A tariff is a tax levied by a government on imported or exported goods. It serves as a source of revenue and a tool for regulating foreign trade. Import tariffs, specifically, aim to protect domestic industries by making foreign goods more expensive, thus encouraging consumers to buy locally produced goods. This form of protectionism is commonly employed alongside other measures like import/export quotas and non-tariff barriers to trade.
June 15, 1903: Lansdowne's "Big Revolver" Speech
On June 15, 1903, Henry Petty-Fitzmaurice advocated for retaliatory tariffs against protectionist countries, marking a shift towards protectionism within the Liberal Unionist party. His "Big Revolver" analogy, referring to the threat of imposing duties, became a prominent political slogan.
1905: Meat riots erupt in Chile over tariffs
In 1905, social unrest erupted in Chile in the form of meat riots. These riots were a direct response to tariffs imposed on cattle imported from Argentina.
1912: Democratic Electoral Victory and Subsequent Tariff Reduction
The Democratic Party won the election in 1912, and in 1913 significantly decreased the average tariff on manufactured goods, from 44% to 25%.
1913: Brief Period of Lower Tariffs
Between 1913 and 1921, the United States experienced a period of lower tariffs, deviating from its usual high protective tariff policy.
1913: Economic Impact of Protectionism
By 1913, the industrial production growth rate in Great Britain (2.1%) significantly lagged behind that of protectionist countries like the USA (4.7%) and Germany (4.1%) from 1870 to 1913, indicating a potential negative impact of Britain's free trade policies.
1913: US Economic Growth Under Protectionism
From 1871 to 1913, the U.S. saw significant economic growth (4.3% annually) under a high tariff regime, surpassing the growth rate of free-trade Britain.
1913: Tariff Reduction Under Democrats
In 1913, after the Democratic victory in 1912, tariffs on manufactured goods were significantly reduced.
1913: Pre-War Tariff Levels
In 1913, the weighted average of tariffs was recorded at 24.6%, serving as a benchmark for comparison with later years.
1913: US Industrial Growth and Protectionism
While the US experienced substantial industrial growth (from 23% to 36% of global manufacturing) between 1870 and 1913 under protectionist policies, the high tariffs had an estimated cost of 0.5% of GDP, and growth was likely more attributed to abundant resources and openness to people and ideas.
1920: Misconceptions about European Protectionism
The period from 1920 to 1929 is often mistakenly characterized by increasing protectionism in Europe. In reality, the weighted average of tariffs remained relatively stable compared to pre-World War I levels.
1921: Republican Return to Power and "Emergency" Tariffs
In 1921, the Republicans returned to power, and in the following year they implemented new tariffs.
1921: Resumption of High Tariffs
Following a brief period of lower tariffs, the United States resumed its policy of high protective tariffs in 1921.
1922: Reintroduction of "Emergency" Tariffs
The Republicans returned to power in 1921 and introduced new "emergency" tariffs in 1922 due to the ineffectiveness of the earlier reductions during World War I.
1927: Stable Tariff Levels
The weighted average of tariffs in 1927 (24.9%) remained close to the 1913 level (24.6%), suggesting relative stability in trade policy during this period.
1928: Tariff Reductions in Developed Countries
Many developed countries lowered their tariffs in 1928, a trend that continued into the following year.
1929: Tariff Reductions in Developed Countries
In 1928 and 1929, many developed countries lowered their tariffs, contrary to the common narrative of increased protectionism during this period.
1929: Trade Decline During the Depression
Paul Krugman argues that the decline in trade between 1929 and 1933 was a consequence of the Great Depression, rather than a cause, and that trade barriers were implemented in response to the economic downturn.
January 1930: Trade Contraction Before Protectionist Measures
Jacques Sapir argues that the main contraction in international trade occurred between January 1930 and July 1932, before many protectionist measures were introduced.
1930: Impact of the 1930 Tariffs
Economists like Milton Friedman and Peter Temin believe that the 1930 tariffs had a negative impact but weren't solely responsible for the Great Depression.
1931: International Liquidity Crisis
The international liquidity crisis in 1931, with a 26.7% drop in liquidity, significantly contributed to the decline in international trade, highlighting a factor beyond protectionism.
July 1932: Period of Trade Contraction
A significant contraction in international trade happened between January 1930 and July 1932, predating the implementation of protectionist measures in many countries.
1932: Britain Abandons Free Trade
In 1932, during the Great Depression, Britain abandoned its free trade policy and reintroduced tariffs, acknowledging the loss of production capacity to protectionist nations like the United States and Germany.
1933: Smoot-Hawley Tariff and the Great Depression
Contrary to popular belief, Paul Krugman argues that the Smoot-Hawley Tariff Act of 1930 did not cause the Great Depression. The decline in trade between 1929 and 1933 was primarily a result of the Depression, not a cause.
1933: End of an Era of Protectionism
In 1933, a period of generally high protective tariffs in the United States, primarily aimed at maintaining high wages, came to an end.
1963: Study on tariff impact begins
A research study commenced in 1963 to analyze the long-term effects of tariff increases across various countries. The study continued until 2014.
1992: Armenia establishes its custom service
Following the collapse of the Soviet Union, Armenia established its own customs service in 1992.
