1 00:00:01,966 --> 00:00:04,333 GEOFF BENNETT: The U.S., Canada and Mexico all agree to delay the start of President 2 00:00:04,333 --> 00:00:09,333 Trump's tariffs and hold off, at least for now, on the possibility of a trade war among allies. 3 00:00:11,366 --> 00:00:14,933 But the delay is only for a few weeks, and, as of now, there will be new tariffs taking 4 00:00:14,933 --> 00:00:19,933 effect tomorrow, 10 percent on goods from China. That's already on top of tariffs on 5 00:00:21,766 --> 00:00:23,933 Chinese products and materials dating back to President Trump's first term. 6 00:00:23,933 --> 00:00:28,200 AMNA NAWAZ: President Trump also called the new tariffs on China a -- quote -- "opening salvo." 7 00:00:28,200 --> 00:00:33,200 And he spoke this weekend about his plans to issue new punitive tariffs against another ally, 8 00:00:35,100 --> 00:00:37,700 the European Union. These threats and the prospects of a trade war lead 9 00:00:37,700 --> 00:00:41,933 to a number of questions about how tariffs have been used in the past, 10 00:00:41,933 --> 00:00:45,366 what effect they have had, and their potential impacts now. 11 00:00:45,366 --> 00:00:50,333 Economics correspondent Paul Solman takes a closer look. 12 00:00:52,500 --> 00:00:55,466 PAUL SOLMAN: Tariffs, taxes on imports to the U.S. collected at 328 ports of entry across 13 00:00:57,600 --> 00:01:01,033 the country. Here's a look at some of the reasons President Trump gives to hike them. 14 00:01:01,033 --> 00:01:03,366 DONALD TRUMP, President of the United States: Instead of taxing our citizens 15 00:01:03,366 --> 00:01:08,033 to enrich other countries, we will tariff and tax foreign countries to enrich our citizens. 16 00:01:10,733 --> 00:01:15,733 PAUL SOLMAN: Reason one, to raise money from foreigners, instead of taxing Americans. President 17 00:01:17,833 --> 00:01:21,000 Trump insists tariffs were once the great revenue source for the United States, and it's true. 18 00:01:22,633 --> 00:01:24,766 DOUGLAS IRWIN, Dartmouth College: Right up until the Civil War, 19 00:01:24,766 --> 00:01:27,933 tariffs raised 90 percent of the revenue for the federal government. But the federal 20 00:01:27,933 --> 00:01:32,900 government was very small. Spending was like 2 to 3 percent of GDP. So there wasn't much to fund, 21 00:01:32,900 --> 00:01:36,333 except for the debt and the current expenditures, and the tariff did it. 22 00:01:36,333 --> 00:01:41,333 PAUL SOLMAN: Today, government spending is almost a quarter of GDP. How much do tariffs bring in? 23 00:01:43,733 --> 00:01:45,966 DOUGLAS IRWIN: Today, it's only about 2 percent of federal revenue comes from the tariff. It's just 24 00:01:45,966 --> 00:01:50,633 been swamped by corporate taxes, income taxes, Social Security taxes and things of that sort. 25 00:01:52,066 --> 00:01:53,666 PAUL SOLMAN: But the point is to replace those taxes. 26 00:01:53,666 --> 00:01:57,033 So how much more money can hire tariffs raise? 27 00:01:57,033 --> 00:02:00,766 KIMBERLY CLAUSING, UCLA School of Law: If you look at total federal revenues in a typical year, 28 00:02:00,766 --> 00:02:04,733 they're over $4 trillion. Almost $3 trillion of 29 00:02:04,733 --> 00:02:09,433 that is a combination of the individual income tax and the corporate income tax, 30 00:02:09,433 --> 00:02:13,466 whereas we think the maximum you could get out of tariffs, if you really pushed them 31 00:02:13,466 --> 00:02:17,200 to the highest level you could go, would be in the neighborhood of $800 billion, right? 32 00:02:17,200 --> 00:02:22,200 So that's not going to come anywhere near what you need to even replace the individual income tax, 33 00:02:24,000 --> 00:02:27,333 let alone the corporate tax, payroll taxes and other types of tax on income. 34 00:02:27,333 --> 00:02:32,333 PAUL SOLMAN: A second reason, tariffs to protect American industry from foreign competition, 35 00:02:34,100 --> 00:02:37,166 a la the future 25th president of the United States, William McKinley. 36 00:02:37,166 --> 00:02:40,033 DOUGLAS IRWIN: So, William McKinley, as chair of the House Ways and Means Committee, ushered 37 00:02:40,033 --> 00:02:45,033 through a piece of legislation that became known as the McKinley tariff. It was passed in 1890. And 38 00:02:47,333 --> 00:02:49,700 it had revenue effects. It was designed to protect domestic industry from foreign competition. 