Published
March 27, 2025
Key Things to Know about Tariffs
- A tariff is a tax on imported goods paid by the U.S. business or individual receiving those goods at their port of entry.
- Broad-based tariffs hurt U.S. manufacturers far more than they help.
- Broad-based tariffs bring painful retaliation against American exports, with American workers and farmers likely the first to feel the pain.
The U.S. Chamber has encouraged the new Administration and Congress to prioritize the goal of achieving at least 3% economic growth annually and cementing in place policies that will support faster economic growth over the long term.
Getting these policies right is critical: Extending the Tax Cuts and Jobs Act, advancing permitting reform, and reforming regulation are all critical.
So is trade. To achieve our nation’s growth goals, we need to sell more “Made in America” goods and services to the 95% of the world’s consumers who live outside our borders.
As the Administration prepares its plans for “reciprocal” tariffs, the Chamber offers two overarching recommendations—taken from our detailed submission to the U.S. Trade Representative (USTR) earlier this month—that enjoy broad support from the U.S. business and agriculture community:
How to Achieve Reciprocity
The United States should pursue “zero-for-zero” reciprocity on tariffs and other trade barriers by negotiating additional trade agreements with allies and other friendly partners.
The best pro-growth response to foreign trade barriers is to negotiate enforceable trade agreements to eliminate tariffs and other trade barriers, open foreign markets, and guarantee reciprocity.
It’s true that some other governments maintain a variety of tariffs as well as non-tariff “behind the border” barriers that limit U.S. exports of goods and services and shut them out of lucrative foreign markets.
Because America’s free-trade agreements (FTAs) have been so successful at removing those foreign trade barriers, they have generated remarkable benefits for American workers, farmers, and companies:
- While the 20 countries with which the United States has FTAs in force represent just 6% of the world’s non-U.S. population, those countries regularly purchase nearly half of all U.S. exports.
- On a per capita basis, those 20 countries purchase 14 times more U.S.-made goods and services than other countries. In other words, FTAs can make big export markets even out of small economies.
- Further, U.S. exports to new FTA partner countries have grown roughly three times as rapidly on average in the five-year period following the agreement’s entry-into-force as the global rate of growth for U.S. exports, as Chamber research shows.
U.S. FTAs deliver “zero-for-zero” tariff reciprocity: They have eliminated duties on a reciprocal basis for approximately 99% of all tariff lines in almost every case (and 100% in some instances). They have also swept away a complex web of non-tariff barriers that previously shut out U.S. exports.
Sectoral arrangements in information and communications technologies (ICTs) and pharmaceuticals have also brought great benefit to U.S. industry and the workers it employs by eliminating trade barriers on a reciprocal basis.
These binding and enforceable agreements are based on principles of fairness, openness, and reciprocity. We need more of them.
How Are Businesses Reacting?
Why Broad-Based Tariffs Aren’t the Answer
The U.S. should reject broad-based tariffs as a policy tool given the substantial economic harm they impose on American workers, farmers, businesses, and consumers and opt for more targeted approaches where necessary.
The U.S. at times imposes tariffs on imports from strategic competitors and non-market economies with a view toward protecting national security. These are often deployed in a targeted way alongside other policy tools, such as export controls, investment restrictions, and financial sanctions.
However, broad-based tariffs impose substantial costs on the United States, and their use will backfire on the U.S. economy. First, a tariff is a tax on imported goods that is paid to U.S. Customs and Border Protection by the U.S. business or individual receiving those goods at their port of entry. Americans literally pay these import taxes.
It is also substantively true that Americans pay U.S. tariffs. The New York Federal Reserve Bank found that “the tariffs that the United States imposed in 2018 have had complete passthrough into domestic prices of imports,” and other research affirms that this is usually the case.
The surge in inflation during the Biden administration and the resulting cost-of-living crisis was a searing experience for many Americans. Painful price increases are widely recognized as a decisive factor in the outcome of the 2024 elections. Many recent studies affirm that today’s tariff plans threaten thousands of dollars in higher prices annual for the typical American household (see American Action Forum, The Budget Lab at Yale University, Moody’s Analytics, Morgan Stanley, National Retail Federation, Peterson Institute for International Economics, Tax Foundation, Tax Policy Center, UBS).
It's no surprise that tariffs are deeply unpopular, and the American people see their connection to price hikes. One recent survey found that 61% of Americans—and 71% of independents—disapprove of tariffs and tariff plans now advancing.
Second, broad-based tariffs hurt U.S. manufacturers far more than they help. Approximately 56% of all U.S. imports are raw materials, components, and capital goods used by domestic manufacturers. A large share of these imports simply are not available domestically in sufficient quantities or at reasonable cost.
Many U.S. manufacturers in key sectors such as semiconductors, aerospace, and autos depend on co-production arrangements with facilities in other countries, particularly Canada, Mexico, Europe, Japan, and Korea. Tariffs are far more likely to undermine the competitiveness of U.S. firms in these sectors than they are to alter the global geography of manufacturing.
The Impact of Tariffs
Indeed, there is no “slack” in the U.S. economy today that could be tapped to replace imports on a large scale: To illustrate, the U.S. economy continues to face labor shortages, with 113 job vacancies for every 100 Americans currently seeking work, which is a far cry from the conditions at the beginning of President Trump’s first administration.
Third, broad-based tariffs bring painful retaliation against American exports, which topped $3 trillion last year. In the past, foreign governments have responded to U.S. tariffs by raising their own duties on Iowa pork, Michigan autos, Pennsylvania apples, South Carolina washing machines, and Wisconsin cheese. Such retaliation from Canada and the EU is already proceeding.
The American workers and farmers who make these products are likely the first to feel the pain of that retaliation. No state will be untouched, but states with strong manufacturing and agricultural bases will likely feel the pain most.
The case against broad-based tariffs is strong — as is the case for engagement and negotiation with trading partners to address unfair trade barriers and strengthen U.S. trade ties. America’s economic growth and prosperity depend on getting these choices right.
About the authors
John G. Murphy
John Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy and regularly represents the Chamber before Congress, the administration, foreign governments, and the World Trade Organization.
