Updated February 22, 2024
U.S. Tariff Policy: Overview
Introduction
goods have increased more than 160% adjusted for
A tariff is a customs duty levied on imported and exported
inflation.
goods and services. Historically, countries used tariffs as a
primary means of collecting revenue. Today, other taxes
Figure 1. Weighted Average Applied Tariff Rates
account for most government revenue in developed
countries. Tariffs are now typically used to protect domestic
industries or as leverage in trade negotiations and disputes.
The U.S. Constitution empowers Congress to set tariffs, a
power that Congress has partially delegated to the
President. The United States is also a member of the World
Trade Organization (WTO) and a party to a number of trade
agreements, which include specific tariff-related
commitments. Congress and the President thus create U.S.
tariff policy within the context of a rules-based global
trading system.
Rules-Based Global Trading System

The rules-based global trading system was established
Source: World Bank.
following World War II. It began as the General Agreement
Notes: Weighted average of applied tariff rates global y and among
on Tariffs and Trade (GATT), which was later integrated
the five largest economies by GDP. Gaps indicate missing data. 2020
into a larger set of agreements establishing the WTO. This
is the most recent year with ful y comparable data.
system has aimed to reduce trade barriers and prevent trade
wars by establishing rules for the use of tariff and nontariff
U.S. Tariff Policy
barriers to trade. Among this system’s core rules with
regard to tariffs are
Who Makes U.S. Tariff Policy?
•
The Constitution grants the power to lay and collect duties
Nondiscrimination. Under the most-favored nation
and to regulate commerce with foreign nations to Congress.
(MFN) rule, a country must extend any trade
The Constitution grants the authority to negotiate
concession, such as a reduced tariff rate, granted to one
international agreements to the President. Since tariffs are
country member to all other WTO members. There are
no longer a primary source of revenue, they have
exceptions, such as preferential rates for Free Trade
increasingly become an instrument of U.S. international
Agreements (FTAs), special treatment for developing
trade and foreign policy. As such, Congress now works
countries, and WTO-allowed responses to unfair trading
with the President to set tariff policy by granting authority
practices.
to negotiate trade agreements and to adjust tariffs in certain
• Binding Commitments. Through multilateral
other circumstances.
negotiations, countries bind themselves to ceilings on
tariff rates for specific imports. That ceiling is called the
Presidential Trade Promotion Authority (TPA). Prior to
bound rate, which can be higher than actual applied
the 1930s, Congress usually set tariff rates itself. As U.S.
rates. Lowering bound rates has been a general goal of
and global tariff rates increased during the Great
each of the multilateral negotiations.
Depression, U.S. exports decreased. Congress responded by
•
authorizing the President to negotiate reciprocal trade
Transparency. The WTO requires members to publish
agreements that reduced tariffs through proclamation
and report their tariff rates and other trade regulations.
authority up to a pre-set boundary. Hence, such an
• Safety Valves. The WTO agreements permit members
agreement could enter into force without further
to raise tariffs to address unfair trade practices and to
implementing legislation. However, nontariff barriers to
allow domestic industries to adjust to sudden surges in
trade (such as discriminatory technical standards) became a
imports in some circumstances.
greater focus of trade negotiations in the late 1960s. As a
result, it became difficult to predict the substance of the
Following the establishment of the GATT in 1947 and the
negotiations and authorize changes to existing U.S. laws by
WTO in 1995, global tariff rates declined significantly,
proclamation before the negotiations took place. Congress
spurring trade and opening markets for U.S. exports. Since
addressed this challenge in 1974 by establishing expedited
the establishment of the WTO, the value of exports of U.S.
procedures to implement more complicated future trade
agreements. Under these procedures, currently known as
Trade Promotion Authority (TPA), Congress establishes
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U.S. Tariff Policy: Overview
U.S. trade negotiating objectives as well as consultation and
attempted to convince advanced emerging economies, such
notification requirements. If the President satisfies these
as China, India, and Brazil, to commit to lower their bound
objectives and requirements, implementing legislation for
tariff rates, which they declined to do. This dispute was
an agreement may receive expedited treatment including an
arguably one of the reasons that the Doha round of
“up or down vote” without amendment. The most recent
negotiations was unable to produce an agreement.
TPA, the Bipartisan Comprehensive Trade Priorities and
Low U.S. tariff rates have also served as an instrument to
Accountability Act of 2015, expired in the summer of 2021.
achieve other foreign policy goals. For example, to
encourage global economic development, Congress created
Presidential Discretionary Authority over Tariff Rates.
