It is US households which will end up paying punitive taxes on Chinese goods
Donald Trump has paused the implementation of a 25 per cent tariff on imports from Canada and Mexico but is moving ahead with a 10 per cent tariff on Chinese goods while considering similar measures against the European Union. Despite the widespread controversy over these actions, Trump has famously called “tariff” the “most beautiful word in the dictionary.” However, historical precedents suggest a more cautious approach.
The scope of these tariffs is reminiscent of the 1930 Smoot-Hawley Tariff Act, which imposed an average tax of nearly 40 per cent on approximately 20,000 imported goods during the Great Depression. Initially aimed at protecting the heavily indebted US agricultural sector from foreign competition, the tariffs backfired, worsening the economic downturn. US imports fell by almost 50 per cent, while global trade contracted by 25 per cent.
The protectionist measures of the 1930s significantly contributed to global economic instability and diplomatic tensions, creating conditions that fueled World War II. The collapse of international trade alliances fractured relationships between major powers, while the surge in economic nationalism deepened divisions and hindered peace efforts.
Furthermore, the Peterson Institute for International Economics estimates that Trump’s tariffs could increase costs for the average American household by over $1,200 annually. This projection underscores the broader economic consequences of protectionist trade policies and unilateral tariff hikes.
When the US imposes tariffs on Chinese goods, importers bear higher costs, which are typically passed on to consumers. Prices for everyday items like electronics, home appliances, clothing, and toys inevitably rise.
Many American businesses depend on globally sourced raw materials and components, particularly from China. Tariffs on these inputs drive up production expenses, resulting in higher prices for finished products. Even manufacturers that assemble goods domestically may have little choice but to raise prices to stay competitive.
In response, effective February 10, China imposed tariffs on $14 billion worth of US exports, targeting products such as liquefied natural gas, coal, crude oil, farm equipment, and automotive goods. These retaliatory measures will strain American farmers, prompting federal subsidies funded by taxpayers to mitigate losses—adding yet another burden on households.
Trump’s approach reflects a strategy of leveraging America’s economic power to negotiate trade deals. However, whether US voters will continue to support this strategy despite rising costs remains uncertain and could determine the longevity of his trade agenda.
