Ranking: Harmful tariffs by economy

Download the Sustainable Trade Index for free.

Ranking: Harmful tariffs by economy

Amid supply chain concerns and geopolitical tensions, some economies have taken steps toward localization. More specifically, companies are bringing production back home and a number of governments have increased tariffs.

This chart from the Hinrich Foundation, the second in a five-part series on trade sustainability, examines which economies have the highest and which have the lowest tariffs. It pulls data from the 2022 Sustainable Trade Index created by the Hinrich Foundation in collaboration with the IMD World Competitiveness Center.

What is a tariff?

A duty is a tax on imported goods. Tariffs can be beneficial as they provide a source of government revenue and help prevent product ‘dumping’ – when exporters advertise products abroad at a lower price than they are worth in their home country. By imposing a tax on imported goods, a tariff can help keep local products competitively priced.

However, taxes on imported goods can also have disadvantages. They are a form of trade protectionism and can reduce economic growth and productivity. In fact, a long-term study found that a 3.6% increase in duty would lead to a 0.4% decline in GDP growth five years later.

Number of harmful tariffs by economy

For the purposes of this data, a harmful tariff is any tariff that discriminates against foreign commercial interests. It excludes those seized for undeniably higher motives, such as UN Security Council sanctions.

Below we highlight the number of applicable tariffs for selected economies included in the 2022 Sustainable Trade Index.

The US has by far the most tariffs, driven in part by the China-US trade war that began in 2018 25% tariff, including auto parts, furniture and semiconductors. As of August 2022, US imports from China of these products were heavily taxed 22% below pre-trade war levels. On the other hand, US imports of Chinese products, which are not subject to tariffs, were 50% higher.

Meanwhile, China retaliated with its own tariffs on US products. However, China still has a sixth of the harmful tariffs that the US has in place. In recent decades, the country’s accession to the World Trade Organization and reduced tariffs have helped it become the world’s largest trading partner.

At the other end of the scale, Hong Kong has a free trade policy. It is the only economy in the index without tariffs. Hong Kong’s economy is heavily reliant on trade and was the sixth largest trade entity for goods in 2021.

Tariffs and trade sustainability

Tariffs are a complex issue that requires governments to weigh the pros and cons. Under the Sustainable Trade Index, there is great diversity in the number of applicable tariffs.

The Sustainable Trade Index measures the ability of 30 economies to trade in ways that balance economic growth, social development and environmental protection. To learn more, visit the STI landing page where you can download the report for free.

The third part of this series will examine the geopolitical uncertainty of the economy and how this is affecting trade and society.