Jan 05
Welcome back to TAXING TARIFFS!
A weekly blog about the present, past, and potential future of tariffs
in these United States.
TAXING TARIFFS is brought to you by Micron Corporation where “WE BUILD
IT BETTER.”
In the last post we listed the eight largest trade partners for the U.S.
and briefly described how the elimination of the de minimis rule had a significant effect on the goods trade of one of those eight trade partners, namely China. Now we turn our attention to two types of tariffs, prevalent since this country’s beginnings.
Tariffs can be ad valorem or specific. Ad valorem tariffs are the most widely used today (in terms of the number of instances of such in the Harmonized Tariff Schedule of the United States) and are calculated according to the value of each good based on a percentage. Specific tariffs are fixed based on weight, volume, or number of items of the good. These two duty value specifications are different, and much of the harm either wrought or perceived by the Smoot-Hawley tariff is due to their difference. One is based on a percentage of value (ad valorem) and the other is based on units of weight (specific). Let’s take a closer look at how ad valorem tariffs are being used in relation to each of the eight trade partners.
At the end of the Northern Hemisphere’s summer in 2025, European Commission President Ursula von der Leyen and United States President Donald Trump shook hands in a show of agreement for 15% taxation on most EU exports to the US. This baseline tariff would apply to several of Europe’s crucial sectors including automobiles, pharmaceuticals, and semiconductors. Polysyllabic imports – indeed; and perhaps, of more trade import than import of speech. This deal surpassed the 10% tariffs imposed by the American president in April of 2025. Yet, 15% is still lower than the US president’s threat of 30% tariffs. As part of this trade agreement the EU promised to buy $750B of American energy products over three years and invest $600B in the US. In this way, Trump established a dominant position in many of the succeeding trade negotiations, one-sided, bilateral, or otherwise.
Perhaps surprisingly, the second largest trade partner of the US is Mexico. In March of 2025, 25% tariffs were set as a baseline for Mexican imports, with the generous exclusion of products that fall under a 2020 trade agreement known as USMCA. The United States Mexico Canada Agreement has been important to trade in North America since its inception: And in some form they will be in the future. There is much to be said, and will be, about trade relations between democratic North American countries with porous borders.
Canada – Oh Canada! In October of this year, our great neighbor to the North had a 35% baseline tariff set on it with a threat of 45% looming. Tariffs in March were at 25% with exclusions under USMC. Political influence and negotiation are very much in play these days between Canada and us.
In the Olympics, gold medals are given for first place, silver for second place, and bronze for third. If China has its way, then maybe their fourth place finish in US trade partnerships will be forged and forwarded with the use of rare earth elements. China holds a special place in US trade negotiations; even if it were only for its mining, refining, and utilization capabilities of the elements just mentioned. But it is not just that. China has become more than a formidable opponent in tariff negotiations. Its economic threats to the US are more than matched by its military capabilities. In 2012 Xi Jinping became General Secretary of the Chinese Communist Party. He became President of The People’s Republic of China in 2013: The Belt and Road Initiative was launched by Xi Jinping at the Two Sessions Meetings that same year. Tariffs as high as 145% had been threatened – then rescinded – by Trump in negotiations since his re-election. Xi then brought rare earth elements into play during the negotiations. Trump backed down though claimed some victory in tariff reductions from 20% to 10% due to mostly unspecified concessions over the deadly and often-abused drug fentanyl. When it comes to tariffs, Trump seems to have met a challenger to his dominant tariff position in the form of a Chinese leader named Xi.
Japan also maintains a special place in the US trade partner relationship hierarchy. Economically speaking, Japan surrendered its position in relation to China four or more decades ago. Threatened with 25% tariffs during negotiations in July, the baseline settled at 15% for most goods including cars and auto parts. Concessions to the tune of $550B were also mentioned.
South Korea duties were set at 10% in April. This was then upped to 15% after an accord much like the EU and Japan did. Concessions for $200B in cash “installments” and $150B in shipbuilding “cooperation” were given according to an article in the Wall Street Journal that was updated on Oct. 30, 2025.
Taiwan holds a dominant position in the semiconductor manufacturing sector, which is huge! It also is just some 80 miles across the Taiwan Strait from one of its neighbors which is a very initiative-taking militarily motivated presence also known as China.
At the end of our list of eight US trade partners is Vietnam, and it is highly significant despite its position in the list. Vietnam faces a 20% tariff: up from 10% in April, and below the 46% threatened. More significant than the baseline adjustments and negotiating threats is the importance of transshipments of goods that often pass through Vietnam – especially from China. Those shipments may have a higher 40% tariff applied.
What do you think about tariffs imposed on imports from trade partners? What then should we do for consumers in tariff terms? Should we raise them or lower them? Let us know at INFO@MICRONCORP.COM. After that, we will see you next time on TAXING TARIFFS.
Dec 19
In order to understand where we are in the various phases of the evolution of tariffs in America, it well serves our purpose to assess the current situation first. To guide us we borrow a widely employed triptych and remix it slightly: As Americans, with regard to tariffs, let us consider, “Where we are, what we’ve done, and where we’re going.” That is to say we’ve shuffled the tariff timeline into the order of present, past, and future. We’ll begin an analysis of our situation today as citizens of one country in a world of 193 countries (in the United Nations) with uni-, bi-, and multilateral trade relationships.
