The

Latest Updates

1. Updated to separate out 25 percent tariffs on Canada and Mexico given recent threats that these tariffs could begin February 1, 2025.
2. The update contains modeling of President-elect Trump’s proposed 25 percent tariffs on Canada and Mexico and 10 percent tariff on China.
3. The update adds import data through 2023, new data on tariff collections, and updated model results for imposed, retaliatory, and proposed tariffs. The
   See

Key Findings

President Trump has threatened a variety of new tariffs for his second term in office, from universal baseline tariffs to country-specific tariffs.

• We estimate the 25 percent tariffs on Canada and Mexico and 10 percent tariffs on China proposed to go into effect as early as February 1, 2025, would shrink economic output by 0.4 percent and increase taxes by $1.2 trillion between 2025 and 2034 on a conventional basis.
• The first Trump administration imposed nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019, amounting to one of the largest tax increases in decades.
• The Biden administration kept most of the Trump administration tariffs in place, and in May 2024, announced tariff hikes on an additional $18 billion of Chinese goods, including semiconductors and electric vehicles, for an additional tax increase of $3.6 billion.
• We estimate the imposed Trump-Biden tariffs will reduce long-run GDP by 0.2 percent, the capital stock by 0.1 percent, and employment by 142,000 full-time equivalent jobs.
• Altogether, the trade war policies currently in place add up to $79 billion in tariffs based on trade levels at the time of
• tariffTariffs are taxes imposed by one country on goods imported from another country. Tarif
  implementation and excluding behavioral and dynamic effects.Before accounting for behavioral effects, the $79 billion in higher tariffs amounts to an average annual
• taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.
  01 Both Both estimates understate the cost to US households because they do not factor in the lost output, lower incomes, and loss in consumer choice the tariffs have caused.Academic and governmental studies find the Trump-Biden tariffs have raised prices and reduced output and employment, producing a net negative impact on the US economy.Economic Effects of Proposed Tariffs
• Tariffs featured heavily in the 2024 presidential campaign as candidate Trump proposed a new 10 percent to 20 percent universal tariff on all imports, a 60 percent tariff on all imports from China, higher tariffs on EVs from China or across the board, 25 percent tariffs on Canada and Mexico, and 10 percent tariffs on China.

We estimate the economic effects of two separate tariff scenarios.

For scenario 1, we model 20 percent universal tariffs and an additional 50 percent tariff on China to reach 60 percent. We estimate scenario 1 would reduce long-run economic output by 1.3 percent before any foreign retaliation.

For scenario 2, we model 25 percent tariffs on all imports from Canada and Mexico and a 10 percent tariff on all imports from China that President Trump has threatened to impose as early as February 1, 2025. We estimate scenario 2 would reduce long-run economic output by 0.4 percent (0.3 percent from the tariffs on Canada and Mexico and 0.1 percent from the tariffs on China) before any foreign retaliation.

Table 1. Estimat 01 Revenue Effects of President Trump’s Proposed Tariffs

Source: Tax Foundation General Equilibrium Model, January 2025.

Economic Effects of Imposed and Retaliatory Tariffs

Using the Tax Foundation’s General Equilibrium Model, we estimate the Trump-Biden Section 301 and Section 232 tariffs will reduce long-run GDP by 0.2 percent, the capital stock by 0.1 percent, and hours worked by 142,000 full-time equivalent jobs. Our Removing the tariffs would boost GDP and employment, as Tax Foundation estimates have shown for the Section 232 steel and aluminum tariffs.
Table 3. Estimated Impact of US Imposed Tariffs

Source: Tax Foundation General Equilibrium Model, June 2024.

We estimate the retaliatory tariffs stemming from Section 232 and Section 301 actions total approximately $13.2 billion in tariff revenues. Re They We Table Estimated Impact of US Retaliatory Tariffs

Source: Tax Foundation General Equilibrium Model, June 2024.

Tariff Revenue Collections Under the Trump-Biden Tariffs

As of March 2024, the trade war tariffs have generated more than $233 billion of higher customs duties collected for the US government from US importers. Of that total, $89 billion, or about 38 percent, was collected during the Trump administration, while the remaining $144 billion, or about 62 percent, was collected during the Biden administration.

Before accounting for behavioral effects, the $79 billion in higher tariffs amount to an average annual tax increase on US households of $625. Trade The actual cost to households is higher than both the $600 estimate before behavioral effects and the $200 to $300 after, because neither accounts for lower incomes as tariffs shrink output, nor the loss in consumer choice as people switch to alternatives that do not face tariffs.

Tariffs Raise Prices and Reduce Economic Growth

Economists generally agree free trade increases the level of economic output and income, while conversely, trade barriers reduce economic output and income. Historical evidence shows tariffs raise prices and reduce available quantities of goods and services for US businesses and consumers, resulting in lower income, reduced employment, and lower economic output.

Tariffs could reduce US output through a few channels. Tarif Tarif This Higher Because higher prices would reduce the return to labor and capital, they would incentivize Americans to work and invest less, leading to lower output.

Alternatively, the US dollar may appreciate in response to tariffs, offsetting the potential price increase for US consumers. A A It also found an estimated $2.8 billion production increase in industries protected by the steel and aluminum tariffs was met with a $3.4 billion production decrease in downstream industries affected by higher input prices.

A January 2024 International Monetary Fund paper found that unexpected tariff shocks tend to reduce imports more than exports, leading to slight decreases in the trade deficit at the expense of persistent gross domestic product losses–for example, the study estimates reversing the 2018-2019 tariffs would increase US output by 4 percent over three years.

