On Feb.1, President Trump implemented a set of tariffs on Canada, Mexico and China in response to rising tensions over fentanyl trafficking and immigration.
On Feb. 3, Mexico announced a series of retaliatory measures that caused the Trump administration to postpone the 25% tariff. Canada declared similar measures and was then granted the same respite later that day
President Trump announced he would halt the import levies on goods from Canada and Mexico for at least one month to allow for negotiation between the countries.
Despite this, tariffs on Chinese imports began at a 10% additional tariff on top of the existing dues currently applied to many Chinese goods.
Understanding Tariffs
A tariff is a tax on imported goods, usually as a percentage of the product’s value. The value of a product is determined by how much an independent buyer would be willing to pay for something from an independent seller.
For example, for an item subject to a 10% tariff, the importer will need to pay an additional $10 for the goods.
Who Pays the Cost?
Under U.S law, the importer is responsible for paying the tariff; however, it is typical for the price on tariffed goods to increase to allow for a larger profit margin for the distributor.
For example, crude oil from Canada that is piped into the US to be refined into gasoline would have a 10% tariff. If priced at $75 a barrel, there would be an additional $7.5 charge to import the oil into the U.S.
Oil has an incredibly small profit margin—this additional charge could lead to higher gas prices for consumers as distributors pass on the extra cost.
“BP is not going to absorb any part of the additional $6 or whatever it is”- David A. Gantz, Will Clayton Fellow in Trade and International Economics at Rice University
Similar to gasoline, items like perishable vegetables may be at risk of price hikes. Items like children’s toys, cosmetics and footwear have high-profit margins that could withstand the additional cost the tariff has in importing the product.
Why Use Them?
Historically, tariffs were used as the primary source of revenue for the federal government until 1913 when federal income tax began.
At their highest, tariffs accounted for approximately 90% of the federal government’s revenue. Once the effects of income tax set in, that percentage fell to 30.1% after the start of the Civil War in 1915.
Tariffs have steadily declined in their contribution toward federal revenue. Over the past 70 years, tariffs have never accounted for more than 2% of revenue. In 2024, their contribution was 1.5% which amounted to about $77 billion in collected duties.
Reciprocal Tariffs
President Trump’s administration has threatened to extend tariffs to other nations to address trade imbalances.
During a Feb.7, meeting with Japanese Prime Minister Shigeru Ishiba, Trump reiterated that reciprocal tariffs would be imposed on various countries soon.
President Trump has remained steadfast in targeting the auto industry as European Union (EU) tariffs on car imports are exceedingly higher than US levies.
Reports indicate that Trump could act on these tariffs “pretty soon” while a potential deal with the UK could alter the trajectory of the EU trade dispute.
The Path Forward
As tensions rise, many question whether the ongoing trade wars will result in meaningful agreements or leave the global economy in a state of perpetual conflict.
Will Trump’s tariff strategy truly “level the playing field” or will it simply exacerbate existing economic challenges?
Let us know your thoughts by tagging us @VALLEYmag on X.
Related
U.S. Under Scrutiny For Treatment of Deportees
Assad Regime Topples in Syria
Trump’s Executive Orders: The Impact on Penn State
Excellent goods from you, man. I’ve take into accout your stuff previous to and you are just too magnificent. I actually like what you have acquired right here, really like what you are stating and the way by which you say it. You’re making it enjoyable and you continue to care for to keep it sensible. I can’t wait to read much more from you. This is actually a great web site.
It is really a nice and useful piece of information. I’m glad that you shared this useful information with us. Please keep us up to date like this. Thanks for sharing.
Glad to be one of many visitants on this awesome web site : D.
Good info. Lucky me I reach on your website by accident, I bookmarked it.
WONDERFUL Post.thanks for share..extra wait .. …
I would like to thnkx for the efforts you have put in writing this blog. I am hoping the same high-grade blog post from you in the upcoming as well. In fact your creative writing abilities has inspired me to get my own blog now. Really the blogging is spreading its wings quickly. Your write up is a good example of it.
Along with almost everything which appears to be developing inside this specific subject matter, many of your opinions are fairly exciting. Nonetheless, I beg your pardon, because I do not subscribe to your entire theory, all be it exhilarating none the less. It looks to me that your comments are generally not totally rationalized and in fact you are generally yourself not thoroughly confident of the assertion. In any event I did take pleasure in reading it.
Good day! I know this is kinda off topic however I’d figured I’d ask. Would you be interested in trading links or maybe guest authoring a blog article or vice-versa? My website goes over a lot of the same subjects as yours and I think we could greatly benefit from each other. If you’re interested feel free to shoot me an email. I look forward to hearing from you! Wonderful blog by the way!
Loving the information on this website , you have done outstanding job on the posts.
Great work! This is the type of info that should be shared around the internet. Shame on Google for not positioning this post higher! Come on over and visit my website . Thanks =)