US Slaps 11.8% Tariffs on Goods of South Asia (Bangladesh, Pakistan Sri Lanka), Consumers in US and Producers Hit as Uncle Sam’s Coffers fill up

· China moves up to 11.3% but Europe and Canada are near zero!

The Numbers:

Imports from U.K., 2021	$56.6 billion
Imports from Pakistan, 2021	$5.3 billion
Tariffs on U.K. goods, 2021	$566 million
Tariffs on Pakistani goods, 2021	$523 million

What They Mean:

Looking at the U.S. tariff system as domestic tax policy for an International Trade Commission hearing last week, PPI’s Ed Gresser found much to dislike. In this role, it turns out to be mainly a way to tax cheap clothes, shoes, and other consumer goods, many of them not made in the United States for decades. As such, it is a remarkably regressive way to raise money, and not obviously effective as a job or production protector.

How does it look from the other side of the border? The complicated answer is, it basically depends where you are on the other side. For most countries U.S. tariffs turn out to be pretty modest, in a range from close to zero to about 5%. For low-income Asian countries reliant on clothing and textile exports, it is very restrictive; for China and to some extent for the world, it has changed a lot since 2017. As a starting point, a quick list (using trade-weighted averages, i.e., tariff payments divided by the value of goods imports) illustrates the world averages of 2017 and 2021, and the variation among countries:

Bangladesh	14.7%
China, 2021	11.3%
Sri Lanka	10.9%
Pakistan	9.8%
Cambodia	8.3%
Vietnam	4.8%
Indonesia	4.5%
World, 2021	3.0%
Ukraine	2.8%
China, 2017	2.7%
Thailand	1.9%
Egypt	1.7%
Samoa	1.5%
Japan	1.5%
World, 2017	1.4%
Brazil	1.0%
Philippines	1.5%
Germany	1.4%
European Union, 2021	1.4%
European Union, 2017	1.3%
El Salvador	1.2%
United Kingdom	1.0%
Argentina	0.9%
New Zealand	0.7%
Lebanon	0.6%
Uzbekistan	0.6%
Norway	0.5%
Haiti	0.4%
Jordan	0.3%
Kenya	0.3%
Ghana	0.2%
Kuwait	0.2%
Fiji	0.2%
South Korea	0.2%
Jamaica	0.1%
Canada	0.1%
Colombia	0.1%
Liberia	0.01%

What explains these patterns?

High tariffs on low-income Asia: The low-income Asian countries at the top of the list — Bangladesh, Cambodia, Pakistan, and Sri Lanka — specialize in exports of clothing and home textiles. Tariffs on these goods average over 11%, and spike to 32% (as one example, for polyester shirts). By comparison, IT goods, medical equipment, natural resources like oil and fish, and primary agricultural commodities are zero, while heavy-industry and sophisticated consumer goods generally get low tariffs. Thus the startling fact that buyers of Pakistan’s modest $5.3 billion worth of shirts, towels, and similar goods pay almost as much as buyers of $56.6 billion in British medicines, aircraft parts, automobiles, and art auction prizes. Likewise, buyers of struggling Sri Lanka’s underwear and clothing paid $325 million last year; the bill for buyers of Norway’s $6.7 billion in salmon, oil, and pharmaceuticals was $34 million, an order of magnitude smaller.

Low-to-medium rate on others: If the highest rates show up in low-income Asia, the lowest are for countries of several different types: (a) energy and natural resource exporters (oil for Kuwait, fish for Fiji, and so on); (b) the 20 U.S. FTA partners, where Canada, Jordan, El Salvador and Colombia stand in for the larger group; and (c) countries enrolled in the African Growth and Opportunity Act or the Caribbean Basin Initiative, such as Kenya, South Africa, Liberia, Haiti, and Jamaica. Larger wealthy and middle-income countries (the U.K., Germany, Brazil, Argentina, Thailand, Japan, etc) have diversified export mixes, typically with a lot of zero-tariff products, a lot of mid-tariff products, and some high-tariff goods, and typically wind up in a range from 1% to 3%.

Changing rates for the world and China: Finally, the system has changed substantially over the last five years, with the worldwide average rate doubling from 1.4% in 2017 to 3.0% in 2021. This is principally due to the Trump administration’s “301” tariffs on Chinese goods. The “232” tariffs on steel and aluminum, though equally controversial, affect only about 1.5% of imports, and changed overall averages only very modestly for the world or large partners like the EU or Japan. For Chinese goods specifically, average rates have jumped from 2.7% in 2017 to 11.3% in 2021 - very high in comparison to the vast majority of countries, but still actually below the normal, permanent rates for products from Bangladesh.