2025. https://www.cbc.ca/news/politics/trump-tariffs-canada-february-1-1.7447829
[8] “Car Prices Face $3,000 Increase as Automakers Worry Over Tariffs”. Bloomberg, 3 Feb 2025. https://www.bloomberg.com/news/articles/2025-02-02/car-prices-face-3-000-increase-as-trump-tariffs-hit-auto-sector
[9] “Government of Canada expands plan to strengthen border security”. Government of Canada, 4 Feb 2025. https://www.canada.ca/en/public-safety-canada/news/2025/02/government-of-canada-expands-plan-to-strengthen-border-security.html
[10] “Mexican president urges ‘cool heads’ in face of Trump threats”. France24, 21 Jan 2025. https://www.france24.com/en/live-news/20250121-mexican-president-urges-cool-heads-in-face-of-trump-threats
[11] Hughes, D., “Trump tariffs would be ‘devastating blow’ to UK steel industry”. The Independent, 10 Feb 2025. https://www.independent.co.uk/business/trump-tariffs-would-be-devastating-blow-to-uk-steel-industry-b2695432.html
[12] “Statement by President von der Leyen on announced US tariffs”. European Commission, 11 Feb 2025. https://ec.europa.eu/commission/presscorner/detail/en/statement_25_469
[13] McGreal, D., “KPMG Economic Outlook”. KPMG, 4 Feb 2025. https://kpmg.com/ie/en/home/insights/2025/02/kpmg-economic-outlook-strategy.html
[14] Campbell, C., “Trump’s tariffs will harm citizens, says Irish PM”. BBC News, 3 Feb 2025. https://www.bbc.co.uk/news/articles/cdxe4dy592vo
[15] Liptak, K., Goldman, D., “Trump will impose new tariffs on Mexico, Canada and China on Saturday, White House says”. CNN, 31 Jan 2025. https://edition.cnn.com/2025/01/31/politics/trump-tariffs-mexico-canada-china/index.html
[16] Clausing, K., Lovely, M., “Trump’s tariffs on Canada, Mexico, and China would cost the typical US household over $1,200 a year”. Peterson Institute, 3 Feb 2025. https://www.piie.com/research/piie-charts/2025/trumps-tariffs-canada-mexico-and-china-would-cost-typical-us-household
