President Trump on Saturday continued to defend his recent remarks about imposing tariffs on steel and aluminum imports. Furthermore, he threatened the European Union with taxes on cars imported to the U.S.
“If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!” Trump wrote on Twitter.
His tweet comes after the New York Times reported on the potential ramifications of Trump’s tariff announcement on Thursday.
“The European Union will hit back at the heart of the United States, slapping tariffs on products like Harley-Davidsons, Kentucky bourbon and bluejeans, if President Trump goes ahead with a plan to place tariffs on steel and aluminum imports, the president of the bloc’s executive arm vowed on Friday,” the Times noted.
RELATED: 10 Everyday Items That Cost More Because of U.S. Import Taxes
10 Everyday Items That Cost More Because of U.S. Import Taxes
10 Everyday Items That Cost More Because of U.S. Import Taxes
When the United States invaded Iraq in 2003, France refused to follow. Years later, in its final hours, the Bush administration reciprocated with a proposed 300% import tax on Roquefort cheese. This tax topped a long list of tariff hikes on gourmet European foodstuffs -- publicly labeled a reaction to the European Union's ban on U.S. hormone-fed beef. The tariffs could have been disastrous for small producers of fine European goods had trade representatives not reached a compromise soon after President Obama took office. In the end, the previous duties on European edibles remained in place, which include 100% tariffs on:
- cured ham
- French truffles
- lingonberry and raspberry jams
- certain chocolates
- unfermented fruit juice
- Italian mineral water
Roquefort, of course, was included among these.
A tariff thrice as high would have seen a pound of the blue-green cheese selling anywhere from $60 to $100 in the United States. Luckily, for turophiles and producers in the small French town from which the cheese takes its name, this revenge-driven import tax never came to be, and the tariff on Roquefort remained at 100%.
The history of the United States peanut tariff reaches back far before the legume-loving President Carter held the Oval Office. America's domestic peanut program has its roots in the Agricultural Adjustment Act of 1933, which set an import quota at 775 metric tons. By the year 2000, the peanut quota was capped at 7% of U.S. production. Today, peanut imports are subject to an ad valorem tax of anywhere between 131.8% (for shelled peanuts) and 163.8% (for unshelled peanuts).
The American Peanut Council boasts that the U.S. is the world's third-largest peanut exporter – behind China and India – with exports between 200,000 and 250,000 metric tons of peanuts a year. In other countries, peanuts are more likely to be processed into oils, cakes, and meals, while in the United States, the largest market for peanuts is edible consumption. As the 12th most valuable cash crop in the country, with a farm value of over $1 billion, the question that remains is how much of this is due to the help of tariffs.
A single paper clip retails for less than a cent. Some 11 billion of them are sold in the United States every year. Cheap, disposable, and likely to end up twisted into an indiscernible shape, it's hard to imagine that a large majority of domestically sold paper clips are still manufactured in the United States.
But they are, and for the most part, this is thanks to tariffs reaching as high as 126.94% on Chinese manufactured paper clips.
ACCO Brands Corporation (ACCO) and Officemate International Corporation of Edison, N.J., are the two major suppliers to the American market, and have benefited from import taxes against China since 1994, when the U.S. government deemed Chinese competition unfair. Last June, Congress renewed the tariff for another five years.
Despite government-mandated protection, paper clip sales still only account for a measly 1% of ACCO's annual sales. Last year, seeking to squeeze higher returns out of its massive market share, the office supply manufacturer introduced the paper clip's successor: The Klix. However, former ACCO president Desmond LaPlace seemed to think the revamped product didn't stand a chance against its predecessor.
"If there is ultimately a commodity product," LaPlace said, "it's paper clips."
Back in 2002, white albacore canner Bumble Bee Seafoods – a subsidiary of ConAgra Foods (CAG) – began lobbying Capitol Hill to raise canned tuna tariffs against Ecuador. Bumble Bee was seeking to make business more difficult for its competitor StarKist Seafood Co., then owned by HJ Heinz Company (HNZ), and currently a subsidiary of the privately held Dongwon Enterprise Co. The tariff had been as high as 35%, and protected U.S. interests in American Samoa's beleaguered cannery industry. These manufacturers were threatened by nearby competitors in Thailand and Indonesia, and they were calling for tariffs as high as possible on every other tuna canner in the business.