A January 2024 study by David Autor and others concludes that the 2018-2019 tariffs failed to provide economic help to the heartland: import tariffs had “neither a sizable nor significant effect on US employment in regions with newly- protected sectors” and foreign retaliation “by contrast had clear negative employment impacts, particularly in agriculture.”

The 2018-2019 Trade War Timeline

The Trump administration imposed several rounds of tariffs on steel, aluminum, washing machines, solar panels, and goods from China, affecting more than $380 billion worth of trade at the time of implementation and amounting to a tax increase of nearly $80 billion. The In May 2024, the Biden administration announced additional tariffs on $18 billion of Chinese goods for a tax increase of $3.6 billion.

Altogether, the

trade war policies currently in place add up to $79 billion in tariffs

based on trade levels at the time of tariff implementation. Note the total revenue generated will be less than our static estimate because tariffs reduce the volume of imports and are subject to evasion and avoidance (which directly lowers tariff revenues) and they reduce real income (which lowers other tax revenues).

Section 232, Steel and Aluminum

In March 2018

• , President Trump announced the administration would impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum. In In In The Around TR Though the agreements on steel and aluminum tariffs will reduce the cost of tariffs paid by some US businesses, a quota system similarly leads to higher prices, and further, retaining tariffs at the margin continues the negative economic impact of the previous tariff policy.
• Tariffs on steel, aluminum, and derivative goods currently
• account for $2.7 billion of the $79 billion in tariffs
• , based on initial import values. Current retaliation against Section 232 steel and aluminum tariffs targets more than $6 billion worth of American products for an estimated total tax of approximately $1.6 billion.
• Section 301, Chinese Products
• Under the Trump administration, the United States Trade Representative began an investigation of China in August 2017, which culminated in a March 2018 report that found China was conducting unfair trade practices.
• In March 2018,
• President Trump announced tariffs on up to $60 billion of imports from China. In Tarif The That increase had been scheduled to take effect beginning in January 2019, but was delayed.
• In August 2019,
• the Trump administration announced plans to impose a 10 percent tariff on approximately $300 billion worth of additional Chinese goods beginning on September 1, 2019, but soon followed with an announcement of schedule changes and certain exemptions.
• In August 2019,
• the Trump administration decided that 4a tariffs would be 15 percent rather than the previously announced 10 percent, a $5.6 billion tax increase.
• In September 2019,
• the Trump administration imposed “List 4a,” a 15 percent tariff on $112 billion of imports, an $11 billion tax increase. They The new tariffs range from 25 to 100% on semiconductors and steel and aluminum products. They also include electric vehicles, batteries, battery parts, natural Graphite, medical goods, cranes and solar cells. The tariff increases will affect some products immediately, while others will be implemented in 2025 or 2026. Based on 2023 import values, the increases will add $3.6 billion in new taxes.

Section 301 tariffs on China currently

account for $77 billion of the $79 billion in tariffs

, based on initial import values. China has responded to Section 301 tariffs by imposing tariffs on over $106 billion of US goods. This is estimated to be a tax of $11.6 billion. The WTO ruling allowed the United States to impose up to 100% tariffs on $7.5 billion of EU goods. Beginning October 18, 2019, tariffs of 10 percent were to be applied on aircraft and 25 percent on agricultural and other products.In summer 2021, the Biden administration reached an agreement to suspend the tariffs on the European Union for five years.

Section 201, Solar Panels and Washing Machines

In January 2018, the Trump administration announced it would begin imposing tariffs on washing machine imports for three years and solar cell and module imports for four years as the result of a Section 201 investigation.

In 2021, the Trump administration extended the washing machine tariffs for two years through February 2023, and they have now expired.

In 2022, the Biden administration extended the solar panel tariffs for four years, though later provided temporary two-year exemptions for imports from four Southeast Asian nations beginning in 2022, which account for a significant share of solar panel imports.

In 2024, the Biden administration removed separate exemptions for bifacial solar panels from the Section 201 tariffs. Additionally, the temporary two-year exemptions expired and the Biden administration is further investigating solar panel imports from the four Southeast Asian nations for additional tariffs.

We estimate the solar cell and module tariffs amounted to a $0.2 billion tax increase based on 2018 import values and quantities, while the washing machine tariffs amounted to a $0.4 billion tax increase based on 2018 import values and quantities.We exclude the tariffs from our tariff totals given the broad exemptions and small magnitudes.

Trade Volumes S

ince Tariffs Were ImposedSince the tariffs were imposed, imports of affected goods have fallen, even before the onset of the COVID-19 pandemic. Since the tariffs were imposed, imports of affected goods have fallen. This is even before the COVID-19 pandemic. Even though trade with China fell after the imposition of tariffs, it did not fundamentally alter the overall balance of trade, as the reduction in trade with China was diverted to increased trade with other countries.Table 5. Imports Affected By US Tariffs

Note that the steel totals do not include imports from Argentina Australia Brazil South Korea Canada and Mexico. Aluminum totals excludes imports from Argentina Australia Canada and Mexico. Starting in 2022, aluminum and steel totals will also exclude imports of the EU, Japan, and the UK. This is because the respective imports have been subject to tariff-rate quotes (TRQs). Excluding all imports for TRQs overstates the savings from TRQs because tariffs still apply when imports exceed historical levels.

Source: Federal Register notices; Tom Lee and Jacqueline Varas, “The Total Cost of U.S. Tariffs,” American Action Forum, Mar. 24, 2022, data retrieved from USITC DataWeb.

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