The typical American household could save between $54 to $288 a year if import tariffs, which still “represent a significant friction to trade,” were removed, according to a new report from the U.S. International Trade Commission (ITC).
The typical American household could save between $54 to $288 a year if import tariffs were removed, according to a new report from the U.S. International Trade Commission (ITC).
“Higher income groups benefit more than lower ones in dollar terms because they spend more; as a share of income, all income groups benefit by about the same percentage,” the ITC said in its ninth annual report, The Economic Effects of Significant U.S. Import Restraints, released on Monday.
Import tariffs, which generally consist of ad valorem or unit-based charges, are paid when goods cross the border.
“Despite considerable trade liberalization, as well as global reductions in tariff rates, free-trade zones, and duty-drawback programs which eliminate some of these charges, tariffs continue to represent a significant friction to trade,” the commission said in the 280-page report, which it prepared on behalf of the Office of the U.S. Trade Representative.
The ITC report estimates changes in U.S. welfare, output, employment, and trade that would result from the unilateral elimination of significant import restraints, including U.S. tariffs and tariff-rate quotas on certain agricultural products, textiles and apparel, and other manufactured products would increase annual U.S. welfare $3.3 billion by 2020.
During the past 25 years, U.S. tariffs and non-tariff measures on imports have dropped to a point where the United States is now one of the most open economies in the world. According to the ITC, the average U.S. import tariff was 1.5 percent in 2015.
“A major part of the growth in global trade is due to the increased use of global supply chains, in which parts of the production process are completed in different countries,” the commission explained. “Nevertheless, restraints to trade still exist.”
The commission said the world import tariff average is now about 2.9 percent, with an average direct tariff of 2.4 percent and an average indirect tariff of 0.5 percent.
“Despite the low overall averages, there is considerable variation by sector,” the ITC said. “For example, the cumulative tariff faced by U.S. importers of textiles and apparel is almost 10 percent; it is over 90 percent on agricultural imports into South Korea.”
The ITC warned that removal of all U.S. import restraints, while good for American consumers due to lower prices at the cash register, will likely put some U.S. firms out of business.
“When an import restraint is removed, the U.S. price of that import declines as import quantities rise,” the commission wrote. “U.S. producers making similar products reduce their prices to compete better, and some may shut down, thus decreasing domestic supply and employment. Exports in most liberalized sectors would increase, although by a smaller proportion than the increase in imports.”
U.S. imports with the largest import tariffs continue to be agricultural products, especially cheese, sugar, and butter; textiles and apparel; leather products; and footwear.
If import restraints on cheese, for example, were eliminated, the ITC said the estimated increase to U.S. welfare would be $32.7 million. U.S. cheese shipments and employment would also decline 0.4 percent and 0.4 percent, respectively, while Imports of cheese would increase 16.5 percent.
In another example, the ITC estimates that removing tariffs on imports of leather and allied products would boost U.S. welfare annually by $320.2 million by 2020. The United States should see an increase in these exports of 6.3 percent a year, while these imports, which already account 95 percent of U.S. domestic demand for leather goods and footwear, would increase by 3.4 percent.
ITC: U.S. economy would save $3.3b if import tariffs ended
