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Analysis of US and China Trade Tariffs














Tariffs have been used by many countries to either raise revenue or protect their industries and strengthen their economy. Types of Tariffs include Transit duties, export duties and import duties. Transit duties are charged on goods that originate from one country and are passing through another country before arriving at the country of destination. Export duties are imposed on indigenous goods that are exported to other countries to ensure that there is domestic supply of the goods. Import duties are a type of tax imposed on import which increases the cost of imported goods as compared to their manufactured counterparts which in turn should create an incentive for indigenous manufacturers. Today, import duties play a significant role in the international trade relationship between countries.

Global Tariff Trend

Belgium, France, Germany, Italy, United Kingdom and United states are examples of countries that have implemented trade tariff in transacting with other countries. Shown below is their average tariff rates between 1913 and 2007.

Figure 1. Average Tariff Rates. From Bown, C. P. (n.d.). Self-Enforcing Trade Developing Countries and WTO Dispute Settlement

As seen from the table above, most of the average tariff rates were higher in the 19th century than the recent average tarriff.

Figure  2. Where Global Tariffs are Highest and Lowest. Chart fromNiall McCarthy Where Tariffs Are Highest And Lowest Around The World [Infographic]

Beyond the tariff imposed by individual countries as shown above, the move towards international trade and globalization influenced Tariff across countries. The General Agreement on Tariffs and Trade is a trade agreement that was signed in Geneva on Oct. 30, 1947, by 23 countries. It’s purpose was to encourage international trade by eliminating trade bariers among member countries. GATT sought to accomplish trade without discrimination among contracting parties (countries) which meant that whenever a country entered a tariff agreement from one country, that tariff became applicable to all other member countries. It also sought to eradicate quotas and other quantity related restrictions. GATT also agreed to eliminate tariff on import from developing to strengthen their economy. GATT had conferences called rounds where contracting parties (countries) gathered to resolve trade issues.

GATT was replaceded by the World Trade Organization (WTO)  in 1995. It  retains some of the agreements under GATT but has a more extended scope than the GATT.

Below is a chart by Surbhi S (2017) comparing the GATT and WTO

Meaning GATT can be described as a set of rules, multilateral trade agreement, that came into force, to encourage international trade and remove cross-country trade barriers. WTO is an international organization, that came into existence to oversee and liberalize trade between countries.
Institution It does not have any institutional existence, but have a small secretariat. It has permanent institution along with a secretariat.
Participant nations Contracting parties Members
Commitments Provisional Full and Permanent
Application The rules of GATT are only for trade in goods. The rules of WTO includes services and aspects of intellectual property along with the goods.
Agreement Its agreement are originally multilateral, but plurilateral agreement are added to it later. Its agreements are purely multilateral.
Domestic Legislation Allowed to continue Not allowed to continue
Dispute Settlement System Slow and ineffective Fast and effective

Figure 3. Comparison chart of GATT and WTO. From Surbhi S (2017) Differences between GATT and WTO

History of Tariffs in the United States of America

The Tariff of 1789 was the first tariff imposed by the united states of America. The purpose of this tariff was to generate revenue for the federal government and help the federal government to pay debts, it also sought to protect infant domestic industries. In the 18th and up to early19th century, tariffs served as a major source of revenue for the federal government, at this time there was no income tax, inheritance tax and other taxes that are levied today.

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The graph below shows the types and respective percentage of federal revenue that were generated between 1792 and 2016 in the united states. As shown by the graph, in recent years, income tax has become the highest source of government revenue in the united states.

Figure 4. Federal Revenue by type. From Wikimedia (https://upload.wikimedia.org/wikipedia/commons/e/e0/Federal_taxes_by_type.pdf)

By 2010, as shown in the pie chart below excises taxes only represented 3% of federal receipts.

Figure 5. Federal Receipts by source, 2010. Joint committee on Taxation


Trade policy formulation in the United States of America

The development and implementation of trade policies in the united states is determined by the U.S. Congress; the President and the Executive Branch; and independent agencies. The congress which is the legislative branch is empowered by the constitution to make laws and therefore plays a crucial role in policy formation including trade policy formation. Congress  A bill is the beginning of the law making process by the congress, after a bill is passed by both the house of representatives and the senate, it is sent to the president for approval, the president may sign the bill thereby making it a law or  veto the bill, either requesting for some adjustments by the congress or out rightly veto the entire bill. However, the veto can be overridden by 2/3 of congress. If the president does not respond to the request, the bill automatically becomes a law after 10 days.

