A History of U.S. Tariffs: Quantifying Strategic Trade-Offs in Tariff Policy Design

Enrique Martínez García () and Michael Sposi

No 2529, Working Papers from Federal Reserve Bank of Dallas

Abstract: U.S. tariff policy has historically balanced competing goals—revenue, protection and reciprocity. Policy priorities have shifted over time in response to changing economic and political conditions. Using a calibrated general equilibrium model, we illustrate these trade-offs through the lens of tariff Laffer curves. A 70 percent tariff maximizes U.S. revenue only in the absence of retaliation; this optimum falls to 30 percent with reciprocal tariffs. A unilateral 25 percent tariff delivers the largest domestic consumption gains through favorable terms-of-trade effects, though these gains vanish under retaliation. Simulations also show that multilateral retaliatory tariffs can partially offset losses for Mexico and Canada—unless escalation triggers broader trade conflict. The 2018–19 tariff war further illustrates how targeted tariffs distort relative prices and cross-border resource allocation.

Keywords: tariff policy; terms of trade; optimal tariffs; Tariff Laffer Curve; general equilibrium models; U.S. trade history (search for similar items in EconPapers)
JEL-codes: C68 F13 F14 F15 F51 H20 (search for similar items in EconPapers)
Pages: 41
Date: 2025-08-05
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DOI: 10.24149/wp2529

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