Trump’s Tariffs: What They Are and How They Would Work

Is this what a trade war looks like?

The Trump administration and China’s leadership have threatened to impose tariffs on $50 billion of each other’s goods. Trump has proposed imposing duties on $400 billion more if China doesn’t further open its markets to U.S. companies and reduce its trade surplus with the United States. China, in turn, says it will retaliate.

In recent years, tariffs had been losing favor as a tool of national trade policy. They were largely a relic of 19th and early 20th centuries that most experts viewed as mutually harmful to all nations involved. But President Donald Trump has restored tariffs to a prominent place in his self-described America First approach.

Trump enraged U.S. allies Canada, Mexico and the European Union earlier this month by slapping tariffs on their steel and aluminum shipments to the United States. The tariffs have been in place on most other countries since March.

Trump has also asked the U.S. Commerce Department to look into imposing tariffs on imported cars, trucks and auto parts, arguing that they pose a threat to U.S. national security.

Here is a look at what tariffs are, how they work, how they’ve been used in the past and what to expect now.

Are we in a trade war?

Economists have no set definition of a trade war. But with the world’s two largest economies aggressively threatening each other with punishing tariffs, such a war appears perilously close. All told, the White House has threatened to hit $450 billion of China’s exports to the U.S. with punitive tariffs. That’s equivalent to 90 percent of the goods that China shipped to the United States last year.

It’s not uncommon for countries — even close allies — to fight over trade in specific products. The United States and Canada, for example, have squabbled for decades over softwood lumber.

But the U.S. and China are fighting over much broader issues, such as China’s requirements that American companies share advanced technology to access China’s market, and the overall trade deficit the U.S. has with China. So far, neither side has shown any sign of bending.

What are tariffs?

Tariffs are a tax on imports. They’re typically charged as a percentage of the transaction price that a buyer pays a foreign seller. Say an American retailer buys 100 garden umbrellas from China for $5 apiece, or $500. The U.S. tariff rate for the umbrellas is 6.5 percent. The retailer would have to pay a $32.50 tariff on the shipment, raising the total price from $500 to $532.50.

In the United States, tariffs — also called duties or levies — are collected by Customs and Border Protection agents at 328 ports of entry across the country. Proceeds go to the Treasury. The tariff rates are published by the U.S. International Trade Commission in the Harmonized Tariff Schedule, which lists U.S. tariffs on everything from dried plantains (1.4 percent) to parachutes (3 percent).

Sometimes, the U.S. will impose additional duties on foreign imports that it determines are being sold at unfairly low prices or are being supported by foreign government subsidies.

Do other countries have higher tariffs than the United States?

Most key U.S. trading partners do not have significantly higher average tariffs. According to an analysis by Greg Daco at Oxford Economics, U.S. tariffs, adjusted for trade volumes, on goods from around the world average 2.4 percent, above Japan’s 2 percent and just below the 3 percent for the European Union and 3.1 percent for Canada.

The comparable figures for Mexico and China are higher: Both have higher duties that top 4 percent.

Trump has complained about the 270 percent duty that Canada imposes on dairy products. But the United States has its own ultra-high tariffs — 168 percent on peanuts and 350 percent on tobacco.

What are tariffs supposed to accomplish?

Two things: Raise government revenue and protect domestic industries from foreign competition. Before the establishment of the federal income tax in 1913, tariffs were a big money raiser for the U.S. government. From 1790 to 1860, for example, they produced 90 percent of federal revenue, according to Clashing Over Commerce: A History of US Trade Policy by Douglas Irwin, an economist at Dartmouth College. By contrast, last year tariffs accounted for only about 1 percent of federal revenue.

In the fiscal year that ended Sept. 30, the U.S. government collected $34.6 billion in customs duties and fees. The White House Office of Management and Budget expects tariffs to fetch $40.4 billion this year.

Those tariffs are meant to increase the price of imports or to punish foreign countries for committing unfair trade practices, like subsidizing their exporters and dumping their products at unfairly low prices. Tariffs discourage imports by making them more expensive. They also reduce competitive pressure on domestic competitors and can allow them to raise prices.

Tariffs fell out of favor as global trade expanded after World War II.

The formation of the World Trade Organization and the advent of trade deals like the North American Free Trade Agreement among the U.S., Mexico and Canada reduced tariffs or eliminated them altogether.

Why are tariffs making a comeback?

