Tariffs 101: How They Shaped Trump’s Trade Policies and International Negotiations

In the realm of international trade policy, tariffs are among the most prominent and contentious tools wielded by governments. At their core, tariffs are taxes imposed on imported goods, usually calculated as a percentage of the product’s value when it crosses the border. While tariffs have existed for centuries, shaping the flow of commerce long before the advent of free trade agreements and global supply chains, they remain as relevant as ever. In recent years, former U.S. President Donald Trump’s enthusiastic use of tariffs as a key element of his economic strategy brought these trade duties back into the global spotlight. Understanding the nature of tariffs, their legal underpinnings, and the rationale behind their application - both in the United States and as compared to the European Union - provides a clearer picture of why Trump found them so appealing.

Understanding Tariffs in a Legal and Tax Context

From a purely legal and tax perspective, tariffs function as a form of indirect taxation. Unlike domestic sales tax or value-added tax (VAT), which consumers pay to their own government, a tariff is imposed at the border on foreign producers. This levy is then generally passed along the supply chain, potentially increasing the final retail price that consumers pay. The key objectives for imposing tariffs range from protecting domestic industries and securing revenue for the government, to using them as leverage in international negotiations and remedying what are seen as unfair trade practices.

In many jurisdictions, tariffs are authorized by overarching legislation that provides the executive branch significant discretion. In the United States, legal frameworks such as Section 232 of the Trade Expansion Act of 1962 or Section 301 of the Trade Act of 1974 allow the President to impose tariffs unilaterally if certain national security or unfair trade conditions are found. This wide latitude empowers the executive to respond quickly to perceived threats or grievances. Trump’s trade agenda often leveraged these laws to impose new tariffs, argue for their expansion, or threaten to raise them further to secure more favorable trade terms from trading partners.

Why Did Trump Embrace Tariffs So Enthusiastically?

1. Political Appeal: Tariffs resonate with voters who believe that international trade deals have eroded domestic manufacturing jobs. By imposing duties on foreign goods, especially those originating from countries with lower labor costs or differing environmental and safety standards - the administration could claim to be “putting America first.” This narrative - coupled with the visible nature of tariff measures - helped solidify Trump’s image as a defender of the domestic worker.
2. Negotiating Leverage: In Trump’s view, tariffs were a negotiation tool. By imposing punitive import taxes on goods from key trading partners, such as China, the U.S. aimed to pressure foreign governments into more favorable bilateral trade agreements. Tariffs thus served as a cudgel that the executive branch could wield without needing to secure Congressional approval for each new action. The White House often portrayed tariffs not as an end in themselves, but as a means to achieve better trade deals and more reciprocal market access.
3. Revenue Generation: While not their primary modern purpose, tariffs can still generate revenue. Historically, customs duties were a mainstay of government finances before the rise of income taxes. Though modern states now rely heavily on a broad tax base, revenue from tariffs still contributes to the U.S. Treasury. Amid complex fiscal debates, a steady stream of tariff revenue can be politically useful when justifying economic policies or balancing trade deficits.

Comparing the U.S. Approach With the EU Model

The European Union’s trade policy structure is markedly different from that of the United States. The EU, comprised of multiple member states, operates a Common External Tariff (CET) scheme applied uniformly to imports from outside its borders. Rather than each member state imposing its own tariffs, the EU negotiates as a single entity, creating a cohesive bargaining unit. Through a centralized and standardized set of rules, the EU reduces the administrative and legal complexity that might arise if each of its 27 member countries acted independently.

EU tariff policy is anchored in treaties that delegate significant authority to the European Commission. While EU member states can influence trade policy through negotiations, the day-to-day decision-making is less susceptible to sudden shifts driven by a single executive figure, as is often seen in the U.S. system. The EU approach tends to be more systematic, rule-based, and tied closely to World Trade Organization (WTO) norms, thereby limiting unilateral surges in tariff activity.

Though the EU also uses tariffs to protect strategic industries, it is more inclined toward long-term, stable trade relationships and comprehensive free trade agreements. For example, the EU has reduced tariffs significantly under trade deals with Canada (CETA) and Japan (EPA), aiming to foster complex supply chains and mutual investment rather than episodic tariff battles. This contrasts with the U.S. approach under Trump, where tariff hikes - particularly on steel and aluminum - were often abrupt and lacked a multilateral framework.

In both the U.S. and EU, tariffs can be used to respond to unfair trade practices, such as dumping or government subsidies that distort competitive neutrality. However, the EU’s response mechanisms tend to be more predictable and are frequently channeled through WTO dispute resolution processes or EU-level legal proceedings. The U.S. under Trump frequently bypassed or stretched multilateral rules, preferring direct tariffs that many critics argued were legally questionable under WTO standards.

Real-World Examples

• Steel and Aluminum Disputes (U.S. vs. EU): Under the Trump administration, the U.S. imposed tariffs on steel and aluminum imports from many countries, citing national security grounds. The EU responded with its own retaliatory measures. Legally, while the U.S. cited Section 232 of the Trade Expansion Act, the EU took the dispute to the WTO. Although not perfect, the EU approach signals a preference for resolution via internationally recognized arbitration rather than escalating tit-for-tat measures.
• Disputes Over Digital Services Taxes: Several EU member states introduced digital services taxes on large tech companies - many of them American - to address perceived tax avoidance. In response, the U.S. threatened tariffs on goods from those EU countries. This scenario exemplifies how the U.S. might use tariffs as a direct tool to force a policy concession, while the EU seeks to regulate and tax digital services through formal legislative means and WTO-compatible solutions.

Conclusion

Tariffs stand at the crossroads of economics, law, diplomacy, and domestic politics. For Trump, tariffs were not merely a dry trade instrument; they were a potent symbol of economic nationalism and a tactical weapon in global negotiations. While the EU also employs tariffs, it generally integrates them into a more stable, rules-based framework that emphasizes multilateral cooperation and long-term planning. Understanding why Trump embraced tariffs so fervently means looking beyond their economic implications. It requires recognizing the political narratives, legal authorities, and negotiating strategies that made these old-fashioned customs duties the cornerstone of a modern trade agenda.