Trump tariffs history

Understanding tariffs in American history

Use of tariffs in early U.S. history

Tariffs were an important source of revenue in early American history. One of the first major acts passed by the U.S. Congress was the Tariff Act of 1789, which imposed duties on a range of imported goods. The aim of the act was to increase revenue and protect domestic industries, and in some years of the 19th century tariffs contributed as much as 95% of federal government funding.

One of the most vocal supporters of tariffs was Alexander Hamilton, first Secretary of the Treasury. He saw them as being essential to nurturing American industries and reducing reliance on British and European imports. And he wasn’t wrong – this approach helped America develop a steel industry that eventually grew and surpassed that of Europe.

By the early 20th century, America had built a stable industrial base and new revenue streams (especially the federal income tax introduced in 1913) reduced the government’s reliance on tariffs. They were no longer considered essential to funding the government or protecting industries that, by that time, were already competing on a global scale.

The Smoot-Hawley Tariff Act

Tariffs were reintroduced after the 1929 stock market crash with the Smoot-Hawley Tariff Act of 1930. This act increased tariffs on more than 20,000 goods with the goal of protecting American farmers and manufacturers from the economic fallout of the Great Depression.

But instead of stabilising the economy, Smoot-Hawley ended up triggering an international trade war. U.S. trading partners retaliated with their own tariffs, which eventually led to trade between the U.S. and Europe declining by two-thirds. The higher cost of imported goods, combined with shrinking export markets, worsened the economic downturn and – some believe – contributed to the development of extremist ideologies throughout Europe.

After World War II, the U.S. shifted towards free trade and helped form the General Agreement on Tariffs and Trade (GATT), the precursor to today’s World Trade Organization (WTO). Since then, the U.S. has largely been an advocate of free trade and reducing trade barriers.

Analysing the Trump administration’s tariff strategy

Tariffs returned to U.S. trade policy under President Donald Trump, both during his first term (2017-2021) and again in 2025.

Introduction of the Trump tariff plan

Trump’s tariffs are positioned as tools for economic nationalism. His America First Trade Policy aims to prioritise domestic manufacturing, reduce trade deficits, and pressure trading partners to negotiate more favorable terms.

The first major tariffs were imposed in early 2018 and targeted imports of solar panels and washing machines with rates of 30% to 50%. Not long after that, tariffs expanded to include a 25% duty on steel and 10% on aluminum from most trading partners, including the EU, Canada, and Mexico. Australia was the only major country to remain fully exempt during this period.

Imposing tariffs on China

In mid-2018, the U.S. levied tariffs on hundreds of billions of dollars’ worth of Chinese goods under the pretext of addressing unfair trading practices, intellectual property theft, and a trade imbalance. The first wave included $50 billion in goods, but that eventually expanded to cover over $350 billion in imports by the end of 2019.

China retaliated with its own tariffs on U.S. exports, including agricultural products, vehicles, and industrial goods. This spurred a trade war that affected global supply chains and increased costs for both consumers and businesses on both sides. Economists believe the U.S.-China trade war reduced consumption, wages, manufacturing exports, and aggregate welfare.

Targeting Canada and Mexico

The tariffs also targeted Canada and Mexico, two of the U.S.’s largest trading partners. In 2018, Trump imposed tariffs on steel and aluminum imports from both countries as leverage in renegotiating the North American Free Trade Agreement (NAFTA). This move triggered quick retaliation, but in 2019 the tariffs were lifted after signing the U.S.-Mexico-Canada Agreement (USMCA), which replaced NAFTA.

In 2020, just a month after the USMCA was enforced, Trump reimposed a 10% tariff on Canadian aluminum citing a national security threat that endangered U.S. producers. This was lifted a month later as Canada prepared for retaliation.

During Trump’s second term, in 2025, three executive orders were signed that imposed 25% tariffs on nearly all goods imported from Mexico and Canada (excluding Canadian oil and energy, which received a 10% tariff). Within hours, Canada responded with their own retaliatory 25% tariffs covering over CA$150 billion in U.S. goods.

Expanding tariffs onto the European Union

The European Union was also targeted by Trump’s tariffs, especially during his second term. In early 2025, Trump threatened to impose tariffs unless the EU reduced its trade surplus with the U.S. by importing more American vehicles, agricultural products, and energy.

The EU pushed back with its own retaliatory measures. Tariffs were reinstated on American products, like bourbon whiskey, and imposed on an additional €18 billion EU in U.S. industrial and agricultural goods. Trump threatened a 200% tariff on EU alcohol in response, all of which were eventually dropped.

