Energy Affordability - Tariffs Deep Dive

Contents

1. Introduction

2. The History of Tariffs

3. The US-China Tariff War

4. Industrial Symbiosis: A Solution?

5. The Role of International Institutions

6. Concluding Remarks

---

Bitesize Edition

• In January 2018, Donald Trump commenced this current iteration of the tariff war against China, also known as the trade war. Previously, the Smoot-Hawley tariffs and the tariffs of 1828 were two of the periods in history that saw the largest tariff rises.

• This spiralled over time into the tit-for-tat moves that we saw during Trump’s Presidency. When Biden came to office, these tariffs were kept in place, and in May this year were raised once again on materials that will be key for the future of technological innovation.

• With countries pivoting to greater self-sufficiency and domestic production in key industries, where is this trade war taking us? Will it continue for decades to come, and are there any strategies that will limit the impact these periods of instability have on the world?

---

Introduction

Last week we discussed subsidies in the energy sector. Today, I’m going to discuss another monetary tool, the tariff. Do tariffs benefit the country imposing them, or do they weaken them? What are the key characteristics of the tariff war we find ourselves embroiled in today, and are there any solutions that could avoid this race to the bottom?

---

The History of Tariffs

Tariffs aren’t a new concept in the world of international trade. In 1930, the Smoot-Hawley Tariff Act saw the United States impose tariffs on imports from other countries. The United States had seen increases in productivity at the time due to electrification and the establishment of the motor vehicle industry. Huge technological innovation was underway, but the United States found itself in a problem of overproduction. Imports of manufactured goods were rising, which is something tariffs would seek to limit, but the export of manufactured goods was rising even faster.

The problem truly emerged when considering food imports and exports. Food exports were falling and with the beginning of the Great Depression in late 1929, the United States wanted to protect US farmers from imports from abroad. Hence the tariffs arrived.

These were the second largest tariffs in the history of the United States, with the largest coming with the Tariff of 1828.

Photo by Sonder Quest on Unsplash

Different types of tariffs can be seen below:

• Ad Valorem Tariffs

• Specific Tariffs

• Compound Tariffs

• Tariff Quotas

• Anti-Dumping Duties

• Countervailing Duties

• Safeguard Tariffs

• Retaliatory Tariffs

• Environmental Tariffs

• Valuation Tariffs

• Seasonal Tariffs

• Preferential Tariffs

• Prohibitive Tariffs

Today, we’re entering a new period of shifting trade dynamics. This is marked by the tariff war between China and the United States.

---

US-China Tariff War