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Editors note: Tariffs are in the news and The Builders Outlook believes it is important to understand this topic, especially when it
impacts housing.
Tariffs, as a tool of trade policy, present a form of tax on goods imported from another country. Tariffs reduce imports by increasing import prices and have an impact on government revenues and budget. Until 1913 and the introduction of the federal income tax, tariffs were the major source of government revenue in the U. S. Being a part of industrial policy, tariffs could increase production for local companies. Tariffs can also be used as a tool of foreign policy, by pressing trade partners to change, adjust, or introduce policies that are preferable for the country imposing the tariffs.
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the local producers, consumers, jobs, infant industry, national security and increasing gross domestic product. On the other hand, negative sides of protectionism could be higher prices, less competition, slower technological progress and therefore slower economic growth.
In addition, retaliation from other countries becomes imminent. Faced with the hardships of the Great Depression, U. S. import tariffs were increased to reduce imports, protect local jobs, increase production, and bring the country out of a depression. However, the effects were a reduction of both imports and exports by 40 %( NBER PDF Source). In addition, increased
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tariffs triggered retaliation measures from other countries.
Devastating consequences of World War II that followed the Great Depression brought the world to agreement to support the idea of promoting global trade by increasing interdependence between nations as a guarantor of global peace. The General Agreement of Tariffs and Trade( GATT), created in 1947 through negotiations rounds until 1993, reduced tariffs, from 22 % to less than 5 %.
GATT was a precursor to the World Trade Organization( WTO). The U. S. has been a WTO member since its founding in 1995 and a member of GATT since 1948.
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Summary
• Tariffs are a form of tax applied on imports from other countries. Economists say the costs are largely passed on to consumers.
• Countries have used them to protect domestic industries, such as agriculture and renewable energy, as well as to retaliate against other states’ unfair trade practices.
• In his second term, U. S. President Trump is again moving to aggressively wield tariffs in pursuit of goals such as pressuring Canada and Mexico, competing with China, and reducing the U. S. trade deficit.
By Joe Cote, Southern New Hampshire University( SNHU) & Council on Foreign
Relations Anshu Siripurapu and Noah Berman
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