Tariffs, free trade and China
Published 7:59 am Wednesday, May 21, 2025
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Way back in the 1970’s, I represented a European machine manufacturer. We provided installation, service and parts as needed by the customer. Imported parts were expensive and subject to additional import costs. By the time the machine manufacturer’s subcontractors were brought into the picture, a rather simple part could become quite expensive by the time it reached me in America.
Because of the cost, I added a machine shop to the business and manufactured the parts which made financial sense. A part manufactured by the shop would normally be 60 to 90 percent less than what I was paying for it from Europe. I felt good about making parts here and the business was more profitable. Made in America was good to me.
A tariff is a tax imposed by government on goods imported from another country. Tariffs are used to protect domestic industries (USA) from foreign competition. Tariffs often raise the price of an imported item resulting in a higher recurring cost to the consumer. Tariffs are also used to raise revenue.
Tariffs have been a part of America ever since George Washington’s Time. A tariff of 5% was imposed on most goods imported to the U.S.A. The funds were needed to run the government.
Between 1792 and 1812 the average tariff was 12.5%. The average tariff rose to 35% in 1816 and 40% in 1820. The U.S. had one of the highest average tariff rates up to World War II. Recently, about 30% of U.S. Imported goods are subject to tariffs. (Information sourced from Wikipedia)
Due to actions by the Trump administration tariff rates are being negotiated for each country with a base rate of 10%.
On Feb. 25, 1913 the Federal Income Tax was created as the 16th Amendment to the Constitution granting Congress the constitutional authority to levy taxes on personal and corporate income. This made tariffs and excise taxes less important as a revenue source.
In 1930, the Smoot-Hawley Tariff Act was implemented to shield American Industry from foreign imports during the great depression. It triggered retaliatory tariffs from affected countries causing significantly reduced world trade and exacerbated the Great Depression.
Tariffs are normally targeted against specific products or commodities from offending countries. Steel, aluminum, tires, textiles, furniture, fruits and vegetables are examples.
After 1970, tariffs trended lower and low-cost producers around the world put pressure on American Industry. Presidents Reagan, Bush and Clinton supported policies and agreements supportive of free trade. In 2001, China gained entry to the World Trade Organization and gained most favored nation status.
China had an economic advantage with low wages and dumped goods on the U.S. market. The textile, apparel, footwear and furniture industries had little protection. There was no bailout of any sort for those industries. Apparently, they were never as important as the automotive and steel industries.
Small rural towns with one or two manufacturing plants were devastated when plants shut down because they were unable to compete with low-cost imported goods. Several of these towns never recovered. Beaufort County lost several manufacturing plants due to low-cost goods and dumping by foreign competition.
Al Klemm is a Washington resident and a former Beaufort County Commissioner.