FACT: The U.S. collects more tariff money on Pakistani goods than on British goods.

THE NUMBERS: 

Imports from U.K., 2022:                $63.8 billion
Imports from Pakistan, 2022:         $6.0 billion

Tariffs on Pakistani goods, 2022:   $607 million
Tariffs on U.K. goods, 2022:           $578 million

WHAT THEY MEAN:

National Security Advisor Jake Sullivan in April asserted (mistakenly) that the U.S.’ “trade-weighted average tariff rate is 2.4 percent.” His source for this number is unclear; the actual figure, via the U.S. International Trade Commission (see below for detail on authoritative estimates) for 2021 was 3.0%, and pending their official word the 2022 rate looks like 2.8%.

A single number like this, though, is useful but blurry. The blurriness reflects the fact that the actual 11,414 official tariff rates vary greatly. The 5,864 ad valorem tariffs alone start at 0.1% and go as high as 48.0%, the 1,078 specific duties and compound tariffs add complexity, and both are then complicated by thousands of special waivers and surcharges. Therefore as a buyer, the rates you pay depend both on what you’re buying and from whom you got it, and as a country, it’s unusual to get a rate very close to the ‘average.

To oversimplify, the permanent “MFN” tariff system raised about $45 billion last year. It taxes low-priced clothes, shoes, and other consumer goods most heavily, natural resource products and high-tech goods most lightly, and heavy-industry and food in between. Therefore it hits lower-income families hardest. The Trump era’s administratively created “232” tariffs on metals and “301” tariffs on about half of imports from China brought in about the same amount of money (mainly from Chinese goods), but mainly cover industrial inputs such as metals, auto parts, and electronics, and so fall most heavily on industrial-sector buyers like auto plants, construction firms, and repair shops. Meanwhile, the U.S.’ 20 FTAs and three currently operating developing-country “preference” programs waive most tariffs for buyers of things from Canada, Mexico, Australia, South Korea, 16 other FTA partners, and also for countries in sub-Saharan Africa and the Caribbean littoral. Putting all these things together, in practice the 2.8% average becomes a range rising from 0% (for Cuba) to 15.0% (for Bangladesh), with natural-resource exporters and most African countries near the bottom, high-income countries a bit below the world average, diversified middle-income states very close to the average, and low-income Asian countries along with China at the top.

Here’s a look as of 2022, with a few entries from earlier years to illustrate the impacts of the 232 and 301 tariffs:

Three explanatory notes for this pattern:

High tariffs on low-income Asia: The high rates at the top reflect the specialization of many lower-income Asian countries — Bangladesh, Sri Lanka, and Pakistan in particular, Cambodia now a bit less so — in exports of clothing and home textiles. This explains why buyers of Pakistan’s modest $6 billion worth of shirts, towels, and similar goods pay fourteen times more than buyers of Norway’s slightly larger $6.7 billion in salmon, oil, and pharmaceuticals, and in fact more than buyers of $63 billion in British medicines, art auction proceeds, and aircraft parts. Ethiopia also shows up here, having lost its AGOA tariff waiver in January 2022 but still exporting somewhat smaller quantities of clothes.

Low-to-medium rate on others: The lowest rates show up for countries that are (a) natural resource exporters (oil for Kuwait and Saudi Arabia, fish for Fiji and Greenland); and (b) FTA partners and special program beneficiaries, with Canada, Jordan, El Salvador, South Korea, and Colombia representing the first group; and Kenya, South Africa, Ghana, Haiti, and Jamaica the second. Larger upper-middle-income and high-income countries — Germany, Poland, Brazil, Argentina, Thailand, Japan — have diversified export mixes, typically with a lot of zero-tariff products, a lot of mid-tariff products, and some high-tariff goods, and usually wind up in a range from 1% to 3%. India is also now in this range, though still a lower-middle-income country. There was only one actual zero-tariff country in the world — meaning, some imports but no tariff revenue collected at all. This weirdly turns out to be Cuba, where trade remains mostly banned, a few licensed U.S. buyers have been buying Cuban artwork, and tariffs on paintings, sculpture, antiques, etc. are all permanently set at zero.