After years of trade agreements that bound the countries of the world more closely and erased restrictions on trade, a populist backlash has grown against globalization. This was evident in Trump’s 2016 election and the British vote that year to leave the European Union — both surprise setbacks for the free-trade establishment.

Critics note that big corporations in rich countries exploited looser rules to move factories to China and other low-wage countries, then shipped goods back to their wealthy home countries while paying low tariffs or none at all. Since China joined the WTO in 2001, the United States has shed 3.1 million factory jobs, though many economists attribute much of that loss not to trade but to robots and other technologies that replace human workers.

Trump campaigned on a pledge to rewrite trade agreements and crack down on China, Mexico and other countries. He blames what he calls their abusive trade policies for America’s persistent trade deficits — $566 billion last year. Most economists, by contrast, say the deficit simply reflects the reality that the United States spends more than it saves. By imposing tariffs, he is beginning to turn his hard-line campaign rhetoric into action.

Are tariffs a wise policy?

Most economists — Trump’s trade adviser Peter Navarro is a notable exception — say no. The tariffs drive up the cost of imports. And by reducing competitive pressure, they give U.S. producers leeway to raise their prices, too. That’s good for those producers — but bad for almost everyone else.

Rising costs especially hurt consumers and companies that rely on imported components. Some U.S. companies that buy steel are complaining that Trump’s tariffs put them at a competitive disadvantage. Their foreign rivals can buy steel more cheaply and offer their products at lower prices.

More broadly, economists say trade restrictions make the economy less efficient. Facing less competition from abroad, domestic companies lose the incentive to increase efficiency or to focus on what they do best.

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Russia’s Record-Breaking $15 Billion World Cup Price Tag: What Does It Buy?

The World Cup in Russia is the most expensive ever – with the official price tag around $15 billion. The result: several huge new stadiums, railroads and upgraded airports, plus the chance to reboot Russia’s global image. So, will the tournament represent a good value for Russians? As Henry Ridgwell reports from Moscow, the government appears to have used the World Cup to bury some bad economic news.

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Amid Outcry, Trump Doubles Down on ‘Zero Tolerance’ Immigration Enforcement

U.S. President Donald Trump is doubling down on his “zero tolerance” policy on illegal immigration, a crackdown that has led to at least 2,000 undocumented children being separated from their parents at the U.S.-Mexico border. VOA Senate correspondent Michael Bowman reports, human rights advocates and lawmakers of both political parties are outraged, sparking action on Capitol Hill.

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Recording of Screaming Children at Border Released

An audio recording was released Monday depicting children desperately crying and begging for their parents after being separated from them by U.S. immigration authorities at its southwestern border, sparking new outrage against the Trump administration and its new “zero-tolerance policy” towards illegal immigrants.

The nearly eight-minute long recording was released by ProPublica, an independent, investigative news site. ProPublica says an unidentified whistleblower passed on the recording to a civil rights attorney, who gave it to the website.

Among the disturbing sounds heard on the recording was a child identified by ProPublica as a six-year-old girl from El Salvador begging authorities in Spanish to call her aunt to pick her up from the detention center. 

At one point in the audio, a man identified as a Border Patrol agent said in Spanish over the cries of scores of children: “Well, we have an orchestra here. What’s missing is a conductor.”

LISTEN: ProPublica recording of children

President Donald Trump defended his administration’s policy of forcibly separating children from parents at the U.S. border with Mexico on Monday, saying “The United States will not be a migrant camp and it will not be a refugee holding facility.”

WATCH: Trump Immigration Enforcement

Trump, speaking in the White House East Room during a National Space Council meeting, warned that “what’s happening in Europe … we can’t allow that to happen to the United States – not on my watch.”

Earlier in the day, on the Twitter social media platform, the president inaccurately linked migration in Germany to a rising crime rate. (Actually, the latest German government statistics show reported crimes at the lowest level in 30 years.)

Nearly 2,000 children were sent to mass detention centers or foster care from mid-April to the end of May, according to government officials.

The regular White House briefing was delayed several times Monday amid the furor as officials huddled with Trump in the West Wing.

‘Zero-tolerance’ policy

Press Secretary Sarah Huckabee Sanders finally introduced Department of Homeland Security Secretary Kirstjen Nielsen by late evening, and she defended the administration’s “zero-tolerance” policy that is breaking up families at the southwestern U.S. border.

