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1 1 (January 31, 2025)

handle is hein.crs/govesit0001 and id is 1 raw text is: U.S. Tariff Policy: Overview Updated January 31, 2025 Introduct on A tariff is a tax levied on imported goods and services. Historically, tariffs were a major source of revenue for many countries and were often the primary source of federal revenue through the late-nineteenth century. Today, other taxes account for most government revenue in developed countries. Tariffs are now typically used selectively to protect certain domestic industries, advance foreign policy goals, or as negotiating leverage in trade negotiations. The U.S. Constitution empowers Congress to set import 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. rues-Based oba Trading System The rules-based global trading system was established following World War II. It began as the General Agreement on Tariffs and Trade (GATT), which was later integrated into a larger set of agreements establishing the WTO. This system aimed to reduce trade barriers and prevent trade wars by establishing rules for the use of tariffs. Among this system's core rules with regard to tariffs are * Nondiscrimination. Under the most-favored nation (MFN) rule, a country must extend any trade concession, such as a reduced tariff rate, granted to one member to all other WTO members. There are exceptions, such as preferential rates for Free Trade Agreements (FTAs), special treatment for developing countries, and remedies for addressing certain unfair trading practices. * Binding Commitments. Through multilateral negotiations, countries bind themselves to ceilings on tariff rates for specific imports. That ceiling is called the bound rate, which can be higher than actual applied rates. * Transparency. The WTO requires members to publish and report their tariff rates. * Safety Valves. The WTO agreements permit members to raise tariffs to address unfair trade practices and to allow domestic industries to adjust to sudden surges in imports in some circumstances. Following the establishment of the GATT in 1947 and the WTO in 1995, global tariff rates declined, spurring trade and opening markets for U.S. exports (Figure 1). Since the establishment of the WTO, the value of exports of U.S. goods have increased more than 160% adjusted for inflation. Figure I. Weighted Average Applied Tariff Rates Source: World Bank. Notes: Weighted average of applied tariff rates (expressed as percentages) globally and among the five largest economies by GDP. Gaps indicate missing data. 2021 is the most recent year with fully comparable data. U.S. Tarff PoLcy Who Makes U.S. Tariff Policy? The Constitution grants Congress the power to lay and collect duties and to regulate commerce with foreign nations. Because tariffs are no longer a major element of domestic tax policy, they have instead become an instrument of U.S. foreign policy and trade promotion. As such, Congress often works with the President to set tariff policy by authorizing the President to negotiate trade agreements and to adjust tariffs in certain circumstances. Presidential Trade Promotion Authority (TPA). Prior to the 1930s, Congress usually set tariff rates legislatively. As U.S. and global tariff rates increased during the Great Depression, U.S. exports decreased. Congress responded by authorizing the President to negotiate reciprocal trade agreements and proclaim tariff reductions up to a pre-set boundary. Hence, such agreements could enter into force without further congressional action. However, by the late 1960s, nontariff barriers to trade (such as discriminatory technical standards) became a greater focus of trade negotiations. As a result, it became difficult to predict the substance of the negotiations and authorize changes to existing U.S. laws by proclamation before the negotiations took place. Congress addressed this challenge in 1974 by establishing expedited procedures to enact implementing legislation for trade agreements addressing nontariff barriers. Under these procedures, currently known as Trade Promotion Authority (TPA), Congress establishes U.S. trade negotiating objectives as well as consultation and notification requirements. If the President satisfies these objectives and requirements, implementing legislation for an agreement may receive expedited treatment including an up or down vote without amendment. The most recent

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