301 & 232 effects: The U.S. worldwide tariff average — that is, the statistic Sullivan was looking for — doubled from 1.4% in 2017 to 2.8% in 2022. The effect of the Trump administration’s “232” steel and aluminum tariffs was small, affecting only about 1.5% of imports and changing average rates for suppliers like the EU, Japan, and Brazil only modestly. The higher global average mainly results from the “301” tariffs on Chinese goods: following these, though China lost some “import market share,” total imports of Chinese goods remained at $500 billion, tariff revenue rose about four-fold, and the average tariff paid by buyers of Chinese goods accordingly rose from 2.7% to 11.0%.  This 11.0% is quite high in comparison to the world average — but, pretty remarkably, is still below the normal rates imposed on buyers of Bangladeshi and Sri Lankan goods.

FURTHER READING:

Sullivan’s April global-economy talk.

… and a worried response from PPI’s Ed Gresser.

At home:

PPI’s take on the tariff system as a form of taxation, and its impact on low-income American families and communities.

Case study 1: PPI’s Valentine’s Day blast against the unfair, gender-biased U.S. underwear tariff system.

Case study 2:  And reports on the contrast between high tariff rates on cheap stainless-steel spoons, and low ones on sterling silver.

“Average tariff rate”:

The NSC’s neighbors at the Office of Management and Budget report $99.9 billion in “customs duties and fees” in FY2022. This makes the tariff system the fourth-largest federal tax, about equal to the combined revenue totals from the $32.5 billion inheritance taxes, the $46.6 billion gas tax, and the $10.2 billion alcohol and $11.3 billion tobacco excise taxes. Subtracting the two main fees from this total (CBP’s Merchandise Processing Fee and Harbor Maintenance Fee revenue), the result is an average of about 2.8%. The U.S. International Trade Commission annually reports “duties” without the “fees”, but hasn’t yet released its final 2022 figure. For 2021 it got $84.5 billion in tariffs, $2.824 trillion in imports, and a 3.0% overall rate. Their preliminary figure for 2022 is a bit lower, with $90.1 billion in tariffs on $3.277 billion in imports, or 2.75%.

OMB’s Historical Tables offer comparisons with other taxes.

… CBP explains the “fees.”

A long view – The U.S. International Trade Commission tracks U.S. tariff rates from the McKinley Tariff of 1890 to 2021.

The tariff system itself:

From the first chapter (01 for live animals) to the last, (97, for artwork), the tariff system’s 11,414 different eight-digit “lines” are meant to give every physical thing a number and a tax rate. The first line, “0101.21.00” stands for “purebred breeding horses” and is set at zero. The last, “9706.90.00,” is for antiques between 100 and 249 years old and is also zero. Overall, the 11,414 lines include (a) 4,315 set at zero (say, for natural gas, smartphones, paper, toys, and medicines); 5,864 with above-zero “ad valorem” (i.e., percentage) tariffs ranging from 0.1% to a peak of 48% for cheap sneakers; and 1,078 “specific duties” (flat fees) and “compound” tariffs (percentages plus flat fees), where tariff change each year with prices. For example, pinking shears used by tailors and dry cleaners are set at 8% plus 8 cents for each. Adding to the confusion are thousands of exemptions and surcharges coded via letters or set down in alternative chapters 98 and 99.

From the ITC, a two-page summary of the 11,414 U.S. tariff lines — how many zero? how many duty-free under FTAs and preferences? how many “specific duties” and compounds? — etc.

And the actual U.S. tariff system, by chapter or the full 4,352-page book in PDF.

International comparisons:

The World Bank’s interactive table of average tariff rates worldwide and by country uses the same “weighted” approach. It has a worldwide average of 2.6% as of 2017, and rates by country for the most recent available year. The world’s highest rate is Bermuda’s 24.1%, followed by Belize at 18.7%, Gambia 17.8%, and Djibouti 7.6%. The lowest are the zeroes for Hong Kong and Macao. Use this with care; its 1.5% figure for the U.S., though correct for 2017, is dated “2020” and isn’t right.