Nielsen forcefully pushed back at the negative media coverage, asserting that what U.S. authorities are doing is properly enforcing the law.

“What has changed is that we no longer exempt entire classes of people who break the law,” she said.

Asked about critics accusing the administration of using children as “pawns” to demand legislative actions from Congress, the DHS secretary replied, “I say that is a very cowardly response,” adding it is clearly within Congress’ power “to make the laws and change the laws. They should do so.”

Trump’s Republican party controls both chambers in Congress, and the family border policies were set by his administration.

In a tweet displaying photographs of a detention facility, showing children sleeping on mats with foil blankets, Democrat Senator Tim Kaine wrote: “The real Trump Hotel.”

Kaine, a member of a subcommittee on children and families, was his party’s vice presidential nominee on the ticket with Hillary Clinton, which lost to Trump and Mike Pence in 2016. 

Kamala Harris, one of the two Democratic Party senators from California, the most populous state, called Monday for Nielsen’s resignation. 

Harris, mentioned as a likely presidential candidate in 2020, said under Nielsen’s watch “our government has committed human rights abuses by breaking up families along the southern border. And she has failed to be accountable and transparent with the American people.”

House Minority Leader Nancy Pelosi also added her voice to those calling for Nielsen to quit her post.

Both Nielsen and Attorney General Jeff Sessions, in speeches to a law enforcement group in New Orleans earlier on Monday, defended the administration’s stance.

Sessions said that while the Trump administration does not want to separate children from their parents “we cannot and will not encourage people to bring children by giving them blanket immunity from our laws.”

UN rebuke

In a rare rebuke of the United States, United Nations Secretary-General Antonio Guterres said migrant children should not be separated from their families at the U.S.-Mexico border.

“Children must not be traumatized by being separated from their parents. Family unity must be preserved,” a spokesman for Guterres said in a statement.

“This is a manufactured crisis. It is not necessary to separate parents and children to effectively enforce the nation’s immigration laws,” said Doris Meissner, who was commissioner of the Immigration and Naturalization Service for seven years during the Clinton administration.

“Earlier administrations have grappled with comparable issues and their responsibility for enforcing the same laws,” she added. “They have made different choices on how best to enforce the laws because they have understood and recognized that the practices we are witnessing today are at odds with fundamental American values and principles.”

The House of Representatives is preparing for expected votes this week on major changes to U.S. immigration laws. 

Trump is scheduled to meet with House Republicans on Tuesday to discuss two competing Republican immigration reform bills.

Sanders on Monday told reporters Trump is willing to sign either bill.

Both would provide legal status to hundreds of thousands of undocumented immigrants brought to the United States as children, make sweeping changes to legal immigration, and boost U.S. border security. However, it is unclear if either will attract enough votes to pass. 

“The degree to which the president seemingly believes and continues to equate immigrants and refugees with crime and danger contributes to heightening fear and opposition to immigration,” Meissner told VOA. “This makes it very difficult for members of Congress to reach agreement on important legislative measures that the country should be taking to manage immigration challenges more effectively.”

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China Warns US of ‘Countermeasures’ Against Possible New Tariffs

China says it will take appropriate countermeasures if the United States follows through with additional tariffs on Chinese goods. 

U.S. President Donald Trump announced Monday that he had asked the U.S. trade representative to identify a list of products to subject to 10 percent tariffs on $200 billion worth of goods. The president said the move was in retaliation to Beijing’s decision to impose tariffs on $50 billion in U.S. goods, matching the first set of tariffs imposed by Trump.

In a statement issued Tuesday, China’s commerce ministry criticized Trump’s latest move as nothing more than “extreme pressure and blackmail” that “deviates from the consensus reached by both sides” during multiple talks. 

“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” Trump said in his statement Monday. “Rather than altering those practices, it is now threatening United States companies, workers and farmers who have done nothing wrong.”

He threatened even more tariffs if Beijing again hits back with tit-for-tat duties on American goods.

Trump’s comments came hours after Secretary of State Mike Pompeo told a Detroit business meeting that China was engaging in “predatory economics 101” and an “unprecedented level of larceny” of intellectual property.

He said China’s recent claims of “openness and globalization” are “a joke.” 

Pompeo said he raised the issue last week in a meeting with Chinese President Xi Jinping, saying, “I reminded him that’s not fair competition.”

