Tariffs have long been a tool used by countries to generate revenue and protect domestic industries. However, in today’s global economy, tariffs are more commonly used for strategic purposes such as advancing foreign policy goals and negotiating trade agreements.
The United States, as a member of the World Trade Organization (WTO), operates within a rules-based global trading system. This system, established after World War II, aims to reduce trade barriers and prevent trade wars by setting rules for the use of tariffs. Key principles of this system include nondiscrimination, binding commitments on tariff rates, transparency in tariff reporting, and safety valves for addressing unfair trade practices.
Since the establishment of the WTO, global tariff rates have declined, leading to increased trade and market openings for U.S. exports. The U.S. tariff policy is a result of collaboration between Congress and the President, with Congress delegating tariff-setting authority to the President. The President has discretionary powers to adjust tariffs in response to specific trade-related concerns, such as national security threats or sudden import surges.
The administration of U.S. tariff policy falls under the purview of the Secretary of the Treasury and the U.S. Customs and Border Protection (CBP). Tariffs are assessed using the Harmonized Tariff Schedule of the United States (HTSUS) when goods enter U.S. ports of entry. Importers self-classify their goods, and CBP collects any applicable tariffs or penalties.
Over the years, the United States has reduced or eliminated many tariffs through bilateral and multilateral trade agreements. The country has used its low-tariff policy to encourage global trade liberalization and pursue broader foreign policy goals. However, not all countries have followed suit, leading to challenges in global trade negotiations.
In recent years, the U.S. has seen an increase in tariffs on certain goods under the Trump administration, with duties paid on imports doubling from FY2015 to FY2020. The Biden administration has continued some of these policies, raising concerns among some Members of Congress about the economic impact of increasing tariffs without congressional approval.
Overall, Congress plays a crucial role in shaping U.S. tariff policy through delegation of authority to the President. The balance between executive discretion in tariff-setting and congressional oversight remains a key issue for lawmakers as they navigate the complexities of global trade dynamics.