The WTO’s World Tariff Profiles 2022 has more detail, with simple averages, trade-weighted averages, “tariff peak” counts, ag vs. non-ag., and more for 151 countries.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: American colonies’ “official” tea imports in 1772: 370 tons

THE NUMBERS: Vessel calls at Boston Harbor –

2020:         779*
1772:           845

* Cargo vessels; adding fishing vessels and cruise ships, the annual total is likely around 1,500. 

WHAT THEY MEAN:

A post-Fourth coda:

The Declaration’s opening paragraphs speak to aspirations — “Life, Liberty, and the pursuit of Happiness” — and the responsibilities of government.  The actual declaration of independence, “these United Colonies are, and of Right ought to be Free and Independent States”, comes at the close.  In between is a list of 27 grievances, of which the sixteenth is a trade policy complaint — “cutting off our Trade with all parts of the world” — and the seventeenth is a general problem of taxation appearing in the form of tariffs. (“Imposing Taxes on us without our Consent”.)  Apart from the patriotic images the list elicits – chests of tea falling into the harbor, red-coated soldiers patrolling colonial Boston, the Continental Congress meeting in Philadelphia — the grievances both refer to very specific events of 1773 and 1774, and raise larger questions about how trade policy and commerce interact with governance, personal rights and liberties, and war.

Background: Just before the revolution, the American colonies had a population of about 2.15 million spread out along the Atlantic seaboard, with the largest concentrations in Massachusetts, New York, Pennsylvania, and Virginia. They appear to have made up about 20% of the population and 30% of the “GDP” of the British empire, and had very busy maritime economies.  Modern attempts to estimate a trade-to-GDP ratio for the early United States in the 1790s show imports at something like 17% of GDP and exports a bit less — figures very close to those of the 2020s — and these ratios were probably higher before the Revolution. Actual figures collected at the time illustrate: The Port of Boston served a Massachusetts population of about 280,000 and reported 845 ship arrivals in 1772, the year before the Tea Party.* Of this total, 93 came into port from Britain and Ireland, 20 from continental Europe, 216 from the Caribbean, and 427 from other North American ports. Adding New York, Philadelphia, Hampton, and Charleston to the Boston figures gives a total of 3,076 arrivals, including 393 from Britain and Ireland, 230 from Europe, 31 from Africa, and 985 from the Caribbean.

In financial and product terms, outbound vessels carried about £3.4 million a year in colonial exports, of which about half (by value) went to Britain and Ireland, a quarter to continental Europe, and a quarter to the Caribbean. These were mostly resource products and agricultural goods. The top 1772 export, accounting for a bit more than a quarter of the total, was £907,000 worth of tobacco from slave-worked plantations in the mid-Atlantic. Next came £397,000 of New England fish, £504,000 of flour and bread, £341,000 of South Carolina rice, and on down through indigo, wheat, furs, whale oil, horses, and a few manufactured goods including wooden barrels, pig iron, and ship masts. British “Navigation Acts” dating to the 17th century regulated several of these products quite strictly (for example, on grounds of naval need the colonies weren’t allowed to ship timber anywhere but Britain) but don’t seem to always been very energetically enforced in other areas. The Declaration’s two trade grievances, relating to events of 1773 and 1774, are as follows:

(1) “Imposing taxes without our Consent”:  Parliamentary laws in the 1760s imposing a series of taxes — first document-stamping, then imported molasses, paper, glass, sugar, and tea — opened up the taxation-without-representation argument. The Tea Party event (December 16, 1773) was the last phase in this dispute, and adds vivid global-economy color to its more abstract intellectual and constitutional core. To recap:  about three dozen “Sons of Liberty” raided three Nantucket-owned ships chartered by the British East India Company, which then administered Britain’s relatively new Asian empire (concentrated in present-day Bangladesh and the Calcutta hinterlands along with southern India and Bombay but quickly getting bigger) and handled China trade. The actual tea thrown into the harbor, collected in 342 wooden chests weighing about 125 kilos each, had all been purchased in Guangzhou in 1771. It included 75 chests of green tea, 240 of low-priced bohea, 15 of upper-class congou, and 10 of elite Fujian souchong. Together it weighed 46 tons, or about an eighth of the year’s British 370 tons of tea sales to the colonies.

