The United States has imposed tariffs since the country was created in 1789. Tariffs are basically a federal tax assessed on the value of merchandise made overseas that is imported into the United States. For example, a 10% tariff on a $100 product declared to U.S. Customs and Border Protection (CBP) would mean CBP would collect $10. If President Trump doubles the tariff to 20%, then the U.S. import company would pay $20 on every $100 product imported.
Tariffs protect domestic industries from unfair foreign competition, generate revenue, and are often used as part of an overall strategy to penalize certain countries that want to export products to the United States or for national security. Negative aspect of tariffs include reduced competition, higher prices, lower quality products and retaliatory tariffs by the countries that had tariffs imposed upon their products.
If done imprudently, drastically higher tariffs, and especially tariffs on our three largest trading partners (Mexico, China and Canada), could lead to a global trade war. This is a genuine concern by countries around the world. The lead story in the media on Nov. 6, 2024 from many of our steadfast allies was “Will Trump’s Victory Spark a Global Trade War?”
I travel extensively for business to various countries, and I’ve seen the effects of tariffs on International businesses and their effect on U.S. industries. I have been a U.S. Customs and International Trade attorney for 35 years, including working as an attorney in the Office of Chief Counsel for U.S. Customs. I can tell you that C-level executives in the United States are nervous and are inquiring about changing their international supply chain to attempt to avoid, or at least minimize, tariffs. Many companies are buying, importing and stockpiling merchandise now to avoid higher tariffs later.
Ultimately, importers have to pass along their increased costs to the American consumer. Once you realize how much of what we eat, what we wear, what we drive and what we use daily is made overseas and shipped to the United States, you will understand that an increase in tariffs will likely cause significant inflation. Did you realize that 70% of all seafood sold in the United States is from overseas? Think about it: From the time you wake up to enjoy your morning coffee, to watching TV, to getting dressed and driving to work, you are absolutely an international consumer. When was the last time you saw a coffee tree? TVs have not been produced in the U.S. for decades. Take a look at your label on the clothing or shoes you are wearing — almost all foreign made. That mobile phone you are using may be designed in the United States, but almost certainly made overseas. Even the car you were told was made in the United States has numerous foreign components.
Doubling the tariffs on imported products will be significant. President Trump imposed a 25% tariff on almost all products made in China shipped to the United States. President Biden continued those same tariffs, and recently eliminated almost all exemptions. President Trump has now threatened that his administration intends to increase the tariff rate from 25% to 60% on all products from China to the United States. He has also threatened to assess 100% tariffs on all products entering the United States made in Mexico and Canada, or from the ‘BRIC” countries such as Brazil, South Africa, India and Saudi Arabia. Based upon my professional experience, I do not believe that this will happen.
My prediction is that companies in the United States (and European Union) will continue to expand the international sourcing of merchandise away from China to Vietnam, South Korea, Malaysia, Turkey, India, Mexico and Canada. Tariffs will also provide added incentive for manufacturing to return to the United States. Sophisticated diplomacy, along with the selective use of tariffs, is the best way to “Make America Great Again.”
Boca Raton-based Peter Quinter, represents individuals and companies involved in the wide variety of legal issues associated with international trade and transportation, including litigation before federal courts across Florida and before the U.S. Court of International Trade in New York.