10 > 3.3.
With Donald Trump jumping around weekly in announcing this or that tariff increase or tariff cut, it can be hard to keep score.
I’m still trying to figure out the Chinese scorecard.
But the UK/US scorecard is starting to become clear: we lost.
Colin Grabow at the Cato Institute put it well:
Last Thursday, the Trump administration announced its first trade deal since its April 2 tariff hike, and it’s clear that higher tariffs are here to stay. Reached with the United Kingdom, the deal — billed by the White House as “historic” and a “breakthrough” — improves trade conditions only relative to the upheaval of recent weeks. Compared to the trade conditions that prevailed when Trump took office in January, there is little to celebrate.
Before Trump unleashed his tariff whirlwind, Americans enjoyed an average tariff rate of 3.3 percent on imports. Now, goods arriving from the UK face a 10 percent rate (apparently the lowest tariff any US trading partner can hope for). Tariffs on British auto imports were just 2.5 percent only months ago, but will now be four times higher (and that’s only for the first 100,000 vehicles, with any auto imports beyond that number facing a 25 percent tariff). [DRH note: the tariffs on auto imports from Britain will be 4 times as much, not 4 times higher.]
For all the talk of tariff hikes as a mere tactic, they are now an enduring feature of the trade landscape. That President Trump is touting an additional $6 billion in tariff revenue as one of the US-UK deal’s selling points further suggests their staying power.
I’ve had a number of pro-Trump friends assure me that Trump has a grand strategy and that at the end, other countries will have lower tariffs than before on our exports and we will have lower, or no higher than earlier, tariffs on imports from them. As Grabow points out, that’s not consistent with the Trump administration messaging. They seem to be settling on a minimum tariff rate of 10%. 10 is more than 3.3.
Trump sometimes asks if we’re tired of all this winning. I certainly am.
Postscript: Trump loves to say that “tariffs” is the most beautiful word in the dictionary. So try this experiment. Recognize that tariffs are taxes. What would you think of someone who says “taxes” is the most beautiful word in the dictionary?
READER COMMENTS
Jose Pablo
May 12 2025 at 9:33pm
Recognize that tariffs are taxes
That said, as taxes go, tariffs are arguably more appealing than, say, income taxes, at least if they are fully passed through to prices, as research suggests they generally are. In fact, they might even be more attractive than any other tax, except perhaps sales taxes or VAT.
But to be clear, I don’t think the tax aspect is the worst part of tariffs. The real issue is that they reduce overall economic efficiency, shielding domestic industries from competition, distorting market signals, and ultimately misallocating resources in ways that undermine productivity and long-term prosperity.
Focusing too much on the “tax” aspect misses the point.
David Henderson
May 12 2025 at 11:08pm
You write:
No it doesn’t. Taxes distort. You’re laying out some of the details of the tax distortion.
robc
May 13 2025 at 8:59am
If you want to minimize tax distortion, the answer isnt sales tax or VAT or tariffs, you need to become a Single Land Taxer.
Thomas L Hutcheson
May 13 2025 at 9:31am
“Except a VAT” That is a huge deal.
The deficits generated by Social Security Medicaid Medicare and ACA subsidies and the revenue losses from eliminating taxation of business income could be erased at low cost with a consumption VAT.
Jose Pablo
May 14 2025 at 12:07pm
The truly interesting thing about a VAT is that, at European rates of 20–25% and assuming a tax base of around $20 trillion in the U.S. (aligned with household consumption and a broad-based system without exemptions), the entire federal revenue could theoretically be raised through this single tax, making it possible to eliminate all other forms of taxation.
That, genuinely, has the potential to make America great again.
Thomas L Hutcheson
May 13 2025 at 9:23am
The chief inefficiency of the 10% minimum tariff is that it taxes exports.
MarkW
May 13 2025 at 10:31am
Politicians love to be able to sell tax increases as punishments for bogeymen. The absurd tobacco settlement was sold as a punishment for tobacco companies rather than a huge cigarette tax increase (which it actually was). And now Trump is trying to sell the tariffs as a punishment for unfair trading practices by foreigners. Politically speaking, it’s a good move if you can get away with it. I think the pols (and their trial lawyer cronies) who pitched the tobacco settlement that way did actually get away with it — I think most Americans bought the cover story. I guess it’s too early to tell with Trump’s tariffs.
Colin Steitz
May 13 2025 at 4:12pm
I would wonder what they did to make it pass admissions or the first 13 weeks of a semester.
Craig
May 14 2025 at 11:05am
“Before Trump unleashed his tariff whirlwind, Americans enjoyed an average tariff rate of 3.3 percent on imports”
I’m just curious if that is the average of the rates or is that the effective tariff rate? (Gross tariffs collected/gross import values)
David Seltzer
May 14 2025 at 11:51am
David: Allow me to pick a nit with Colin Grabow. “Americans enjoyed an average tariff rate of 3.3 percent on imports.” I won’t speak for other Americans, but I wouldn’t enjoy any tariff. As you have continually hammered we dear readers, words are important.
David Henderson
May 14 2025 at 5:45pm
Ooh. Good catch.
I don’t enjoy a little tariff and I don’t enjoy a little arsenic.
T Boyle
May 20 2025 at 12:09pm
“What would you think of someone who says ‘taxes’ is the most beautiful word in the dictionary?”
I’d assume they vote for AOC.
Comments are closed.