That’s a lot of trade relationships. So let’s focus on the eight largest trading partners for the U.S. The top U.S. trading partners in goods in 2024 were the E.U., Mexico, Canada, China, Japan, South Korea, Taiwan, and Vietnam. Combining imports and exports, the European Union traded nearly one trillion in U.S. dollars ($1T), Mexico just over $800 Billion, Canada just under $800B, China just under $600B, Japan just over $200B, and South Korea, Taiwan, and Vietnam all under $200B.
Even for this dominant group of eight, that really is a lot of potential trade relationships. Despite the long-standing wave of globalization, regional relationships are still used to group, protect, and encourage trade. The European Union is a prime example of trade and monetary union between independent nations. The U.S., Mexico, and Canada have been grouped under trade agreements starting with NAFTA (North American Free Trade Agreement). This was later replaced by USMCA, the U.S.-Mexico-Canada Agreement. Japan, South Korea, Tawain, and Vietnam can be grouped in a few different ways, often with Japan standing alone with regards to the U.S. And China is certainly worthy of being ungrouped and standing alone.
To describe the trade relationships between nine countries (eight trading partners and the U.S.) we should define some terms. Tariffs, and exemptions from them, come in different forms with different terms applying to them. Three of the most important terms to understand are ad valorem, specific, and de minimis. Tariffs that are specific are calculated as a constant value multiplied by weight. Ad valorem tariffs are based on a percentage of the unit cost. And the de minimis rule is an exemption of duties based on a maximum value.
Specific tariffs based on weight were part of the reason that the infamous Smoot-Hawley tariffs bit so hard in the early 20th century. Ad valorem tariffs are what are mostly used today with the exception of bulk items such as steel and aluminum which are specific. Today ad valorem tariffs are often being placed on the goods from a country, as a whole, as opposed to the more complex way that tariffs were applied in the past, not just on individual goods from a specific country but also on the individual components that made up those goods. In this regard, the production, protection, and taxing of wool in the U.S. 19th century is probably the best case-study of just how complex the specification of tariff schedules can become.
We’ll start with the exemption of duties by the de minimis rule, since it has a significant influence on how electronic components are shipped. Electronic components that are shipped across the world often avoid tariffs by either utilizing the de minimis rule or by using intermediary countries for initial export to avoid tariffs. So it is informative to see what happened when the de minimis loophole was closed.
On April 2nd of 2025, President Donald J. Trump signed an Executive Order, which took effect on May 2nd of 2025, closing a loophole for low-value imports from the People’s Republic of China (PRC) and Hong Kong. The
de minimus rule allows for duty-free imports of goods that are valued at less than $800. How “goods” are defined is fuzzy. A precision resistor valued at ten cents is probably covered by de minimis. Is a spool of 10,000 of those resistors also covered under de minimis? How about a shipping container of 1,000 of those spools?
Once de minimis for China was ended at the beginning of May, China’s exports of low-value packages to the U.S. dropped by more than $1B in the following weeks. Not just coincidentally, the same trade to the
E.U. increased by nearly three quarters of $1B in roughly the same time period. Taxes can certainly form strong incentives or disincentives for trade between countries. Human ingenuity, however, is always there to figure out ways around (or through) those governmental authorities at the ports, often legally, and always considered as to the advantage of those conducting the trade.
What do you think about companies avoiding tariffs? Does that help lower costs for consumers? Should it be allowed in some cases? Let us know at INFO@MICRONCORP.COM. After that, we’ll see you next time on TAXING TARIFFS.
Dec 10
Welcome to Taxing Tariffs! Or as I like to word it “Taxing Tariffs and a Folding Trump Card: How will the Supreme Court and China Respond?”
Before we lean into those current pressing questions about tariffs, let’s glance back at the history of tariffs on this side of the Atlantic.
Long before the current set of leaders and national conditions, there existed much heated debate about tariffs in these not so United States. Agricultural and industrial interests, mostly divided between the South and the North, though both often politically driven by the West, conflicted on the subject of taxation. None other than Thomas Jefferson and Alexander Hamilton eloquently debated the varying positions that states held on schedules of taxes collectively known as tariffs. And that was in 1791.
America has been steeped in and indeed began by “opting out of” tariffs since before its beginning, so let’s state what tariffs are. Tariffs are duties on imports that are paid at the ports and docks, and if passed on to consumers they become taxes on individuals. In the nascent States this was well understood. To hear politicians speak today, one would think that tariffs are only placed on other nations: a tariff on China, a tariff on Canadian imports, a tariff on Mexican auto parts. U.S. tariffs are paid by U.S. corporate entities and U.S. citizens, period.
Do you feel any price pain due to tariffs? Do you think there’s still a divide in this country on the topic of tariffs? Let us know INFO@MICRONCORP.COM. After that, we’ll see you next time on TAXING TARIFFS.