The grievance prompting this event was a 3 pence-per-pound tea tax, kept in effect since 1768 though the other objectionable taxes had been withdrawn in 1770. In passing the May 1773 “Tea Act,” Parliament’s main ‘policy’ goal was to bail out the East India Company, which had nearly bankrupted itself during the conquest of Bengal. The Company had originally purchased the tea intending to auction it off in London, but found itself stuck with more than it could sell during an economic downturn. (Having sat in warehouses for two years, it might have gotten a bit moldy.)  In more ideological terms Parliament wanted to (a) enforce Navigation Act regulations barring colonists from buying tea from other sources, amid probably exaggerated claims that as much as 85% of colonial tea came tax-free from the Netherlands via colonial “smugglers”, and (b) insist once again on the very grating point about Parliamentary rights to tax the colonies without their approval.  Bostonians weren’t alone in their annoyance: Philadelphians boycotted a similar East India Company tea ship in the same month (the captain left without a fight), and New Yorkers had planned to do the same, but their tea ship got blown off course in a storm and wound up in Antigua. The last tea ship, sent to Charleston, off-loaded the tea but couldn’t sell it.

(2) “Cutting off our Trade with all parts of the world”: Parliament learned of the Tea Party in late January of 1774 — the trans-Atlantic voyage took about a month — and responded in March with five new laws collectively called the “Coercive Acts.” The first of these, the “Boston Port Act,” banned shipping from Boston with the exception of ships delivering food and fuel. The loss of 800 or more ship visits and nearly a million pounds worth of exports, and the presumed intention to wreck the Massachusetts economy as retaliation for the Tea Party, likely discredited whatever pro-U.K. sentiment remained, even apart from the four other laws. (Two of them involving “quartering” soldiers at local expense, the other two reducing local government and judicial rights. These points are noted in grievances #11, 14, 21, and 22.)

Massachusetts Bay diplomats in turn requested a sympathy boycott of trade with Britain from the other 12 colonies. The Continental Congress, meeting in September, agreed with an exception for rice exports. By 1775 imports had dropped from £2.59 million to £0.2 million, and most of this seems to represent flows of weapons to the British garrison in Boston. The export boycott program worked less quickly, but effectively enough that almost all trade had ceased by the time the Continental Congress reconvened in June of 1776.

PPI wishes you a happy, if slightly belated, Fourth.

* By way of context, this 845 vessel-call total compares very favorably to the Department of Transportation’s report of 779 cargo vessel arrivals in Boston Harbor in 2020. Cruises, non-existent in the 1770s, add another 115 or so, and two or three fishery vessels arrive daily, so a combined total is likely around 1,500.

FURTHER READING:

The National Archives’ official Declaration text.

The Massachusetts Historical Society’s Tea Party recap.

Colonial data on demographics, maritime economy, import/export, the 18th-century slave trade, and other topics from the Census Almanac of Statistical Abstracts.

… and the Department of Transportation’s Boston Harbor cargo snapshot.

From the World Green Tea Association in Japan, a concise piece on the British East India Company and the tea trade.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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FACT: The African American exporting community shrank by 34% in 2020.

THE NUMBERS: African American-owned exporting businesses* –

2021:        Data not yet available
2020:                   1,001
2019:                   1,514
2017-20 avg.       1,380

*Census/BEA

WHAT THEY MEAN:

The Census’ annual counts of U.S. exporting businesses peak at 305,200 in 2014.  Then they drift downward, to 289,400 in 2019; then comes a sheer drop to 271,705 in COVID-stricken 2020.  The most recent report, for 2021, shows a modest rebound to 278,400 in 2021 as trade flows recovered. (The update for 2022 comes in January.) All the loss has come in the small-business sector. Census’ count of “large company” exporters — those with 500 or more employees — has actually risen a bit, from 6,968 in 2014 to 7,121 in 2021. The tally of very small exporters (those with fewer than 100 employees each) has meanwhile dropped by almost 10%, from 281,300 in 2014 to 255,300 in 2021.  For some reason, which is not clear in the data, this drop appears to have been steepest among African-American businesses.

