We live in an era of free trade, except when we don't. The recent furor over trade deals between the U.S. and China and between the U.S. and the rest of the Americas made it appear that the U.S. went all-in on free trade until Donald J. Trump became president. The reality is, there have always been plenty of exceptions to free trade. And moreover, protective barriers like tariffs may harm some industries or companies while benefitting others.
- Paper clip manufacturers successfully argued that Chinese rivals were dumping cheap substitutes on the market.
- American tuna producers use cheap foreign labor but still exploit a loophole to evade tariffs.
- The U.S. tobacco industry has been protected by tariffs since the Great Depression.
In general, these tariffs are intended to protect critical American industries from foreign competition or to prevent dumping of cheap goods in the U.S. by foreign manufacturers, or both.
Most paper clips sold in the U.S. are still manufactured domestically, due in large part to a tariff of 127% on Chinese-manufactured paper clips. The tariff has been in effect since the 1990s when American paper clip manufacturers started facing tough competition from cheaper-priced Chinese imports. The manufacturers successfully argued that their Chinese rivals were "dumping" paper clips on the American market. That is, they were selling at a loss in order to drive domestic manufacturers out of business.
The tuna industry is subject to a bewildering array of regulations regarding import quotas, tariffs, and quality standards. And that has led to some fairly ingenious workarounds.
For instance, canned tuna manufactured and sold in the U.S. has been protected by a 35% tariff against Ecuador's cannery imports since 2002. However, American canned tuna manufacturers outsource the cleaning of their fish to countries with cheap labor and then ship it back to have domestic operations in California and Georgia package the final product.
New Balance is the last big shoemaker to make its product in the U.S.
This takes advantage of a loophole that deems the product to be domestically produced if it's packaged here.
Tobacco is big business in the U.S., and American tariffs have protected the industry since the Great Depression. Some tobacco products imported to the U.S. are taxed as high as 350%.
But tariffs go two ways. In 2018, in retaliation for U.S. trade policies, China announced a 25% increase in its tariffs on a list of 100 U.S. products, including cigars and cigarettes.
That was not welcome news in North Carolina, which exported more than $156 million in tobacco products to China in 2017.
Sneakers produced by New Balance, the last large shoemaker to have its entire production process in the U.S., are protected by a 20% tariff on foreign shoe imports.
This is part of the reason why other major brands such as Nike and Adidas have higher prices. Since they create many of their final products outside the U.S., they pay the tariff that protects domestic suppliers such as New Balance, and they pass those costs through to the customer.