Weekly Updates
Weekly Updates
- The US offers a compact case study of trade protection. In January 2018, US President Trump imposed tariffs on imports of all washing machines into the US. Imports were taxed at a rate of 20%, rising to 50%. US President Biden allowed the tax to lapse in February 2023. What did the tax do?
- The tax was paid by US consumers. By summer 2022, US consumers paid 42% more for a washing machine than in 2017. Euro area consumers paid 3% more and UK consumers 2% more. When the tax ended US prices did start to come down, but US consumers are still paying more than the rest of the world.
- The tax increase was large and resulted in a significant drop in the foreign supply of washing machines—the number of units imported roughly halved. Domestic manufacturers had less competition, allowing them to raise prices.
- The effect of the tariff was to take money from US consumers, and hand it to the US government (as tax payments) and US washing machine manufacturers (as higher profits). Competition in the US has still not fully recovered. Even after the tax ended, import volumes are still below pre-tariff levels. Trade that was hurt by the tax has been slow to return.
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