[By Guancha Network columnist Chen Jing]
On April 2, Trump announced the "reciprocal tariff" plan, calculating the tariff increase based on America's trade deficit with all countries. Among these, China would face an additional 34% tariff on top of the current rates.
This is a reckless move. What are its motivations? What are Trump's true intentions? And how will the situation unfold after China's strong counterattack? Understanding the rise and fall of tariffs in U.S. history will provide insight into these questions.
On April 2, 2025, local time at the White House in the United States, Trump held a report on trade barriers to deliver a speech.
I. History of U.S. Tariffs
The establishment of the United States was closely linked to the issue of tariffs. The famous "Boston Tea Party" was one of the direct triggers of the War of Independence.
After Britain won the "Seven Years' War," it faced severe financial burdens. In 1767, the British Parliament passed the new Taxation Act known as the Townshend Acts targeting the North American colonies. The North American colonies launched a large-scale boycott of British goods, prompting Britain to send a large number of troops to suppress them. In 1770, the British opened fire on protesters under the pretext of protecting officials enforcing the tariff regulations, killing four people and injuring six, resulting in the "Boston Massacre."
On December 16, 1773, more than 8,000 people gathered in Boston to protest, and around 60 members of the "Sons of Liberty" disguised as Native Americans boarded the tea ships and dumped all 342 boxes of tea from three East India Company ships into the sea, marking the "Boston Tea Party." The East India Company's tea was 50% cheaper than local smugglers' tea and exempt from high import tariffs, which hit local tea production and sales, making it a target for resistance.
Boston Tea Party
Following this, Britain closed the Boston Harbor, revoked Massachusetts Bay Province's autonomy, and allowed British soldiers to search civilian homes, intensifying their rule. On April 19, 1775, the first shot of the American Revolutionary War was fired in Lexington, opposing Britain's taxation and lawmaking authority over the colonies.
It’s worth noting that both Canada and the United States had many colonists at the time; only Canada chose to remain allied with Britain and even burned the White House alongside Britain during the War of 1812. Historically, Canada has faced multiple claims of being annexed by the United States, but those who were pro-American often moved southward, weakening the forces advocating for annexation. Chinese public opinion lacks familiarity with these histories, leading to surprise at Trump's suggestion of Canada joining the United States.
After independence, tariffs were a dominant source of federal government revenue in the United States, far exceeding imagination. In the first half of the 19th century, tariffs accounted for 80%-95% of federal government revenue, making tariffs the "pillar industry" of the U.S. government.
The earliest tariff bill in the United States was signed by President Washington in 1789, being the second law since the founding of the nation. Its purpose was to generate income for the federal government while protecting domestic industries. When foreign goods arrived at American ports, federal fiscal agencies collected import duties, with detailed rates ranging from 5% to 15%. States were not authorized to set their own tariffs independently, and the Constitution stipulated that there would be no tax on the free flow of goods between states. Since then, there have been several significant tariff acts in American history.
After the founding of the country, tariffs played a crucial role for the federal government. Unlike other nations, the U.S. could be described as having established itself through tariffs. Contrary to popular belief, historically the U.S. placed great emphasis on the protective function of tariffs and did not support "free trade." The fundamental reason was that North America's manufacturing level was relatively lower compared to Europe and Britain. Founding fathers like Alexander Hamilton (the first Treasury Secretary, important political economist, but never president) concluded that manufacturing was a national security issue, particularly regarding the production of war materials.
In his "Report on Manufactures," Hamilton proposed that protective tariffs were a lever for rapid industrialization. At the time, the global focal industry was textiles, similar to today's semiconductor industry. Britain imposed a blockade on textile technology, prohibiting the export of textile machinery, machine models, and restricting the emigration of textile professionals to America, attempting to monopolize the global textile industry. Compared to handmade clothing in America, British textiles were over 30 times cheaper.
However, America already had some industrial foundation, and Britain's blockade was destined to fail—only requiring someone like Samuel Slater, who understood textile machinery, to solve the problem. In 1789, Slater sneaked out of Britain to seek opportunities in America, establishing 13 textile factories that brought the New World into the age of advanced machines represented by industrialization, becoming the "founder of the American Industrial Revolution." By 1809, the U.S. had 62 textile factories. The new machinery significantly increased productivity in American textile production, although costs were still higher than British products, tariff policies provided early protection.
Tariff policies have been a pillar policy for America's industrial development since early on. For instance, in the early 19th century, American merchant ships enjoyed a 10% tariff discount on imported goods to support American commercial shipping.
