| Photo by Diego Fernandez on Unsplash
The topic of “tariffs” has been the main subject of conversation in almost every corner of the world ever since President Donald Trump announced early in March that he would impose heftier tariffs on Canada and Mexico. On April 2, when the US president delivered his “Liberation Day” speech at the White House Rose Garden, “tariffs” became the trending buzzword worldwide as he declared America’s “economic independence” and announced wide-ranging reciprocal tariffs on almost every country.
In a stunning dramatic announcement, the US president declared a 90-day pause for many countries because they apparently reached out and signified a willingness to discuss the issues—except for China, which was slapped with a 125 percent tariff on its goods. Analysts and experts have been giving differing perspectives regarding the impact of President Trump’s decisions on the global economy and the implications concerning trade relations.
But what exactly is the history of tariffs, and how did the term come about? Several articles have since been written about this topic, including one from npr.org that traces it to the Arabic “ta’rif,” which means “notification” or “inventory.”
According to an article in Shapiro (a supply chain logistics company specializing in international freight forwarding and other services), tariffs are “a concept as old as the Silk Road and as dynamic as today’s global trade networks. Tariffs have long been the tools of choice for nations wanting to sway trade dynamics, defend domestic industries, or even engage in the occasional economic skirmish.”
Saying tariffs are beyond just another line item on imported goods, Shapiro explains that these customs duties are “financial instruments with the power to sculpt economic landscapes” and that by imposing such, countries can “protect their local industries from overseas competition,” among other things.
The article discusses the concept of tariffs from ancient Greece and Rome, when a fixed fee had to be paid before foreign goods were allowed entry into local markets, down to the Industrial Revolution and the 20th Century. Tariffs evolved as nations tried to shield their faltering economies, at times resulting in “deeper economic woes.”
“The creation of the General Agreement on Tariffs and Trade (GATT) in 1947 marked a turning point, as countries rallied to reduce trade barriers and promote global commerce. GATT paved the way for the World Trade Organization (WTO), heralding a new era of multilateral trade agreements,” the Shapiro article explains.
“The disputes today, in particular the Section 301 tariffs on China, serve as “a prime example of tariffs in action, aimed at correcting trade imbalances and addressing intellectual property disputes, that despite the uncertainty, tariffs will “continue to be pivotal in shaping international trade, their application evolving alongside the global economic landscape.”
–shapiro
One of the more well-known in US history is the Smoot-Hawley Tariff Act, more formally known as the United States Tariff Act of 1930, which President Herbert Hoover signed during the start of the Great Depression. Intended to help American farmers, the imposition of already punitive import duties on a wide range of agricultural and industrial goods from other countries by 20 percent saw about two dozen countries, including Canada, France, and Spain, retaliating with higher tariffs within two years of the Smoot-Hawley Tariff Act’s passage – leading to a sharp decrease in global trade.
From 1932 to 1938, Britain and Ireland engaged in a skirmish known as the Anglo-Irish Trade War. The war was triggered when the British government, led by Neville Chamberlain, imposed high tariffs on Irish cattle and other agricultural products. Chamberlain’s move was prompted by the refusal of the Irish Free State to pay land annuities to British landowners. The Irish retaliated reciprocal tariffs on British goods such as coal and steel. The trade war lasted six years before relations were restored through a settlement in 1938.
When considering the history of tariffs, some may find it amusing that “tariff wars” have been waged not only over steel, chips, or automotives but also over bananas, corn, and chicken.
In 1815, Britain enacted the “Corn Laws” that banned the importation of cheap corn by imposing steep import duties in an attempt to protect its local agriculture industry. But while landowners benefited from the legislation, it made life difficult for the working class because it raised the price of food and negatively impacted the growth of other sectors.
The 1960s saw the “Chicken War” eruption between the US and the European Economic Community. It started when cheap poultry from the US began flooding the European markets, which had apparently developed a taste for American chicken. This prompted European farmers to lobby for higher tariffs on their US competitors. The ECC’s higher tariffs on American frozen chicken triggered retaliatory tariffs from the US on European products, sparking a bigger trade war.
In the early 1990s, trade between the US and the European Union went bananas because the latter imposed more favorable tariffs on bananas from former European colonies in the Caribbean and Africa than from US companies in Latin America. Despite a WTO ruling enjoining the EU to change its preferential policy, the European Union refused to comply – prompting the US to impose tariffs on popular European products such as cheese, cashmere sweaters, chocolates, and others. The dispute went on for almost two decades, only ending in 2012.
The disputes today, in particular the Section 301 tariffs on China, serve as “a prime example of tariffs in action, aimed at correcting trade imbalances and addressing intellectual property disputes,” goes the Shapiro article, concluding that despite the uncertainty, tariffs will “continue to be pivotal in shaping international trade, their application evolving alongside the global economic landscape.”
For many countries like ours, we hope that sooner rather than later, we will be able to quote the Bard of Avon himself and say that “all’s well that ends well.”
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