Trump said he has an “excellent relationship” with Xi, “but the United States will no longer be taken advantage of on trade by China and other countries in the world.”

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Trump’s Tariff War Threatens to Erode Support of Farmers

President Donald Trump’s tariff battle with key buyers of U.S. apples, soybeans and corn threatens the support of some of his biggest backers – U.S. farmers now seeing their livelihoods in jeopardy.

Farmers overwhelmingly supported Trump in the 2016 election, welcoming how he championed rural economies and vowed to repeal estate taxes that often hit family farms hard.

Now those same farmers are seeing crop prices fall and export markets shrink after Trump’s tariffs triggered a wave of retaliation from buyers of U.S. apples, cheese, potatoes, bourbon and soybeans.

“A lot of people in the ag community were willing to give President Trump the benefit of the doubt,” said Brian Kuehl, executive director of Farmers for Free Trade. “The reason you are seeing people increase the pressure now is because thepressure is increasing on them. Now the impact is really starting to hit. It is not something you can just take lightly.”

His group, along with the U.S. Apple Association, will start running television ads on Tuesday attacking Trump’s tariffs in Pennsylvania and Michigan, apple-growing states that could play a role in which party controls Congress after the November elections.

Trump, a Republican, has said farmers will not become a casualty in any trade war, floating ideas like subsidizing those hurt by tariffs.

Even before trading partners imposed tariffs, U.S. farmers were facing a tough year. Net farm income was expected to fall 6.7 percent to $59.5 billion in 2018, according to the U.S. Agriculture Department.

Now an even more bearish tone hangs over agricultural markets due to trade spats with NAFTA partners Canada and Mexico, plus mounting tensions with China and Europe.

After Trump imposed tariffs on steel and aluminum imports, Mexico imposed a 20 percent tariff on imports of U.S. apples, potatoes and cranberries.

Last week, Trump imposed $50 billion in tariffs on China.

Beijing retaliated with a 25 percent tariff on U.S. soybeans and other goods starting July 6, sending soybean futures to a two-year low and throwing into doubt forecasts for U.S. soybean exports to rise 11 percent this marketing year.

China’s tariffs could contribute to a 30 percent drop in income for Ohio corn and soybean farmers this year, said Ben Brown, manager of an Ohio State University farm program.

If the tariffs stay in place, net farm income in Ohio could drop as much as 63 percent in 2019, he said.

Last week, the American Soybean Association said it was disappointed and for weeks had implored the Trump administration to “find non-tariff solutions to address Chinese intellectual property theft and not place American farmers in harm’s way.”

The group added that the White House has ignored its requests for meetings.

The timing also hurts farmers, as it is too late in the season for farmers to adjust planting plans.

“Crops are in the ground and will soon be ready for harvest,” said Casey Guernsey with Americans For Farmers and Families. “We need the certainty of knowing that there will be market availability in order to sell them.”

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WHO Lists Compulsive Video Gaming As Mental Health Problem

Parents suspicious that their children may be addicted to video games now have support from health authorities. The World Health Organization has listed “gaming disorder” as a new mental health problem on its 11th edition of  International Classification of Diseases, released on Monday. But as VOA’s Zlatica Hoke reports, not all psychologists agree that compulsive gaming should be on that list.

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Norway Tests Tiny Electric Plane, Sees Passenger Flights by 2025

Norway tested a two-seater electric plane on Monday and predicted a start to passenger flights by 2025 if new aviation technologies match a green shift that has made Norwegians the world’s top buyers of electric cars.

Transport Minister Ketil Solvik-Olsen and Dag Falk-Petersen, head of state-run Avinor which runs most of Norway’s airports, took a few minutes’ flight around Oslo airport in an Alpha Electro G2 plane, built by Pipistrel in Slovenia.

“This is … a first example that we are moving fast forward” towards greener aviation, Solvik-Olsen told Reuters. “We do have to make sure it is safe – people won’t fly if they don’t trust it.”

He said plane makers such as Boeing and Airbus were developing electric aircraft and that battery prices were tumbling, making it feasible to reach a government goal of making all domestic flights in Norway electric by 2040.

Asked when passenger flights in electric planes could start, Falk-Petersen, the pilot, said: “My best guess is before 2025 … It should all be electrified by 2040.”

The two said the plane, with a takeoff weight of 570 kg (1255 lb), was cramped and buffeted by winds but far quieter than a conventional plane run on fossil fuels.