This struggle continued in 2010, when Congress raised the minimum wage in American Samoa, and, facing tighter profit margins, Chicken of the Sea producers Thai Union Group shut down its factories in the country. Along with Bumble Bee, the company "adopted a business model of exploiting cheap foreign labor to clean their fish while employing skeletal crews of 200 employees or less in small U.S. operations in Georgia, Puerto Rico, and California to package the final product," said Rep. Eni Faleomavaega, American Samoa's non-voting congressional representative, at the time.
It's these methods that have allowed canners to avoid the canned tuna tariff that still, after years of effort, remains at 35%.
Windbreakers, Lycra Leggings, Lululemon (LULU) tank tops, and countless other articles of clothing are made from synthetic fabric, which is protected by up to a 32% tariff in the U.S.
Rep. Todd Young (R-Ind.) would like to see this tax abolished, and recently introduced a bill to Congress that, if passed, would temporarily suspend tariffs on fabrics woven from synthetic filament yarns. A spokesman from Young's office explained to Minyanville exactly why Young is targeting the duty.
"It is a protective tariff as that [synthetic] fabric used to be made domestically. It is no longer produced here, but the tariff remains. Manufacturers who use it as an input are at a disadvantage globally as it now costs them more to produce their products."
If repealed, the cost of synthetic fabrics would fall and lessen production costs for U.S. manufacturers.
Eastman Chemical Company (EMN) is a leading global manufacturer of chemicals, fibers, and plastics headquartered in Kingsport, Tenn. According to a company spokesman, the last synthetic fiber they produced in the United States was Kodel Polyester, before the company shut down the operation in 1993.
David Orden, a professor of International Policy and Trade at Virginia Tech, explains the history of America's tobacco tax to Minyanville in an email.
"Since the Great Depression, the US has supported farmers, mostly with payments from the government, but in a few cases of imported products (sugar, dairy products, tobacco) it has protected farmers with high tariffs," wrote Orden.
The import rate on certain tobacco products can reach as high as 350%, making it one of the most protected American products around. It's surprising for an industry whose unsavory reputation is an old story. Historically, the government supported the industry with production caps that restricted supply and drove prices high. When these restrictions were eliminated by the Tobacco Quota Buyout in 2005, tobacco could be grown freely, at any quantity in the United States.
With public sentiment shifting against tobacco usage and excise taxes reaching up to an added $5.85 per pack, American cigarette manufacturers, like Reynolds America (RAI) and Altria Group (MO), can no longer rely on the remaining protective tariffs. They have, however, subverted falling sales in the U.S. to reap profits in overseas markets, and in recent years successfully propositioned many U.S. farmers to switch to growing the crop. Where an acre of corn yields a profit of about $100, an acre of tobacco will yield $1,000 to $1,500.
The 1920s were marked by some of the highest U.S. tariff rates across the board thanks to the Smoot-Hawley Act, which raised average duties nearly 10 times higher than they are today. A 48% import tax on certain sneakers is an unintended leftover of this bygone era, and one American company is fighting hard to keep it in place.
New Balance has supported the sneaker tariff for quite some time, taking pride in the fact that it's the largest of the last shoemakers fully producing in the United States. The tariff is vital to Boston-based New Balance if it intends to compete against manufacturers like Nike (NKE), which along with distributors Walmart (WMT) and Collective Brands (PSS), are backing the elimination of U.S. tariffs on footwear shipped out of Vietnam.
If the Trans-Pacific Partnership currently being negotiated by President Obama and eight other Pacific nations eliminates these tariffs, it will likely mean an end to New Balance's competitive edge. And if the company goes under, so will 1,350 of the 4,000 domestic shoe-making jobs left in America.
