On the menu today: If you live in Wisconsin or either of those House districts in Florida, don’t forget to vote today.
Welcome to the eve of “Liberation Day” that President Trump announced back on March 21. I could do an April Fool’s Day edition and tell you how great tariffs are and how your 401(k) is doing fine, but that’s just mean. Instead, I decided to look at just what tariffs other countries are imposing on goods imported from the United States. A couple of countries likely to get hit by Trump’s retaliatory tariffs are charging relatively low ones — Japan, Taiwan, you guys aren’t really the problem. But even if starting a tariff-hiking trade war is economically self-destructive, Trump does have a point that a bunch of our biggest trading partners have higher tariffs on our goods than we charge on theirs. Read on.
What Other Countries Charge on Imported Goods from the U.S.
Back on February 25, the Office of the United States Trade Representative published in the Federal Register a request for public comments on reviewing and identifying any unfair trade practices by other countries. The register notice specified, “USTR is particularly interested in submissions related to the largest trading economies, such as G20 countries, as well as those economies that have the largest trade deficits in goods with the United States, including Argentina, Australia, Brazil, Canada, China, the European Union, India, Indonesia, Japan, Korea, Malaysia, Mexico, Russia, Saudi Arabia, South Africa, Switzerland, Taiwan, Thailand, Türkiye, United Kingdom, and Vietnam. These countries cover 88 percent of total goods trade with the United States.”
A lot of these countries have extremely complicated systems of tariffs with different rates on different products. I’m going to just quote the simplest summaries from the U.S. Department of Commerce’s International Trade Administration.
Argentina: “Since 2019, the average tariff rate is 22 percent.”
Australia: “Since July 2018, GST [Goods and Services Tax] of 10 percent applies to sales of low value imported goods to consumers.”
Brazil: “Imports are subject to several taxes and fees in Brazil, which are usually paid during the customs clearance process. There are three taxes that account for the bulk of import costs: Import Duty, Industrialized Product tax, and Merchandise and Service Circulation tax. In addition to these taxes, several smaller taxes and fees apply to imports. Note that most taxes are calculated on a cumulative basis.”
Canada: “U.S. companies shipping to Canada should be aware that Canada’s de minimis threshold is Canadian $40 (approximately US $31) for taxes and Canadian $150 (approximately US $116.50) for duties. By comparison, in March 2016, the United States raised its de minimis threshold from US $200 to US $800. Some stakeholders, particularly shipping companies and online retailers, maintain that Canada’s low de minimis threshold creates an unnecessary trade barrier.”
China: “Import tariff rates are divided into six categories: general rates, most-favored-nation (MFN) rates, agreement rates, preferential rates, tariff rate quota rates, and provisional rates. Since China is a member of the WTO, imports from the United States are assessed at the MFN rate. The five Special Economic Zones, open cities, and foreign trade zones within cities offer preferential duty reductions or exemptions. Companies doing business in these areas should consult the relevant regulations.” Chinese regulations are complicated from product to product, but as of 2022, according to the World Bank, China’s MFN rate is 7.57 percent.
The ITA’s most recent assessment of the European Union is from 2020:
The EU’s average Most Favored Nation (MFN) applied tariff rate was 5.2 percent in 2018 (latest data available). The EU’s average MFN applied tariff rate was 12 percent for agricultural products and 4.2 percent for non-agricultural products in 2018 (latest data available). The EU has bound 100 percent of its tariff lines in the WTO, with a simple average WTO bound tariff rate of 5.1 percent. Although the EU’s tariffs are generally low for non-agricultural goods, there are some high tariffs that affect U.S. exports, such as rates of up to 26 percent for fish and seafood, 22 percent for trucks, 14 percent for bicycles, 10 percent for passenger vehicles, 10 percent for processed wood products, and 6.5 percent for fertilizers and plastics.
Keep in mind, the EU argues its VAT should not be considered a tariff. “Value-Added Tax (VAT) is a consumption tax, similar to sales taxes in the United States, and is used in over 170 countries worldwide. It is applied on a non-discriminatory basis, regardless of where a product is made. Any company selling goods for consumption in the EU — whether foreign or domestic — must pay VAT. EU produced goods pay exactly the same VAT as any imported goods. VAT is not a trade measure, let alone a tariff. It is clearly not a measure applied exclusively to foreign goods like an import tariff.”
India: The tariff rate varies considerably from one good to another, but according to India Briefing, “India imposes an average tariff of 17 percent.”