39 00:02:49,700 --> 00:02:52,733 And, in particular, he, as representing the state of Ohio, 40 00:02:52,733 --> 00:02:57,233 was interested in helping out the steel industry, which was located in his district. 41 00:02:57,233 --> 00:03:01,966 PAUL SOLMAN: President Trump has promised to help out various industries nowadays, citing McKinley. 42 00:03:01,966 --> 00:03:06,966 DONALD TRUMP: President McKinley made our country very rich through tariffs and through talent. 43 00:03:08,800 --> 00:03:12,633 PAUL SOLMAN: However, when McKinley became president in 1897: 44 00:03:12,633 --> 00:03:15,933 DOUGLAS IRWIN: The wasn't this massive boom. We had, like, sort of a mini-depression in 45 00:03:15,933 --> 00:03:20,400 1893 that lasted for several years. And as president now, McKinley said, 46 00:03:20,400 --> 00:03:24,200 gee, if we could export manufactured goods and farm goods to the world, 47 00:03:24,200 --> 00:03:27,500 we could pull out of this recession and do much better. 48 00:03:27,500 --> 00:03:31,233 And he changed tack. In fact, he said the age of exclusion is past. 49 00:03:31,233 --> 00:03:34,733 He also said commercial wars weren't productive. And so he was a much more 50 00:03:34,733 --> 00:03:39,300 outward-oriented president than he was as a member of Congress. 51 00:03:39,300 --> 00:03:41,300 PAUL SOLMAN: Plus, there's a problem with tariffs, 52 00:03:41,300 --> 00:03:46,300 countertariffs, which both Mexico and Canada threatened before today's delay. 53 00:03:48,266 --> 00:03:50,166 JUSTIN TRUDEAU, Canadian Prime Minister: Canada will be responding to the U.S. trade 54 00:03:50,166 --> 00:03:54,633 action with 25 percent tariffs against $155 billion worth of American goods, 55 00:03:57,966 --> 00:04:02,933 such as American beer, wine, and bourbon, fruits and fruit juices, 56 00:04:04,800 --> 00:04:08,333 including orange juice, along with vegetables, perfume, clothing, and shoes. 57 00:04:10,200 --> 00:04:14,866 It will include major consumer products like household appliances, furniture, 58 00:04:14,866 --> 00:04:19,866 and sports equipment, and materials like lumber and plastics, along with much, much more. 59 00:04:22,900 --> 00:04:27,666 PAUL SOLMAN: Which would make our goods more expensive and thus hurt our exports. 60 00:04:27,666 --> 00:04:31,666 And that raises the question, who pays for tariffs anyway? 61 00:04:31,666 --> 00:04:34,500 According to research on the last Trump tariffs: 62 00:04:34,500 --> 00:04:37,800 AMIT KHANDELWAL, Yale University: So what we found in the 2018-2019 tariffs is that, 63 00:04:37,800 --> 00:04:41,000 when the U.S. imposed tariffs on predominantly Chinese goods, 64 00:04:41,000 --> 00:04:46,000 the U.S. economy and U.S. importers bore the full incidence of those tariffs. And some of 65 00:04:47,500 --> 00:04:50,566 those costs would then trickle down and come back to consumers. 66 00:04:50,566 --> 00:04:54,700 PAUL SOLMAN: Prices went up less than half-a-percent. But the first Trump 67 00:04:54,700 --> 00:04:59,700 tariffs were just 15 percent on about 15 percent of U.S. imports, not much. And, 68 00:05:01,866 --> 00:05:05,800 of course, the more and higher the tariffs, the more expensive for importers and consumers. 69 00:05:07,066 --> 00:05:09,600 Moreover, they don't hit everyone equally. 70 00:05:09,600 --> 00:05:11,566 DOUGLAS IRWIN: The tariff is a very regressive tax. 71 00:05:11,566 --> 00:05:14,800 It hits lower-income households more than higher-income households. So if we were 72 00:05:14,800 --> 00:05:19,500 to attempt to try to cut the income tax or replace the income tax with a tariff, 73 00:05:19,500 --> 00:05:24,300 we'd be going from a fairly progressive tax system to a very regressive tax system. 74 00:05:24,300 --> 00:05:28,000 PAUL SOLMAN: Muscling other countries may be working, as Colombia's about-face 75 00:05:28,000 --> 00:05:33,000 on accepting deportees suggests when Trump threatened tariffs on Colombia. 76 00:05:34,100 --> 00:05:37,033 As to protecting American manufacturing: 77 00:05:37,033 --> 00:05:39,500 DOUGLAS IRWIN: Well, here, it's a double-edged sword. We'd help 78 00:05:39,500 --> 00:05:43,400 some industries, but we'd hurt others. Economists see trade-offs, rather than 79 00:05:43,400 --> 00:05:47,900 sort of net creation of jobs and expansion of manufacturing, as a result of tariffs. 80 00:05:47,900 --> 00:05:52,400 PAUL SOLMAN: What impact will the new tariffs actually have? We will soon find out. 81 00:05:52,400 --> 00:05:54,000 For the "PBS News Hour," Paul Solman.