The Regressive Nature of the U.S. Tariff Code: Origins and Implications

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Abstract:

The U.S. tariff code has a surprising and little-known feature: tariffs are systematically
higher on lower-end versions of goods relative to their higher-end counterparts. For
example, a handbag made of reptile leather has a tariff rate of 5.3 percent, while a
plastic-sided handbag has a tariff rate of 16 percent. In this paper, we document the
presence, historical origins, and consequences of this regressive pattern. Regressive
tariffs are present throughout the tariff code, but are especially pervasive in consumer
goods categories, where tariffs are 4 percentage points higher, on average, for low-value
varieties. Using a newly constructed dataset on legislated tariffs that covers all major
trade agreements back to the 1930 Smoot-Hawley Tariff Act, we show that this variation
in rates across varieties largely originated in trade agreements made in the 1930s and
40s and has persisted over time. Welfare estimates suggest that the regressive nature
of tariff rates on consumer goods has important distributional consequences.

Last updated on 04/05/2022