Indonesia: “U.S. stakeholders have asserted that Indonesia is applying tariffs in excess of its WTO bound rates for certain categories of information and communications technology (ICT) products. Since at least 2020, Indonesia appears to be applying a 10 percent duty [on] switching and routing equipment, and a 5 percent duty on computer servers.”
Japan: “The average applied tariff rate in Japan is one of the lowest in the world. Simple average applied Most Favored Nation (MFN) tariff for Japan, according to the WTO data, is as follows: all products — 4.3 percent; agriculture products — 15.5 percent; non-agriculture — 2.5 percent.”
[South] Korea: “Korea has a flat 10 percent Value Added Tax (VAT) on all imports… A special excise tax of 10-20 percent is also levied on the importation of certain luxury items and durable consumer goods.”
Malaysia’s tariffs are typically imposed on a value-add basis, with a simple average applied tariff of 6.1 percent for industrial goods. For certain goods, such as alcohol, wine, poultry and pork, Malaysia charges specific duties that represent considerably higher effective tariff rates. Duties for tariff lines where there is significant local production are often higher. The Ministry of Finance (MOF) announced on July 16, 2018, that the Sales and Services Taxation (SST) is chargeable on the manufacture of taxable goods in Malaysia. The SST is also applied to the importation of taxable goods into Malaysia at the rate of 5 or 10 percent, or a specific rate depending on the category of products.
Mexico: “There are no tariffs for products made in the United States that meet rules of origin requirements under the United States-Mexico-Canada Agreement (USMCA). However, there are several exceptions and caveats noted below that may affect overall pricing of U.S. exports.”
Russia: “The U.S. Commercial Service Russia suspended operations on July 15, 2021, due to the Russian government’s ban on locally employed staff. Russia’s invasion of Ukraine on February 24, 2022, has severely affected bilateral commercial relations. . . . U.S. export statistics from 2023 show roughly a 90 percent drop in U.S. exports compared to 2021, the last year before Russia re-invaded Ukraine.”
(Why would any U.S. companies be trying to sell anything to the Russians these days? What would Russia want to buy from U.S.? Oh, that’s right, podcasters.)
As a member of the Gulf Cooperation Council, it applies the GCC common external tariff of at least five percent to be levied on most goods imported from countries outside the GCC. . . . Saudi Arabia imports over $1.5 billion worth of U.S. agricultural products annually, making it among the top 20 U.S. agricultural export markets. Most food products are subject to a 5 percent import duty. Selected processed food products, however, are assessed higher rates depending on the self-sufficiency level of the Kingdom aimed at protecting local food processors and production from competitively priced imports.
South Africa: “The value-added tax (VAT) is 15 percent. VAT is payable on nearly all imports.”
Switzerland: “Switzerland tends to impose low tariff rates on overall imports. In 2019, the trade-weighted average applied rate was 1.7 percent, according to the WTO. While non-agricultural goods from MFN countries only faced a simple average tariff rate of 1.3 percent in 2020, duties of 30.4 percent were applied to agricultural goods on average, and these rose to 137.7 percent for dairy products.”
Taiwan: “In 2023, the average nominal tariff rate for industrial products is 4.13 percent and 15.06 percent for agricultural products. The overall average nominal tariff rate for imported goods was 6.34 percent, according to Taiwan Customs.”
Thailand’s average Most-Favored-Nation (MFN) applied tariff rate was 11.5 percent in 2021 (latest data available). Thailand’s average MFN applied tariff rate was 31.2 percent for agricultural products and 8.4 percent for non-agricultural products in 2021. . . . High tariffs in many sectors continue to hinder access to the Thai market for many U.S. products. The highest ad valorem tariff rates apply to imports competing with locally produced goods, including automobiles and automotive parts, motorcycles, beef, pork, poultry, tea, tobacco, flowers, beer and spirits, and textiles and apparel. Wine imports are subject to a 54 percent tariff and six different taxes; taken together, the effective duty and tax burden is nearly 400 percent.
Türkiye: “Türkiye applies the common external tariff (CET) to industrial goods, and its most-favored nation (MFN) tariffs on non-agricultural products on average of 5 percent. . . . VAT for most agricultural products ranges from 1 percent to 10 percent but may be as high as 20 percent for certain processed products. . . . Since 2018, U.S. spirits and liquors face an additional 70 percent tariff.”
Also, notice the Trump administration has kept the Biden administration’s policy of spelling “Turkey” as “Türkiye.” The Turks didn’t like the fact that their country’s name has the same pronunciation and spelling as what we eat for Thanksgiving.