Norway tops the world league for per capita sales of electric cars such as Teslas, Nissan Leafs or Volkswagen Golfs, backed by incentives such as big tax breaks, free parking and exemptions from road tolls.

In May 2018, 56 percent of all cars sold in Norway were either pure electric or hybrids against 46 percent in the same month of 2017, according to official statistics.

Norway, a mountainous country of five million people where fjords and remote islands mean many short-hop routes of less than 200 kms, would be ideal for electric planes, Solvik-Olsen said. Also, 98 percent of electricity in Norway is generated from clean hydro power.

Some opposition politicians said the government needed to do far more to meet green commitments in the 200-nation Paris climate agreement.

“This is a start … but we have to make jet fuel a lot more expensive,” said Arild Hermstad, a leader of the Green Party.

The first electric planes flew across the English Channel in July 2015, including an Airbus E-Fan. French aviator Louis Bleriot who was first to fly across the Channel, in 1909, in a fossil-fuel powered plane.

Electric planes so far have big problems of weight, with bulky batteries and limited ranges. Both Falk-Petersen and Solvik-Olsen said they had been on strict diets before the flight.

“My wife is happy about it,” Solvik-Olsen said.

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Intel Tops List of Tech Companies Fighting Forced Labor

Intel topped a list issued on Monday ranking how well technology companies combat the risk of forced labor in their supply chains, overtaking HP and Apple.

Most of the top 40 global technology companies assessed in the study by KnowTheChain, an online resource for business, had made progress since the last report was published in 2016. But the study found there was still room for improvement.

“The sector needs to advance their efforts further down the supply chain in order to truly protect vulnerable workers,” said Kilian Moote, project director of KnowTheChain, in a statement.

Intel, HP and Apple scored the highest on the list, which looked at factors including purchasing practices, monitoring and auditing processes. China-based BOE Technology Group and Taiwan’s Largan Precision came bottom.

Workers who make the components used by technology companies are often migrants vulnerable to exploitative working conditions, the report said. 

About 25 million people globally were estimated to be trapped in forced labor in 2016, according to the International Labor Organization and rights group Walk Free Foundation.

Laborers in technology companies’ supply chains are sometimes charged high recruitment fees to get jobs, trapped in debt servitude, or deprived of their passports or other documents, the report said.

It highlighted a failure to give workers a voice through grievance mechanisms and tackle exploitative recruiting practices as the main areas of concern across the sector.

In recent years modern slavery has increasingly come under the global spotlight, putting ever greater regulatory and consumer pressure on firms to ensure their supply chains are free of forced labor, child labor and other forms of slavery.

From cosmetics and clothes to shrimp and smartphones, supply chains are often complex with multiple layers across various countries — whether in sourcing the raw materials or creating the final product — making it hard to identify exploitation.

Overall, large technology companies fared better than smaller ones, suggesting a strong link between size and capacity to take action, the report said. Amazon, which ranked 20th, was a notable exception, it said.

“Top-ranking brands … are listening to workers in their supply chains and weeding out unscrupulous recruitment processes,” Phil Bloomer, head of the Business & Human Rights Resource Center, told the Thomson Reuters Foundation.

A spokesman for Amazon said the report drew from old and incomplete information and failed to take into account recently launched anti-slavery commitments and initiatives.

HP said it regularly assessed its supply chain to identify and address any concerns and risks of exploitation.

“We strive to ensure that workers in our supply chain have fair treatment, safe working conditions, and freely chosen employment,” said Annukka Dickens, HP’s director for human rights and supply chain responsibility.

Intel, Apple, BOE Technology and Largan Precision did not immediately respond to requests for comment.

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Apple Aims to Solve Problems Locating 911 Calls for Help

Apple is trying to drag the U.S.’s antiquated system for handling 911 calls into the 21st century.

 

If it lives up to Apple’s promise, the next iPhone operating system coming out in September will automatically deliver quicker and more reliable information pinpointing the location of 911 calls to about 6,300 emergency response centers in the U.S.

 

Apple is trying to solve a problem caused by the technological mismatch between a system built for landlines 50 years ago and today’s increasingly sophisticated smartphones that make most emergency calls in the U.S.

 

The analog system often struggles to decipher the precise location of calls coming from digital devices, resulting in emergency responders sometimes being sent a mile or more from people pleading for help.

 

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