This insight comes from a decade-old Census/BEA statistical collaboration to provide a very detailed look at the nature of smaller exporters. For 2012, and then the years 2017-2020, the two agencies identified the ownership of about two-thirds of U.S. exporters by race and ethnicity, gender, public vs. private ownership, and veteran status.  From there they proceed to find the countries where exporters find their customers; levels of employment and pay (including with comparison to non-exporters); and at least for 2017-2020 changes over time. The 2020 report, taken in the context of the 2017/2018/2019 editions shows the following about African American exporting firms:

(1) Total count, employment, and pay: Census and BEA found 1,001 African American-owned exporting businesses in 2020. As a group, they employed 49,045 workers, with a combined payroll of $1.96 billion — that is, an average of 49 people per business, at payrolls of $39,900 per worker. Their non-exporting peers, meanwhile, averaged 9 workers at payrolls of $33,191 per worker.

(2) Markets: The 1,001 firms earned about a tenth of their income from exports. (In precise terms, $1.1 billion out of $12 billion in total receipts). The European Union was their largest customer at $467 million, and bought from 358 of the companies. Canada was next at $115 million. The African American businesses were significantly more focused on African markets than other exporters: 13.8% of them, or 138 of the 1,001 in actual numbers, had African customers in 2020, as opposed to 8.4% of exporters with owners of other races and ethnicities. By country, over the most recent four years, Nigeria was their largest African market, followed by Ghana.

(3) Trends: Exporting communities of almost all ethnicities shrank in 2020, but the COVID shock seems to have hit African American exporting firms much harder than others. The 1,001 African American exporters in 2020 represents a drop of 27% from the average across 2017-2019, and 34% from the 1,514 in 2019. The count of African American exporters to Africa specifically fell especially steeply, dropping by half from 278 in 2019 to the 138 of 2020.  Meanwhile, the counts of African-American exporters to China fell from 117 to 87, to Mexico from 121 to 108, and to India from 53 to 28.  By comparison, BEA’s tallies of white-owned and Hispanic exporters were down about 7% from the 2017-2020 averages, and that of Asian-owned exporters by 3%. Native American exporters were an interesting exception, growing a bit in 2020 to 511 firms from an average of 452 across 2017-2019.

The reports do not indicate why, in the context of a general decline in trade during the COVID pandemic, the African American exporter group would have contracted more sharply than others. Nor do they say (since the most recent edition covers 2020*) whether their rebound in 2021 might have been stronger. Combined with Census’ total-exporter counts, though, they do seem to indicate that (a) U.S. small-business exporters have been struggling in general for nearly a decade, (b) the most recent drop hit African American exporters hardest, and (c) while government policies are never the only answer to a problem, the agencies charged with supporting SME exporters ought to be thinking about recovery options for this particular group, and probably more generally about whether their current approaches are enough.

*  Census will update its total-exporters in April 2024 (with a preliminary edition in January) with 2022 figures. This will presumably help show whether the modestly higher count of 2021 was the beginning of a nearly decade-long negative trend, or just a small bounce after an unusually bad 2020. The very detailed Census/BEA studies with race/ethnicity/gender/market data for 2021 (assuming the two agencies keep doing them) would likely come out in May, with information on whether African American export businesses rebounded from the COVID shock at par with, or faster than, or slower than, their peers.

FURTHER READING:

Census/BEA’s collaborative series on the nature of exporting businesses, with data on exporters by ownership, overseas markets, export dependence levels, employment, and payroll (2020 version; go to the main page for 2017, 2018, and 2019).

… and the annual report on exporters and importers by large/medium/small size, known as “Profile of Importing and Exporting Companies,” has totals, state-by-state figures, SMEs vs. large firms for 25 countries as well as the world, etc.

A recent report from PPI in collaboration with Prosperity Now looks at the barriers facing entrepreneurs of color, and the smaller, less profitable businesses that emerge as a result.

Government Resources:

The Minority Business Development Administration (2015) looks at diversity and success in American export firms.

The Commerce Department’s Global Diversity Exporter Initiative.

And the Small Business Administration’s export center.

World Perspective: 

The WTO looks at small businesses and trade.

And the Geneva-based International Trade Center’s SME competitiveness report.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.

Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.

Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007).  He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.

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