the Generalized System of Preferences (GSP), which
In dozens of statutes, Congress has empowered the
authorizes the President to give unilateral duty-free
President to adjust tariff rates in response to specific trade-
treatment to some products from some developing
related concerns that touch on issues of executive interest,
countries. The United States has also pursued FTAs as part
such as foreign policy and national security, or require an
of broader foreign policy and security goals.
administrative finding by a U.S. agency. For example,
Section 232 of the Trade Expansion Act of 1962 empowers
the President to adjust tariffs on imports that threaten to
Key Dates in U.S. Tariff History
impair U.S. national security. Section 5(b) of the Trading
1913: Underwood Tariff Act reimposes federal income tax
with the Enemy Act and Section 203 of the International
and lowers tariff rates from roughly 40% to 25%.
Emergency Economic Powers Act empower the President
Revenue now comes primarily from income taxes.
in a time of war or emergency to impose tariffs on all
imports. Section 201 of the Trade Act of 1974 empowers
1930: Tariff Act of 1930, known as the Smoot-Hawley Tariff,
the President to raise tariff rates temporarily when the U.S.
raises U.S. tariffs to their highest levels since 1828. This
International Trade Commission (ITC) determines that a
was the last tariff act in which Congress set rates.
sudden import surge has caused or threatened serious injury
1934: Reciprocal Tariff Act delegates to the President the
to a U.S. industry. Congress has also empowered U.S.
power to negotiate bilateral, reciprocal trade
agencies to impose duties to offset injurious unfair trade
agreements. Renewed several times.
practices, based on industry petitions or through initiation
1947: The United States and 23 other countries enter the
by the Commerce Department.
GATT to lower tariffs and other trade barriers.
How Is U.S. Tariff Policy Administered?
1962: Trade Expansion Act delegates to the President the
power to cut tariffs generally up to 50% and to cut up
U.S. Customs and Border Protection (CBP) administers the
to 80% or eliminate tariffs on certain categories of
collection of tariffs at U.S. ports of entry according to rules
products.
and regulations prescribed by the Secretary of the Treasury.
1976: The United States institutes its Generalized System of
When a good enters a U.S. port of entry, merchandise is
Preferences (GSP), establishing preferential tariff rates
classified and tariffs are assessed using the U.S.
for developing countries.
Harmonized Tariff Schedule (USHTS), a compendium of
1995: The United States enters the WTO. This is the last
tariff rates based on a globally standardized nomenclature.
time GATT/WTO members multilaterally agree to
Today, importers self-classify and declare the value or
major reductions in tariff rates.
quantity of their goods. CBP reviews the paperwork,
performs occasional audits, and then collects any applicable
tariffs or penalties as well as any administrative fees.
Issues for Congress
Finally, CBP deposits any revenue from tariffs or other
For more than 80 years, Congress has delegated extensive
penalties into the General Fund of the United States.
tariff-setting authority to the President. This delegation
insulated Congress from domestic pressures and led to an
What Has U.S. Tariff Policy Been?
overall decline in global tariff rates. However, it has meant
Over the past 70 years, tariffs have never accounted for
that the U.S. pursuit of a low-tariff, rules-based global
much more than 2% of total federal revenue. In FY2020,
trading system has been the product of executive discretion.
for example, CBP collected $74.4 billion in tariffs,
While Congress has set negotiating goals, it has relied on
accounting for approximately 2.2% of total federal revenue.
Presidential leadership to achieve those goals.
Instead, the United States has generally used its tariff policy
to encourage global trade liberalization and pursue broader
The Trump Administration was openly critical of low-tariff
foreign policy goals.
policies and made extensive use of the authorities delegated
to the President to increase tariffs on certain goods. As a
Since 1934, the United States has generally reduced or
result, the amount of duties paid on U.S. imports doubled
eliminated many tariffs as part of bilateral and multilateral
from FY2015 to FY2020 from approximately $37 billion to
trade agreements. By supporting the creation of the GATT
$74 billion. The Biden Administration has maintained some
and the WTO, the United States sought to reduce tariff rates
of those policies. Congress may want to consider whether
globally within a rules-based trading system. Roughly 70%
the current restrictions on such delegated authorities
of all products enter the United States duty free.
adequately protect congressional interests and reflect
congressional priorities.
U.S. reductions in tariff rates have not always inspired
others to follow. During the most recent (Doha) round of
WTO trade negotiations, the United States unsuccessfully
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U.S. Tariff Policy: Overview

Christopher A. Casey, Analyst in International Trade and
Finance
IF11030


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https://crsreports.congress.gov | IF11030 · VERSION 8 · UPDATED

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