The history of tariffs

The topic of “tariffs” has been the main subject of conversation in almost every single corner of the world ever since President Donald Trump announced early in March that he would be imposing 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 buzz word 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 willingness to discuss the issues – except for China that was slapped with a 125 percent tariff for its goods. Analysts and experts have been giving their differing perspectives regarding the impact of President Trump’s decisions on the global economy and 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” that means “notification” or “inventory.”

According to an article in Shapiro (a supply chain logistics company specializing in international freight forwarding and other services), tariffs is “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 the time of ancient Greece and Rome as a fixed fee that had to be paid before foreign goods were allowed entry into local markets, down to the Industrial Revolution and the 20th Century, with tariffs evolving 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.

One of the more well-known in US history is the Smoot-Hawley Tariff Act, or more formally known as the United States Tariff Act of 1930 that 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 that included 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 that 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. In retaliation, the Irish imposed reciprocal tariffs on British goods such as coal and steel. The trade war lasted for six years before relations were restored through a settlement in 1938.

Going through 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, Britian 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 eruption of the “Chicken War” between the US and the European Economic Community. It started when cheap poultry from the US began flooding the European markets that had apparently developed a taste for American chicken – prompting European farmers to lobby for higher tariffs on their US competitors. The ECC’s imposition of 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 coming from former European colonies in the Caribbean and Africa over bananas 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 are hopeful that sooner rather than later, we will be able to quote the Bard of Avon himself and say in the end that “all’s well that ends well.”

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