United Kingdom: “Import prices for products entering the UK generally consist of: Cost, Insurance, Freight and Duty, with a standard VAT of 20 percent levied at the border on the aggregate value. VAT is reduced to 5 percent for some goods and services such as children’s car seats and home energy. VAT is further reduced to zero for certain goods such as food and children’s clothing.”
Vietnam: “Most U.S. exports now face tariffs of 15 percent or less. However, in recent years, Vietnam has increased applied tariff rates on several products, and although the rates remain below its WTO bound levels, foreign businesses have been affected by the increases. Most of the products for which tariffs have increased are produced by Vietnamese companies.”
Yes, Trump is obsessed with tariffs, and even said, “I always say tariffs are the most beautiful words to me in the dictionary.”
But these countries are imposing tariffs higher than we impose on goods imported from them. Yes, the U.S. imposes all kinds of tariffs, but — at least before Trump started imposing and reimposing them — they were generally on the lower side: “The effective tariff rate on all U.S. goods imports (import duties as a share of total goods imports) averaged 2.3 percent in 2023, ranging from 0.1 percent for oil and gas products to 12.4 percent for textile products.”)
With that said, some foreign exporters argue we had our own unfair protectionist tariffs in place on certain goods — even before Trump returned to office:
Brazilians grumble about U.S. limits on imported sugar. Koreans bemoan U.S. tariffs on light trucks. And the Chinese gripe about restrictions that prevent their smartphone makers from selling in the U.S. market.
Before Trump’s recent trade moves, the U.S. had one of the most open economies on Earth — unless you were trying to sell Americans foreign-made pickup trucks, clothing, tobacco, cereal or several dozen other products. In that case, the U.S. government charges double-digit import taxes designed to discourage consumers from buying foreign goods and to protect domestic producers.
But as laid out above, in some places, our companies are paying a significantly higher rate to sell our goods there than they pay to sell their goods here. That does seem at least a little unfair, doesn’t it? For example, in India, “The gap is even wider in agriculture, where India’s simple average tariff is 39 percent, compared to five percent in the U.S.”
Now, since Trump returned to office, have any of these countries proposed a reduction on their tariffs on goods imported from the United States?
Vietnam actually made this move a few days ago:
Vietnam will cut its tariffs on several U.S. products including LNG and cars, and moved to approve Starlink services, as the country tries to avoid being hit with U.S. tariffs because of its large bilateral trade surplus.
Under the new plans revealed late on Tuesday, the tariff on American liquefied natural gas will be cut to 2 percent from 5 percent, on automobiles to 32 percent from a range of 45 percent to 64 percent, and on ethanol to 5 percent from 10 percent, the head of the Finance Ministry’s tax policy department Nguyen Quoc Hung said in a statement posted on the ministry’s website.
According to Bloomberg News, “The European Union is identifying concessions it’s willing to make to Donald Trump’s administration to secure the partial removal of the US tariffs that have already started hitting the bloc’s exports and that are set to increase after April 2.”
Say, fellas, how about instead of a trade war where everybody’s hiking their tariffs as high as they can, we get into a competition where everybody’s trying to get them as low as they can?
With all that said, the fact that Trump may have a point about the tariff disparity between the U.S. and its largest trading partners doesn’t make the economic harm any easier to take.
I mentioned your 401(k) at the start of this newsletter. When Trump took the oath of office for the second time, the Dow Jones Industrial Average closed at 43,487.83, the tech-heavy Nasdaq Composite closed at 19,630.20, and the S&P 500 closed at 5,996.66.
At the end of March 31, the Dow closed at 42,001.76, the Nasdaq Composite closed at 17,299.29, and the S&P 500 closed at 5,611.85 — meaning that in the 70 days of Trump’s second term, the Dow’s down 3.4 percent, the Nasdaq’s down 11.8 percent, and the S&P is down 6.4 percent. Not great!
ADDENDUM: Michael Makovsky of JINSA, who knows a thing or two about massive ordnance penetrator bombs, writes in to say that in addition to the B-2, “B-52s can carry MOP’s as well, though they’re obviously slower. (I understand that a C-130 could also in theory do so, but it would involve simply dropping it out of the plane and thus isn’t practical.) It’s my understanding that we only have about 18 operational B-2s, by the way.”
So, the five B2s stationed at Diego Garcia would represent almost one-third of all available B-2 bombers.