After a dramatic day of telephone diplomacy, United States President Donald Trump has agreed to pause 25 percent tariffs on imports from Mexico and Canada that were to come into effect on Tuesday.
But the pause is only for a month, and a 10 percent tariff that Trump announced on Chinese imports, on top of existing tariffs kicked in on Tuesday morning.
The threat of an all-out multifront tariff war still looms: before Trump pulled back, for now, on his threat, Mexico and Canada had both also warned that they would launch retaliatory tariffs on the US if Washington goes ahead with the president’s tariff plan. And China has announced tit-for-tat tariffs of its own.
Trump’s threats have also spooked global markets and drawn condemnation from around the world, even as he has threatened to impose tariffs on the European Union and India.
But for all the chaos that Trump has unleashed, he isn’t the first US president to wage tariff wars. In fact, he is following in steps of a series of predecessors who tried to use tariffs as a bludgeon to get other countries to follow Washington’s interests.
What happened in those instances? Who were the key players involved? And what is Trump’s rationale for trying to impose tariffs?
Why did Trump impose tariffs on Canada, China and Mexico?
Trump has justified his threat by accusing the three targeted countries of not doing enough to prevent drugs, specifically fentanyl, from entering the US. He has also insisted that Canada and Mexico are flooding the US with unauthorised immigrants by permitting them access to US borders. Finally, he has alluded to the trade deficits that the US has with each of these nations – its top three trading partners.
“Number one is the people that have poured into our country, so horribly and so much … number two are the drugs, fentanyl and everything else that have come into the country … and number three are the massive subsidies we’re giving to Canada and Mexico over deficits,” Trump said in the Oval Office on Thursday.
On Saturday, Trump declared a state of emergency by invoking the International Emergency Economic Powers Act (IEEPA) and imposed tariffs on the three countries. These tariffs were to come into effect from 12:01am EST (05:01 GMT) on Tuesday.
But after a telephone call with Mexican President Claudia Sheinbaum and two conversations with Canadian Prime Minister Justin Trudeau, Trump agreed to put the tariffs on the two neighbours on pause for a month.
Canada and Mexico announced that they would each send 10,000 soldiers to their borders to crack down on undocumented migrants trying to enter the US, and to stop fentanyl from seeping across the borders.
Yet this reprieve is temporary and does not extend to China – and on Sunday, Trump warned that Europe is his next target. “They don’t take our cars, they don’t take our farm products. They take almost nothing and we take everything from them,” he told reporters at his Mar-a-Lago estate in Florida, threatening tariffs.
So how have tariff wars played out in the past?
1930: The Smoot-Hawley Tariffs
In 1929, the stock market crashed on Wall Street, sending shock waves through the US and the rest of the world. The Great Depression, a period of global economic turmoil that would last a decade, had begun.
Months later, in June 1930, US President Herbert Hoover signed the Smoot-Hawley Act into law. The law was originally aimed at imposing tariffs to protect US farmers from foreign competition, but it was extended to a wider array of products and increased tariffs on agricultural and industrial goods by about 20 percent.
The law was named after its top supporters, Republican Senator Reed Smoot of Utah and Republican Representative Willis Hawley of Oregon.
Almost immediately, the act caused trade wars. Several countries, including Canada, France and Spain, imposed retaliatory tariffs on US products. Canada slapped tariffs on 16 US products which accounted for about a third of US exports at the time, according to US-based nonprofit research organisation, the National Bureau of Economic Research (NBER).
The slowdown of trade weakened the US economy. By 1933, US exports dropped by 61 percent. Smoot-Hawley is often cited by experts as a factor which aggravated the US economic crisis.
Hoover’s popularity tumbled and his re-election bid failed, when Democrat Franklin D Roosevelt defeated him in the 1932 presidential election.
In June 1934, Roosevelt signed the Reciprocal Trade Agreements Act, which called for bilateral trade deals with other countries to negate the effects of Smoot-Hawley. The Act said “that a full and permanent domestic recovery depends in part upon a revived and strengthened international trade”. Between 1934 and 1939, the Roosevelt administration negotiated trade agreements with 19 countries.
1960s: Chicken War
In the 1960s, the US and European nations played an expensive game of chicken across the Atlantic Ocean.
During World War II from 1939 to 1945, red meat was rationed. The US government began a campaign to encourage Americans to eat fish and poultry instead. In the years that followed, the US ramped up the factory farming of chicken, which lowered the price of poultry.
The period after World War II also saw the acceleration of globalisation. Europe started buying cheap chicken from the US. As a result, European farmers were scared of being priced out of the market with fast, inexpensive American chickens out-clucking slower, pricier European ones.
In 1962, members of the European Economic Community (EEC), which was later absorbed into the European Union, imposed tariffs on American chicken. France, West Germany, Italy, Belgium, the Netherlands and Luxembourg increased their tariff on US poultry to 13.43 cents (around $1.4 today), per pound of chicken.
US poultry exports to Europe fell sharply. Between 1962 and 1963, US global chicken exports dropped by about 30 percent, according to a report by the United States Department of Agriculture.
In 1963, President Lyndon B Johnson imposed retaliatory tariffs on: potato starch, 25 cents ($2.57 now) per pound; brandy, $5 ($51.3 now) per gallon if over $9 ($92.4 now) per gallon; dextrin, a chemical used to manufacture paper, 3 cents ($0.31 now) per pound; and automobile trucks valued more than $1,000 ($10,267.7 now) by 25 percent.
