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• The United States Congress passed the Smoot–Hawley Tariff Act of 1930 to address the Great Depression, but the act worsened the economic situation as Canada, Britain, Germany, France, and other industrial nations retaliated with their own tariffs and bilateral trade deals, causing a decline in American imports and exports.
• Adding a 25% tariff on all imports from the European Union to previous tariff measures raises the average effective tariff rate (AETR) to 17.0%.
• Experts attribute the muted economic impact of tariffs to several factors: traded goods representing a small share of consumption, losses being reflected in consumption choices rather than prices, the frontloading of imports before tariffs began, American businesses absorbing tariff costs, delays in tariff implementation, and the exploitation of tariff loopholes.
• Scenario 2 of the proposed 2025 tariff package includes a 20 percent tariff on all imports from China, a 25 percent tariff on aluminum and steel imports from all countries, and a 25 percent tariff on goods imported from Canada and Mexico not covered under the United States-Mexico-Canada Agreement (USMCA).
• Between 2018 and 2019, the United States imposed tariffs ranging from 10 percent to 25 percent on hundreds of billions of dollars of imports from China.
• Governments use tariffs to reduce trade deficits by discouraging imports when a country buys more from abroad than it sells, with the goal of balancing trade.
• The share of United States imports originating from China decreased from 22.0 percent in 2017 to 13.8 percent in 2024, reflecting business adjustments to the 2018-2019 tariffs by shifting supply chains to alternate trade partners.
• In a simulated scenario involving a uniform tariff on European Union imports, the Average Effective Tariff Rate (AETR) for United States imports from the European Union would increase from 4.4 percent to 29.4 percent.
• A weakening US dollar increases the price of imports for consumers, thereby exacerbating the price impact of tariffs.
• Assuming full pass-through, the cost of imports from China rises by approximately 22 cents for every dollar of imported goods due to the 20% tariff on Chinese imports.
• Proponents of tariffs argue that tariffs protect faltering domestic industries and reverse trade imbalances by curbing imports and boosting local production.
• The Richmond Fed researchers estimate industry-level tariff impacts by aggregating tariffs using each product-country pair's share of total industry imports as weights, classifying industries according to the North American Industry Classification System (NAICS) at the three-digit level.
• The most aggressive tariff package simulated by the Richmond Fed includes a 25 percent tariff on EU imports, 20 percent on Chinese imports, 25 percent on steel and aluminum, 25 percent on non-USMCA goods from Canada and Mexico, and 25 percent on auto imports.
• The Trump administration tariffs reduce imports and cause the United States to lose the economic gains associated with free trade.
• Sectors including food, chemicals, agriculture, and energy have relatively modest exposure to tariffs because they are less reliant on imports from affected countries or benefit from trade exemptions.
• When tariffs increase the price of imports, consumers may substitute those goods with domestically produced alternatives or imports from countries not subject to the tariffs.
• Applying 25% tariffs on imports from Canada and Mexico that fall outside the US-Mexico-Canada Agreement coverage raises the average effective tariff rate (AETR) to 10.4%.
• The Richmond Fed estimates that the overall cost increase for industries under 'Scenario 2' is smaller than the headline 20 percent tariff because these industries source a portion of their imports from countries unaffected by the tariff increases.
• "Tariffs remain an unknown that could have a large impact on our company due to both imports of our raw materials and exports of our finished product, not to mention the impact of demand on our industrial customers."
• As of March 2025, the implementation of 20% tariffs on all Chinese imports and 25% tariffs on aluminum and steel increased the average effective tariff rate (AETR) to 7.1%.
• Under the Richmond Fed's 'Scenario 3' model, the transportation equipment sector faces average tariff rates above 25 percent, reflecting the heavy dependence of U.S. auto manufacturing on imported parts and finished vehicles from Canada, Mexico, and the EU.
• A tariff is a tax imposed by a government on goods and services imported from another country, typically calculated as a percentage of the value of goods or as a fixed amount per unit.
• The average effective tariff rate (AETR) is a metric that reflects the average tariff paid across all imports.
• The Richmond Fed's 'Scenario 2' tariff model assumes a 20 percent increase on all imports from China, a 25 percent increase on all aluminum and steel imports, and a 25 percent tariff on non-USMCA goods from Canada and Mexico relative to the benchmark case.
• Under the proposed Scenario 2 tariff package, the overall Average Effective Tariff Rate (AETR) for United States imports is projected to increase from 7.1 percent to 10.4 percent.
• High tariffs can restrict imports, harm industries dependent on foreign inputs, escalate trade tensions, and provoke retaliatory actions from trading partners, as evidenced by historical episodes such as the Great Depression.
• The Richmond Fed's 'Scenario 4' economic model introduces a 25 percent tariff on all imports from the European Union, causing the overall Average Effective Tariff Rate (AETR) to increase from 12.4 percent to 17.0 percent.
• Douglas Irwin states that United States tariffs were intended to serve three primary purposes: to raise revenue for the government, to restrict imports and protect domestic producers from foreign competition, and to reach reciprocity agreements that reduce trade barriers.
• As of March 2025, the United States has introduced new tariffs, including an additional 20 percent on all imports from China and a 25 percent tariff on aluminum and steel imports from several countries.