In 1986, President Reagan was upset with the Japanese. Their protectionist tariffs were, in the Gipper's words, "unreasonable and constitute[d] a burden or restriction on U.S. commerce." In the year prior, these restrictions were estimated to have cost US manufacturers $260 million. So, in retaliation, Reagan ordered a 40% tariff on all Japanese leather and footwear products being imported into the U.S. Japan failed to make a concession at the time and the tariff remains in place to this day.
In Japan, protectionist policies are notorious, and the Asian nation boasts tariffs that not only rival but far surpass those of the United States. Import restrictions on foreign automobiles have completely sealed Japan off to U.S. car makers. Imported beef is taxed at 38.5%, but jumps to 50% when import volume reaches more than 17% of the year before. Rice, however, is the killer. A 778% duty is levied on imported rice – far higher than any U.S. import tax on the books – and is aimed at protecting Japan's 1.63 million farmers from deflation of the country's most inefficient crop.
The broom tariff – which includes but is not limited to hand-operated mechanical floor sweepers, mops, and feather dusters, and extends to brushes, paint pads and rollers, and squeegees – is complex, but represents the conditional nature of America's average tariff.
For instance, whiskbrooms valued below $0.96 each are taxed at an import rate of 8% up until 61,655 dozen units have been entered or withdrawn from a warehouse for consumption, at which time an import quota is reached. Whiskbrooms valued above $0.96 avoid any quota but are subject to a tariff of 14%. All other types of brooms are subject to a similar 8% tariff when valued under $0.96, but have a higher quota of 121,478 dozen units. When valued at $0.96 each, these brooms, like their whisk cousins, are free of a quota, but receive the highest duty at 32%.
Despite sweeping innovations like Procter & Gamble's (PG) Swiffer product line, the most efficient broom technology has remained decidedly old-fashioned. Whiskbrooms are made from broomcorn -- also known as sorghum grass -- which can be cultivated by hand and dried to make a thin, stiff, straw-like material known for its durability and, unlike other materials, its ability to absorb dirt. For U.S.-based whiskbroom manufacturers like Newell Rubbermaid (NWL), the cheapest source of broomcorn is Mexico, which is exempt from any of the above tariffs.
It's something to think about the next time you're pushing around dust bunnies.
The U.S. tariff on tires made in China is one example where a well-intentioned government move may have backfired. In 2009, a 35% tariff was slapped on tires manufactured in China, and the U.S. sat and waited for tire manufacturing jobs to flow back to American shores. In his 2012 State of the Union address, Obama praised the success of this protective duty. But, as John Bussey recently put it in an article for The Wall Street Journal, "If it doesn't get built in China and it's too expensive to make in the U.S., it will get made in a cheap locale somewhere else."
A representative from the major U.S. tire dealer Goodyear Tire & Rubber (GT) explained to TheWall Street Journal that the business has hardly been affected by the tariff, and the company hasn't been involved in the Chinese market for years.
According to the U.S.-China Business Council, between 2009 and 2011 tire imports from China dropped by 30%, while imports from Canada increased by the same percentage. Imports to the United States from South Korea, Indonesia, Thailand, and Mexico all increased over 100%, with imports from Taiwan increasing by 285%. The council also sources the Bureau of Labor Statistics, which charts the U.S. tire manufacturing industry's decline over the past decade. In the year 2000, the U.S. boasted roughly 86,800 tire manufacturing jobs, which by 2011 took a sharp dip to roughly 51,700.
In response to Obama's statement, U.S.-China Business Council President John Frisbie was quoted disparaging the claims.
"So far as saving American jobs, it just isn't working. And it really hurt a lot of people in the industry -- smaller businesses that geared up to bring these tires in from China."
Despite widespread criticism and a steep stock market drop over fears of a trade war, Trump has stood his ground on imposing tariffs.
“The United States has an $800 Billion Dollar Yearly Trade Deficit because of our ‘very stupid’ trade deals and policies. Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been. No more!” Trump wrote in another tweet on Saturday.