Besides the alcohol tariffs, the Trump administration also imposed a 25% tariff on European car imports and a 20% tariff on all EU imports. The EU responded with an offer to reduce its own car tariffs and a ‘zero-for-zero’ agreement on industrial goods like cars, pharmaceuticals, and machinery. In the resulting back-and-forth, Trump threatened tariffs of up to 50% on all EU imports, citing powerful trade barriers, VAT taxes, and unfair lawsuits against American companies, amongst other reasons. Most of these tariffs have yet to materialise.

Evaluating the economic and political impact of tariffs

Who pays tariffs?

One of the biggest misconceptions around tariffs is that they’re paid by foreign countries. In reality, tariffs are paid by U.S. importers bringing goods into the country. These businesses pay the tariff at the border and often pass the added costs down to consumers in the form of higher prices.

Tariff impact on U.S. businesses and consumers

When tariffs increase the cost of imported materials and finished goods, it pushes up prices for consumers, potentially shrinking their purchasing power and reducing consumer demand. It also affects businesses by disrupting supply chains, lengthening production timelines, and increasing labor costs.

Some of the industries most affected by tariffs include:

• Manufacturing & construction: Higher steel and aluminum tariffs increase production costs for everything from cars to buildings
• Agriculture: Retaliatory tariffs by countries like China can hurt U.S. farmers by making American crops like soybeans and pork more expensive abroad, reducing demand
• Retail & consumer goods: Higher import costs can make everyday items more expensive for consumers.

Tracking tariff revenue and trade deficit

With all that in mind, have President Trump’s tariffs been effective?

As of June 12, 2025, the tariffs have generated nearly $72 billion in revenue for the U.S., an increase of more than 80% compared to the previous year. There’s also been a drop in the trade deficit, with the U.S. trade gap narrowing to $61.6 billion in April, the lowest in over a year. Imports also fell sharply while exports hit a record high.

That said, it’s hard to say whether this data represents a long-term shift or just a temporary reaction to policy changes. It’s also worth noting that, while the trade deficit decreased with China, Canada, Mexico, and the EU, it also increased slightly with countries like Vietnam.

Examining inflation and production shifts

Trump has argued that tariffs encourage companies to bring manufacturing back to the U.S. But even if factories are set up in the U.S., most products rely on goods imported from overseas, whether for the components that go into the product or the machines used to make them.

This means that American companies will likely have to pay higher costs, which can push prices up for consumers and increase inflation.

Biden administration’s tariff response review

As we’ve mentioned, Trump’s tariffs were imposed both throughout his first and second term. So what happened in between, during the Biden administration?

Many people expected President Joe Biden to roll back Trump’s trade policies when he took office in 2021. But most of Trump’s China tariffs remained in place. In 2024, Biden even expanded certain tariffs on Chinese imports. Duties on Chinese solar cells doubled, and they tripled on EV batteries. Tariffs on Chinese steel, aluminum, and certain medical equipment also increased, citing national security and unfair trading practices.

What’s different is that Trump’s strategy was largely unilateral, while Biden emphasised multilateralism and rebuilding trade alliances, especially with Europe and the Indo-Pacific. Ultimately, both administrations used tariffs as a tool to protect U.S. industries and compete with China, they just used different styles and messaging.

A preview of potential second-term tariff policies

Trump’s second term kicked off with a dramatic escalation of tariff policy. On April 2, 2025, new tariffs were announced under a ‘reciprocal’ strategy, and the average U.S. tariff rate jumped from 2.5% to over 27%.

Key trading partners, including China, Mexico, Canada, Japan, and South Korea, faced tariffs ranging from 10% to more than 50%, disrupting the market and triggering widespread retaliation. The EU, China, and others responded with new tariffs on American goods, including farm exports and tech products.

Small businesses in the U.S. were hit especially hard and face rising costs, supply chain pressure, and shrinking margins.

Trump’s tariff rollback in 2025

In mid-2025, the Trump administration began scaling back some of the tariffs amidst growing global backlash. In May, the U.S. and China agreed to a mutual rollback of tariffs and declared a 90-day truce in their trade war. The Trump administration lowered its tariffs on Chinese goods from 145% to 30% while China reduced its retaliatory duties from 125% to 10%.

Tariffs on EU imports, including the proposed 50% hike, were delayed until July 9 after a phone call between Trump and European Commission President Ursula von der Leyen. The goal of the delay is to avoid further escalation and give negotiators more time to find common ground. Trump also paused or adjusted tariffs on Mexico and Canada earlier in the year, citing improved border security and drug enforcement.

It’s not yet certain whether this pause represents a lasting shift in policy or if it’s just a tactical pause.

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