The “chicken tax” on light trucks remains in force. This has led to a cat-and-mouse game between foreign manufacturers trying to access US markets, and regulators. Manufacturers tried to build models that could either meet specifications for passenger vehicles, or could be assembled in the US. Eventually though, Asian automakers, particularly from Japan, mostly set up factories in North America.
1982: The lumber war between the US and Canada
The US was convinced that it could see the wood for the trees, as it battled Canada over softwood lumber.
The root of the conflict was the fact that Canada grows and harvests lumber from public land, with prices determined by the government. On the other hand, the US harvests lumber from privately owned lots.
In 1982, the US argued that Canada was unfairly subsidising its softwood lumber, which led to several rounds of conflict, tariffs and retaliatory tariffs.
The lumber war continues. Canadian lumber faces an existing 14 percent tariff in the US, even before Trump’s threat to add 25 percent more.
The US imports almost half of its wood products from Canada, according to the Observatory of Economic Complexity.
1987: Tariffs on Japanese automobiles
In 1987, President Ronald Reagan imposed 100 percent tariffs on $300m worth of Japanese imports, affecting, in particular, automobiles from the East Asian nation.
The Reagan administration said it had imposed these tariffs as a result of Tokyo reneging on the terms of a 1986 semiconductor trade agreement with Washington. The agreement asked Japan to open its market to exports of computer semiconductors made by the US.
Japan did not retaliate. “Hoping to prevent this issue from causing severe damage to the world’s free-trading system, the Japanese government has decided, from this broader perspective, not to take any retaliatory measures immediately,” Japan’s international trade minister, Hajime Tamura, told the press.
Things soured for the Japanese economy, the value of the yen appreciated and exports dropped. In the 1990s, Japan fell into a recession which ended in 2002.
Prior to the tariffs, the US had a massive trade deficit with Japan. In 1986, the deficit was about $55bn. The deficit dropped slightly, to under $52bn in 1988 and $43bn in 1991. The deficit has since fluctuated, rising in recent times. In 2023 it stood at $72bn.
1993: Banana split
In 1993, soon after the EU was formed, the bloc placed tariffs on bananas from Latin American countries to give small farmers in its former Caribbean and African colonies an upper hand in the market.
The US argued that this went against the rules of free trade. Its interest? Most banana plantations in Latin America were owned by American companies whose profits were at risk.
The US filed eight separate complaints with the World Trade Organization (WTO), an international body that oversees trade between countries. In the first case filed in 1997, the WTO ruled in favour of the US. The WTO then consistently ruled against the EU.
While the EU said that it was lowering the tariffs, the US argued that fair trade had not been restored. In retaliation, the US imposed 100 percent tariffs on European products such as Scottish cashmere or French cheese. It was bananas for brie.
The resolution began with the Geneva Banana Agreement in December 2009, agreed upon by the US, EU and 10 Latin American countries. It called for tariffs on bananas from Latin American countries to be reduced from 148 euros per tonne to 114 euros per tonne by 2017.
In 2012, the EU signed an agreement with the Latin American countries to formally end the WTO cases. The Latin American countries were Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama and Venezuela.
2002: Steel war with Europe
To boost the American steel industry, President George W Bush places tariffs ranging from 8 to 30 percent on steel from foreign countries. Mexico and Canada were exempt from this, but it hit Europe.
Imports of steel from countries affected by Bush’s tariff targets plummeted by about 28 percent on average in 2002, and a further 37 percent by 2003, according to an analysis by the French research institute Centre d’Etudes Prospectives et d’Informations Internationales (CEPII). However, the US started importing more steel from countries that the tariffs were not targeting. Overall, US steel imports grew by 3 percent in the 12 months after the tariff was imposed.
These tariffs affected the US steel industry. Some smaller steel companies either went bankrupt or were acquired by larger ones.
In retaliation, Europe threatened tariffs on a range of American products worth $2.2bn (about $3.85bn now), ranging from oranges from Florida to Harley Davidson motorbikes. Days before Europe would have imposed these tariffs, Bush lifted the steel tariffs in 2003.
2018: Trump’s first tariff war
Trump’s first term as president was from 2016 to 2020.
In January 2018, he introduced tariffs on all solar panels and washing machines. While the tariffs didn’t differentiate between the source country of these products, China is the world’s largest manufacturer of solar panels. In June 2018, Trump imposed 25 percent tariffs on more than 800 products from China.
In between, in April 2018, Beijing responded with a retaliatory 178.6 percent tariff on sorghum from the US. These tariffs were removed in May 2018. China also imposed 25 percent tariffs on 128 US products including soybeans and aeroplanes.
That year, Trump also slapped a 25 percent tariff on steel, and a 10 percent tariff on aluminium, from Canada, Mexico and EU countries.
Like China, other targeted countries also hit back.
Canada placed 25 percent tariffs and 10 percent tariffs on a range of products coming in from the US. From the summer of 2019 into 2020, the US and China imposed multiple tariffs on each other, while trying to negotiate an end to their dispute. China lost its position as the top trade partner of the US to Mexico in 2019. After negotiations between the US and China, a truce was announced in January 2020.
