Current Events: Trade and Tariffs

Duties and tariffs are different types of taxes imposed on foreign goods; tariffs are a direct tax applied to goods from a foreign country, while duties are taxes charged to the consumer of imported goods. Tariffs are used to protect certain domestic industries, advance foreign policy, or in trade negotiations. According to the Congressional Research Service, currently roughly 70% of all products enter the United States duty free. This is because, over the last century, the United States has been part of multiple international agreements to reduce trade barriers like tariffs and quotas. Though the US Constitution gives Congress power to set import tariffs, the Legislative Branch has partially delegated this duty to the President. President Trump’s proposed tariffs have economists speaking out, either to warn of possible repercussions on prices and international relations, or to praise shaking up the status quo.

Tariffs are one of the oldest tools countries have used to encourage people to buy goods made at home by making foreign goods more expensive. Tariffs are also a tool of diplomacy. A nation can offer another country the removal of a tariff as an incentive, or can threaten to add or increase tariffs to discourage unwanted behavior. Severe tariffs can also lead to trade wars. Before the Industrial Revolution, the main economic policy regarding trade was mercantilism, wherein countries attempted to maximize exports and minimize imports, often with the use of tariffs. Today, however, the world’s economy is so interconnected that goods are sometimes made with raw materials from several countries, assembled in one country, packaged in another, and sold all over the globe. In today’s globalized economy, two competing trade theories have emerged: protectionism and free trade.

Protectionism is an approach in which a country slaps tariffs on imports in order to protect the industries within its borders by making foreign goods artificially more expensive. Since tariffs also raise revenue for a country, they are an alternative to taxing the people directly. Critics of protectionist policies worry tariffs make goods more expensive for consumers and can harm relationships between countries. Free trade advocates believe countries should agree exchange goods free of tariffs, quotas, and other restrictions. And though free trade tends to lower prices for consumers, there are consequences if producer countries don’t have their own regulations protecting workers and the environment.

The resources below give overviews of international trade concepts, as well as the tension between protectionist and free trade theories of economics. This week’s CLP lesson plan asks students to identify bias as they compare news coverage of Trump’s proposed tariffs.

Note: CLP has a previous current event on tariffs from 2018.

Essential Questions:

What drives international trade?
How can tariffs benefit a country?
What are the negative or unpredictable consequences of tariffs?
How do protectionism and free trade differ?
What do you think about President Trump’s proposed tariffs?

Vocabulary:

international trade: an exchange involving a good or service conducted between at least two different countries

tariff: a tax on the import or export of goods between countries

protectionism: government policy to help its country’s trade or industry by taxing goods bought from other countries

trade war: when one country retaliates against another by raising import tariffs or placing other restrictions on the other country’s imports.

free trade: when goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions