A popular argument for tariffs often made by the US president Donald Trump is that tariffs will bring back manufacturing together with the jobs:
The higher the tariffs, the more likely it is the company will come into the United States and build a factory [...] so it doesn't have to pay the tariff.[1]
Full Donald Trump Interview Live on Bloomberg. Retrieved November 12, 2024. ↩︎
The threat of tariffs in itself can be seen as a negotiation tool with other countries. For example, a day after Donald Trump was re-elected as the 47th president of the US, the President of the European Commission, Ursula von der Leyen, suggested that the EU could purchase its liquefied gas supplies from the US instead of Russia[1].
EU's Von der Leyen Suggests US LNG Could Replace Russian Supply. Retrieved November 12, 2024. ↩︎
The Chicken Tax is a good example of how countries reciprocate with their own tariffs when tariffs are imposed on their goods. Back in 1962, the European Union imposed a 50% tariff on the chickens imported from the United States, causing the latter to sell 25% less of their chicken exports[1]. In response, the United States raised its import tax by 25% in 1963 on starch, brandy, dextrin, and light trucks from the EU[2]. As a result West Germany imported 3 times less of their light trucks the next year. Soon after, Volkswagen cargo vans and pickup trucks, the intended targets, "practically disappeared from the U.S. market"[3].
A more recent example is the tariffs imposed by the Trump administration in 2018 on various imports, e.g., solar panels, washing machines, steel, and aluminum[4][5]. In response to the growing list of Chinese imports being taxed or expected to be taxed, the Chinese government retaliated with tariffs of its own on 128 products it imported from the US, affecting soybean farmers, automakers, and Boeing's best-selling plane[6].
"Western Europe: Nobody But Their Chickens". Time. November 30, 1962. Retrieved November 18, 2024. ↩︎
"Lyndon B. Johnson: Proclamation 3564 – Proclamation Increasing Rates of Duty on Specified Articles". American Presidency Project, UCSB. Retrieved November 18, 2024. ↩︎
Ending the “Chicken War”: The Case for Abolishing the 25 Percent Truck Tariff. The Cato Institute. June 18, 2003. Retrieved November 18, 2024. ↩︎
U.S. Imposes New Tariffs, Ramping Up ‘America First’ Trade Policy. The Wall Street Journal. January 22, 2018. Retrieved November 18, 2024. ↩︎
Trump announces steel and aluminum tariffs Thursday over objections from advisers and Republicans. The Washington Post. March 1, 2018. Retrieved November 18, 2024. ↩︎
As China Fires Back in Trade War, Here Are the Winners And Losers. Bloomberg. April 4, 2018. Retrieved November 18, 2024. ↩︎