1999: Revised Kyoto Convention defines free zones
The 1999 Revised Kyoto Convention defined a "free zone" as an area within a contracting party's territory where goods are generally considered outside the customs territory concerning import duties and taxes, allowing for tariff-free processing and re-exporting.
2001: Ha-Joon Chang challenges free trade orthodoxy
In 2001, economist Ha-Joon Chang argued that many developed nations, including Britain and the United States, achieved economic growth not through free trade, but through protectionist policies that fostered infant industries. He cited East Asian economies as further evidence, noting their rapid growth periods coincided with industrial protection and promotion, not free trade.
2002: US imposes steel tariffs
In 2002, the United States imposed a three-year, 30% tariff on various imported steel products, a move supported by domestic steel producers.
2003: Armenia joins WTO and benefits from MFC
Armenia became a member of the World Trade Organization (WTO) in 2003, granting it Most Favored Country (MFC) status and its associated benefits. At 2.7%, Armenia's tariffs were the lowest within the WTO framework. Armenia is also a member of the World Customs Organization (WCO), using the harmonized system for tariff classification.
2003: Dumping policies and reduced gains for developing countries
In 2003, studies using the LINKAGE model estimated potential gains for developing countries from WTO rules at $539 billion.
2005: Revised models show significantly lower gains from free trade for developing countries
By 2005, revised models like the GTAP model drastically lowered the estimated gains for developing countries from trade liberalization, reducing the 2003 LINKAGE estimate to just $22 billion. A later version of the LINKAGE model also reduced the estimate to $90 billion. The projected gains from the "Doha Round" for developing countries were also minimal, estimated at $4 billion by the GTAP model. Critics argue these models overestimate the benefits of free trade by failing to account for income loss due to the removal of tariff barriers.
2007: Australian political parties address car tariffs before election
In the leadup to the 2007 Australian federal election, the issue of car tariffs took center stage. Both the Labor and Liberal parties pledged to review existing tariffs if elected. Independent candidate Nick Xenophon also prioritized the introduction of tariff-related legislation.
2009: Armenia's tariffs were around three percent
In 2009, Armenia's applied tariffs averaged around three percent, which is considerably lower than the rates implemented after joining the EAEU in 2015.
2011: Friedman's View on the 1930 Tariffs
As of 2011, Milton Friedman believed that while the 1930 tariffs were harmful, they weren't solely responsible for the Great Depression. He attributed the Depression to insufficient action by the Federal Reserve.
2013: Russia leads the world in protectionist measures
In 2013, Russia became the global leader in protectionism, implementing 20% of all protectionist measures worldwide and a third of those within the G20. These measures included tariffs, import restrictions, sanitary regulations, and subsidies for domestic industries like agriculture, space, automotive, electronics, chemistry, and energy.
2014: Study on tariff impact concludes
A long-term study concluding in 2014 demonstrated a correlation between tariff increases and several negative economic outcomes, including declines in domestic output and productivity, rising unemployment and inequality, currency appreciation, and minimal impact on the trade balance. The study tracked data across 151 countries from 1963.
2015: Armenia joins EAEU and adopts new tariff regime
In 2015, Armenia joined the Eurasian Economic Union (EAEU), leading to mostly tariff-free trade within the union but increased tariffs on imports from outside. Initially, these tariffs were set at 0-10%, a significant rise from the roughly 3% rate in 2009, and disproportionately affected agricultural goods. Armenia also committed to aligning with the EAEU's uniform tariff schedule, although it was allowed to maintain some non-EAEU rates until 2022. Membership entailed stricter adherence to EAEU standards, regulations, and practices, effectively ceding control over aspects of its foreign trade regime.
2017: Irwin's Book on US Trade Policy
In 2017, Douglas Irwin published "Clashing over Commerce: A History of US Trade Policy," challenging common myths about the impact of tariffs on American manufacturing.
2017: India implements tariffs to boost domestic manufacturing
Starting in 2017, India implemented tariffs on various electronics and "non-essential items" primarily imported from China and South Korea. This was part of the "Make in India" initiative aimed at bolstering domestic manufacturing and addressing current account deficits. The national solar energy program also favored local producers by mandating the use of Indian-made solar cells.
March 2018: Economists overwhelmingly agree tariffs reduce overall welfare
In March 2018, a University of Chicago survey of leading economists revealed a strong consensus against the idea that new U.S. tariffs on steel and aluminum would improve Americans' welfare. Two-thirds strongly disagreed, and one-third disagreed, with none expressing agreement. The consensus view held that such tariffs benefit a small number at the expense of the majority, with consumer losses exceeding producer and government gains due to deadweight losses.
2021: Study links tariff increases to negative economic outcomes
A 2021 study examining 151 countries from 1963 to 2014 linked tariff increases to negative long-term economic consequences. The study found that increased tariffs correlated with decreased domestic output and productivity, higher unemployment and inequality, and currency appreciation, without significantly impacting the trade balance.
2022: Armenia's transition period for non-EAEU tariffs ends
By 2022, Armenia's transition period allowing the application of some non-EAEU tariff rates, as per Decision No. 113, came to an end. This meant that Armenia was expected to fully comply with the EAEU's common external tariff schedule.
2024: Switzerland abolishes industrial product tariffs
In 2024, Switzerland eliminated all tariffs on imported industrial products, anticipating annual economic benefits of CHF 860 million.