When it comes to tariffs, The United States Constitution gives Congress the power to impose and collect taxes, tariffs, duties, and the like, and to regulate international commerce. However, since 1935, the Congress has delegated increasing responsibility to negotiate trade agreements with other countries to the President. Congress also has committed itself periodically to vote on presidentially negotiated trade agreements without chance of amendment[1]. In addition, Section 232 of the Trade Expansion Act of 1962 allows the president to bypass Congress and impose tariffs by executive order.

Recent statutes have tried to limit the power of the president in trade policy by specifying actions that are allowed and time limits within which they can be carried out[2] . Congress can also challenge the presidents action at the court.

US and China Trade Relation

The united states and china already had economic relations as at 1784. This relationship was mainly influenced by Trade, religion and freedom (politics)[3].  One of the major points of the US-China policy is US support of the Open Policy in china which allowed for foreign investment and trade but did not allow any country to control China. However, since 1949, the US-China relationship is said to have gone through three periods: Containment (1949 – 1969) when the US tried to weaken China’s communist government, Rapprochement (1970-1979) when the US tried to reconnect with China, Full Diplomatic Relation (1979 – Present) when the two countries related fully on diplomatic terms. Today, china and US still has a trade relationship however both countries disagree on several things including nuclear weapons.

US and China Tariff 2018

Donald trump, the 45th and current president of the United States started working toward redefining US – China trade relation in January 2018. The president had been very clear about his disapproval of the united states relation with china as he believes that china is ripping the US. Between January 2018 and December 2018, tariff imposed by the US on imported goods have increased to rates that haven’t been seen in decades and will further increase as stated by the president. No doubt, the effect of this change will be far reaching beyond the United States and China. It will also impact the global economy.


  • Amadeo, K. (n.d.). How GATT Saved the World. Retrieved from https://www.thebalance.com/gatt-purpose-history-pros-cons-3305578
  • Bertrand, T. J., & Robinson, R. (2018, October 03). International trade. Retrieved from https://www.britannica.com/topic/international-trade/The-national-treatment-clause#ref61722
  • Bown, C. P. (n.d.). Self-Enforcing Trade Developing Countries and WTO Dispute Settlement. Retrieved December 9, 2018, from https://books.google.com/books?id=j2dS8whqMSwC&pg=PA12&lpg=PA12&dq=IRWIN 2002 TABLE 5.1 P.153&source=bl&ots=WJnOQr3t_k&sig=22a8ehDIYdsntLv3lGm5qC4boNs&hl=en&sa=X&ved=2ahUKEwj13v3L0pTfAhVJG6wKHVwDA7EQ6AEwAHoECAYQAQ#v=onepage&q=IRWIN 2002 TABLE 5.1 P.153&f=false
  • Cheng, D. (2012, October 11). The Complicated History of U.S. Relations with China. Retrieved December 9, 2018, from https://www.heritage.org/asia/report/the-complicated-history-us-relations-china
  • Introduction to the U.S. Trade Policy Process. (n.d.). Retrieved December 9, 2018, from https://www2.gwu.edu/~iiep/signatureinitiatives/governance/briefs/Introduction.pdf
  • Lewis, C. D. (2016, December 9). Presidential Authority over Trade: Imposing Tariffs and Duties. Retrieved December 9, 2018, from https://fas.org/sgp/crs/misc/R44707.pdf
  • McCarthy, N. (2018, March 23). Where Tariffs Are Highest and Lowest Around The World [Infographic]. Retrieved from https://www.forbes.com/sites/niallmccarthy/2018/03/23/where-global-tariffs-are-highest-and-lowest-infographic/#2ce27d4c7f26
  • S, S. (2017, May 29). Difference Between GATT and WTO (with Comparison Chart). Retrieved from https://keydifferences.com/difference-between-gatt-and-wto.html
  • Testimony of The Staff Of The Joint Committee On Taxation Before The Select Revenue Measures Subcommittee Of The House Committee On Ways And Means Hearing On Taxes As Part Of The Federal Budget March 23, 1010. (n.d.). Retrieved December 10, 2018, from https://www.jct.gov/publications.html?func=startdown&id=3676
  • U.S.-China Relations Since 1949. (n.d.). Retrieved December 9, 2018, from http://afe.easia.columbia.edu/special/china_1950_us_china.htm

[1] Institute for International Economic Policy: Introduction to the U.S. Trade Policy Process

[2] Congressional Research Service: Presidential Authority over Trade: Imposing Tariffs and Duties

[3] The Complicated History of U.S. Relations with China

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