by B. R. GOWANI
Tariffs
Tariffs are a tax imposed on imported goods to protect local industries in order to be self-sufficient and thus avoid being taken advantage of. For a very long time, Britain charged tariffs on many items, only in 1860 were they totally removed. But were reintroduced in late 1920s during the depression years.
Likewise, the US did the same. In 1789, just 13 years after independence from Britain, it imposed 5% tariff that was raised to 25% during war with Britain in 1812. By 1820, the tariffs were 40%. In 1844, Abraham Lincoln, not yet a president, boasted:
“Give us a protective tariff and we will have the greatest nation on earth.”
By 1860, the tariffs were 60%. Till then, more than 90% of the federal government revenue came from tariffs. Lincoln was the President from 1861 to 1865, also the years during which the US fought Civil War. Lincoln enacted an emergency income tax but it was abolished once the war ended.
President William McKinley in 1897, raised the rate to 50%. In 1929, the rate shot up to 59.1%. From 1798 to 1913, the federal government revenue from tariffs made up 50% to 90% of total revenue. (The attempt in 1894 to tax peoples’ incomes failed. However, this succeeded in 1913, thus reducing the government’s need for relying on tariffs for income.) Since the early 1950s, tariff income has seldom risen by more than 2%.
Reuters headline “The global economy is on a Trump roller-coaster ride” sums up the adverse effects of Trump’s tariff levies on so many countries.
A few examples:
- Italian pasta-makers, already tariffed 15%, were threatened with an extra 92% tariffs (totaling 107%).
- 25% tariffs on India were increased to 50% that was a penalty for buying Russian oil.
- 100% tariffs on pharmaceutical products.
Till July 14, 2025, due to Trump tantrums, there have been 28 tariff flip-flops. The number now, must be much higher, of course.
Trade deficit
One of President Donald Trump’s characteristics is to portray himself as a victim of his opponents, courts, establishment, etc.
The other victim, in Trump’s eyes, is the United States which has been taken advantage of by the rest of the world. Even though the facts show the US as having unfair practices with the rest of the world. But ultimately, all have to accept the Dear Leader’s whims.
Trump threatened several countries with high tariffs and then imposed them since he thinks the US is not getting a fair deal. (See Trump 2.0 tariff tracker.) Why? Because, many countries sell more goods and/or services to the US but buy less goods and/or services back from the US, resulting in a trade deficit for the US. But then there are countries that buy more goods/services from the US but sell less goods/services which results in a trade surplus for the US. (See the full list for the year 2024 here.)
The tragedy is that it is people in the US who are going to pay for the extra expense tariffs cause, in the form of raised prices not the countries sending goods to the US.
Overall, US has been buying more than it sells for a very long time. As can be noted:
- For the year 2024, the US goods and services deficit was $918.4 billion — which was $133.5 billion more than 2023.
- The total US exports for 2024 were $3,191.6 billion, up $119.8 billion from 2023.
- The total US imports were $4,110.0 billion, up $253.3 billion from 2023.
One other grievance Trump has against many countries is that they impose tariffs on goods they import from the US, but the US doesn’t impose tariffs on goods it imports from many of those countries.
There are reasons for that: one is that the developing countries want to protect their own industries to create some sort of self sufficiency. Another reason being that those countries need US dollars to import goods from the US and that takes funds away from other pressing needs of the country.
Also we have to remember the fact that both Democratic and Republican administrations have allowed those countries to export more than they imported from the US, knowing that these countries impose tariffs on US goods. The US has ignored this to keep those countries within the US orbit for geopolitical purpose.
Also, many of the countries have US as their largest trading partner and so the US can dictate the terms beneficial to it.
Why the trade deficit?
It is not as if China, India, and other countries with whom the US has trade deficits forced the US to open its market, like the US Colonel Perry did to Japan in the late 1850s.
It behooves us to remember that US industries moved to other countries, especially China, for greater profit and cheap labor, and that move greatly diminished the manufacturing sector in the US. These same US companies send those goods back to the US to be sold at exorbitant prices, thereby realizing hefty profits for their companies (on which they rarely pay any taxes).
Trump’s tariffs have had the effect of lowering the trade deficit in June 2025 to a two-year low. Many countries are looking elsewhere to sell their products, bypassing the US.
In 1791, the US Treasury Secretary, Alexander Hamilton, had warned countries to take care of certain industries so as to maintain independence:
“Not only wealth, but the independence and security of a Country, appear to be materially connected with the prosperity of manufactures. Every nation, with a view to those great objects, ought to endeavor to possess within itself all the essentials of national supply. These comprise the means of Subsistence, habitation, clothing, and defense.”
The US was less than a couple of decades old then. But today, the US is a superpower, with all sorts of weapons and forces to defend itself and is also the biggest sellers of arms with 43% of the world’s weapons.
Trump wants to get manufacturing back to the US and there is nothing wrong with it. But he’ll have to force companies to lower their profit margins, and pay decent wages to the US workers.
These companies should not complain that they have high labor costs, as they compare the costs to other countries where these US companies currently produce goods in a very cheap labor market.
Manufacturing goods here (at a substantially greater cost) should be weighed against investing workforce in AI and other advanced technologies to be competitive in future markets, and be more forward planning and gain a greater foothold in future markets.
B. R. Gowani can be reached at brgowani@hotmail.com