Tariffs on steel, aluminum, and a selection of goods from China that were imposed by Donald Trump during his time in office have unexpectedly been retained by US president Joe Biden. Now, new research suggests these tariffs cost the US economy $51 billion a year. But the impact is more complex, with other effects, such as retaliatory tariffs and new measures in the pipeline.

Leverage for future trade negotiations

The consequences of the tariffs implemented by Trump are far-reaching, with such trade barriers:

• Increasing the cost of consumer and producer goods
• Depressing the economic benefits associated with competition
• Suppressing economic growth
• Reducing imports and exports
• Raising prices
• Decreasing national welfare
• Putting the burden of the cost of tariffs on importers

So, with a vast array of negatives associated with the tariffs, it would make sense for Biden to have scrapped all of them upon taking office. In fact, each of them has stayed in place, with the incumbent president’s reasoning apparently being that they could provide leverage for future trade negotiations.

When you factor in corresponding retaliation, the price of this policy comes to around $410 billion of traded goods each year.

Impact on US trade levels

As well as the economic impact, the tariffs have also caused a shift in the ways that importers work and organize their supply chains. For example, it has become less viable to import goods from China, but trade in general has also decreased for the US, affecting both imports and exports.

The consequences of this have been felt by consumers and businesses alike in the US, where prices have risen and choice has fallen. Supply chains take time to adjust and the impact of the tariffs has slowly become clear. In a similar way, removing or changing the tariffs would not rectify the issues instantly, with a lag between the move and results on the ground.

Exclusions to the tariffs

While the tariffs were imposed unilaterally by Trump, there’s a system in place to allow US companies to put the case forward for products to be excluded if their business is negatively impacted. To receive an exclusion, the product in question must not be available in the US or any other country not covered by the tariffs.

Some 190,000 petitions have been enacted against the tariffs since they came into effect. Data relating to exclusions is not widely available and the financials can only be estimated. From Section 301 tariffs on China alone, it’s thought roughly $132 billion of exclusions have been granted.

Retaliatory action against the US

Tariffs imposed by the US have not gone unnoticed by the countries it trades with, and retaliatory action has been taken against the nation’s exports. So far, six nations or unions (the European Union) have implemented tariffs in response to those sanctioned by Trump. In some cases they equate to as much as 70 per cent on US exports, costing approximately $79.1 billion.

China’s suspension of retaliatory tariffs

A number of retaliatory tariffs from China have been imposed and suspended in recent years, as the Trump administration and now Biden’s government adjust how they work with the East Asian country. Retaliatory action that was due to come into effect in December has been avoided due to trade negotiations between the two nations. US auto parts have been subject to tariffs off and on as other tariffs on China have shifted.

Ongoing potential tariffs

A number of potential tariffs put in motion by Trump are yet to be resolved. For example, the Office of the United States Trade Representative (USTR) has not imposed tariffs on Vietnam as it investigates currency manipulation. It’s also looking into the import of Vietnamese timber and whether to implement tariffs on the product.

Securing access to uranium and titanium sponge is among the US focuses and has led to the formation of a number of working groups. They are currently reviewing comments submitted by members of the public and will present their findings on a way forward.

Whether or not tariffs on a number of digital services taxes will be implemented is yet to be seen. They have been temporarily suspended to allow negotiations on a global digital tax scheme to take place. If the US is to be convinced not to put the tariffs in place, it must be confident such taxes are not being imposed in an unfair fashion.

Among other tariffs being considered are energy-related goods from Mexico, mobile cranes from outside the US and auto parts. How these play out will impact imports and exports in the US, as well as demonstrating the new administration’s attitude towards tariffs.