State-by-state breakdown of tariffs paid on imports from TPP countries

Posted on by Dan Anthony

In 2015, U.S. companies paid about $6 billion in tariffs (i.e., import taxes) on products sourced from TPP countries. The vast majority of those tariffs – about $5.4 billion – were assessed on imports from the five TPP countries that have not already negotiated an FTA with the United States (i.e., Brunei, Japan, Malaysia, New Zealand, and Vietnam).

Like any other cost, money paid for import taxes decreases the money available for other priorities such as hiring workers, making capital investments, or increasing marketing efforts to boost sales. And these taxes affect businesses in every state, as shown in the map below of estimated tariffs paid on imports into each state from the five “new” TPP countries.

TPP_Tariffs_by_State

California faced the most tariffs (about $1.6 billion) by a large margin, but about a third of all states faced at least $100 million in estimated tariffs and another third faced between $10 million and $100 million in estimated tariffs. Only a handful of states faced under $1 million in estimated tariffs.*

Imports into Texas, home state of Ways and Means Chairman Kevin Brady, faced an estimated $278 million in import taxes from the new TPP countries in 2015. Brady recently argued that free trade promotes economic freedom and power by allowing the American consumer to “buy what’s good for our family or business at the price we choose to afford.” Passing the TPP would make prices more affordable for families and businesses, both in Texas and throughout the United States.

* To be clear, states don’t pay or even collect the tariffs; importers pay the tariffs to the federal government. Estimates are based on national data on tariffs collected and the state import data using the Census Bureau’s “state of destination” definition. As such, any overstatement of tariffs paid on imports into a given state (or states) would be offset by understatement of tariffs paid on imports into another state (or states).

Promoting economic freedom and power through lower U.S. tariffs

Posted on by Dan Anthony

Recently, House Ways and Means Committee Chairman Kevin Brady (R-TX) gave a speech arguing that “free trade” really means the “freedom to trade.” Though it did not mention imports or the TPP specifically, it provides a direct defense of lowering U.S. import taxes for the benefit of American businesses and families.

According to Brady:

Free trade isn’t about China, or Mexico, or Britain. It’s about America – and guaranteeing Americans their economic freedom.

This is protecting our freedom against those who would tell you which smart phone you can buy, what car you can drive, what groceries you can choose… and at what price.

That last part is key because artificially raising the price of foreign goods is exactly what tariffs do. In 2015 alone, the United States collected about $6 billion in tariffs on imports from TPP countries. By eliminating those tariffs – as much as half of them in year one of implementation – the TPP would protect American businesses and families economic freedom.

Brady continued that free trade is not just about economic freedom, but also economic power, since it limits the ability of Washington, special interests, industry and unions to determine what is best for everyday Americans:

If you think about it, the freedom to trade is the most anti-establishment power Americans enjoy because daily it tells politicians and special interests to take a hike – we, the American consumer, will buy what’s good for our family or business at the price we choose to afford.

Perhaps ironically, Congress must act before American consumers can tell Washington to “take a hike.” Yet simply acknowledging that lower U.S. tariffs increase Americans’ economic freedom and power is important. Congressional passage of the TPP this year would go a long way to promoting such ideals.

Just how high are U.S. tariffs on imports from TPP countries?

Posted on by Dan Anthony
Average_Tariffs_New_TPP_Countries

One of the most common refrains about U.S. trade policy involves low U.S. tariffs. Generally, commenters brag that average U.S. tariffs are just 1.4 or 1.5 percent (depending on the year), among the lowest in the world.

But there are a two problems with that bit of conventional wisdom:

  1. a small percentage of a big dollar value can still can still be lots of money, and
  2. the 1.4 percent figure is an average, obscuring some very high tariffs on key products imported from TPP countries.

The first point is rather self-explanatory. Given the choice between 1.4 percent of LeBron James’ earnings and 100 percent of their own earnings, most people (rightly) would choose a small percent of LeBron’s pay without bothering to look it up.

As it relates more directly to trade, John Murphy on Twitter has correctly noted that people who say tariffs are generally low and therefore don’t matter “operate far from business realities, where margins are razor thin for tradeable goods.” Indeed, the U.S. collected about $6 billion in taxes on products imported from TPP countries in 2015 – no small sum for the American companies forced to pay those taxes.

The second point requires a little more explanation. The 1.4 percent average tariff figure includes many imports that face no U.S. tariffs, and therefore do not reflect the tariffs that could be reduced by TPP. Some of the imports face no tariffs because existing free trade agreements (FTAs), such as those with Canada and Mexico. Other products do not face import taxes regardless of where they are made. The duty-free-from-all-countries group includes most high-tech products (e.g., phones, computers), imports by the government, products designed for use by the handicapped, and many other specific products (e.g., coffee beans, industrial diamonds, most toys).

In terms of potential TPP gains, excluding duty-free imports shows that average tariffs for products that actually face tariffs can be quite high. The average U.S. tariff collected on imports from the TPP countries that do not already have an FTA with the United States is about 2.6 percent – and the average tariff for all imports from Vietnam is 7.5 percent. Excluding the duty-free products from those TPP same countries results in an average U.S. tariff of about 5.1 percent. For imports from Vietnam, it jumps to 14.3 percent (see chart above)!

Ultimately, the taxes are paid by the end consumer, whether they are U.S. manufacturers trying to remain competitive in the global marketplace or families trying stretch paychecks as far as possible. So the next time someone mentions “low U.S. tariffs,” keep in mind that individual import taxes are much, much higher for many goods and the TPP represents a major opportunity to reduce them.