Tariff policy differences were also a significant root cause of the Civil War. The North developed manufacturing and advocated for high tariffs, while the South relied on cotton exports and advocated for low tariffs and free trade. The controversial "Tariff of Abominations" passed in 1828 raised average tariff rates to 25%, increasing key industrial items such as steel and textiles to 25%, with actual cotton textile tariffs reaching 71%.
This more reflected the needs of Northern steel and textile industries, targeting mainly European and British cheap goods competition, while Southern plantation owners suffered severely from reduced export revenues and skyrocketing import prices. This led to the outbreak of Southern tensions. For example, South Carolina nullified the 1828 tariff act and threatened to secede from the Union. The Civil War was the result of various accumulated contradictions.
Average effective tariffs of the United States, the United Kingdom, and France, 1830-2010
Under Northern dominance, the U.S. reached its historical peak tariff rate of over 50% in the 1830s. Subsequently, there was a somewhat dramatic change, with tariffs dropping to 10%-20%.
At that time, the Democratic Party had its base in the South (after the Civil War, it moved to the North, switching homes with the Republican Party), holding an advantage in Congress. In 1830 and 1832, two tariff rate reductions were made. Europe experienced prolonged peace after the Napoleonic Wars, with the rise of free trade ideology, which influenced the U.S. as well. In 1837, the U.S. faced a severe economic crisis, necessitating tariff reduction to promote trade. Lowering tariffs also boosted tariff revenues; for instance, in 1855, when the tariff rate was lowered to 20%, revenues doubled compared to ten years prior, reaching $53 million. Newly added states in the Midwest also benefited from agricultural exports and inclined toward free trade, supporting tariff reductions.
The Republican Party (called Whigs from 1832-1852) continued to advocate for high tariffs due to industrial self-development needs. After winning the 1840 election and controlling Congress, they raised tariffs again in 1842. In 1846, Democrats regained control of Congress and lowered tariffs to 25%. Overall, it was a tug-of-war, but Democrats controlled more before the Civil War. In 1857, Democrats and the nonpartisan coalition reduced tariffs to 15%.
The turning point came with the arrival of the Civil War (1861-1865). When some Southern states declared secession, Southern senators left. Northern-controlled Congress immediately raised tariffs, later passing the 1864 Tariff Act, which increased the average tariff rate to 47.56%. The purpose of the act was to fund war expenses, protect Northern industries, and provide railroad subsidies. President Lincoln declared: "Give us a protective tariff, and we will have the greatest nation in the world."
From an economic perspective, the Civil War was a struggle over the direction of American industry and tariffs. The outcome was that the protectionist North defeated the free trade South. Thereafter, the U.S. entered a long period of high tariffs compared to Europe, where the free trade ideology and practice continued to develop.
After the war, U.S. tariffs decreased somewhat but remained at a high level. At this time, Republicans controlled the situation, with some Democrats moving to the Northeast and shifting to support high tariffs. However, Democrats generally supported free trade and low tariffs on the grounds of "damaging consumer interests" and "promoting international trade and economic growth." During the 1880-1900 internal tariff struggles in the U.S., Cleveland of the Democrats and McKinley of the Republicans were representative figures.
Cleveland was elected president twice in 1884 and 1892, with one term in between, and he was the only president before Trump to serve non-consecutive terms. Under Cleveland's strong push, U.S. tariffs decreased somewhat in the 1890s.
McKinley was elected president in 1896 and 1900 (he died in office in September 1901). He inherited the Republican tradition, strongly supporting trade protectionism to protect emerging industries and manufacturing from foreign competition. Protectionism was McKinley's hallmark stance, making him a famous advocate of high tariffs in American history.
Because of this history, Trump holds McKinley in high regard. After taking office in 2025, he immediately signed a decree renaming Alaska's highest peak as "Mount McKinley." Trump called McKinley the "King of Tariffs," evaluating him in his inaugural speech: "President McKinley made our country very wealthy through tariffs and wit; he was a born businessman who provided funding for many of Theodore Roosevelt's great achievements."
Average effective tariffs in the U.S., 1890-2025
The history of U.S. tariffs before 1900 is relatively obscure, and Chinese public opinion lacks clarity about the origins of Trump's tariff stance. They tend to believe, based on impressions, that the U.S. traditionally supports low-tariff free trade. After entering the 20th century, this indeed became the case, but there was once a noticeable increase in tariffs.
After Theodore Roosevelt became vice president following McKinley's assassination, U.S. tariffs continuously dropped to 6%. The fundamental reason was that after decades of development, the U.S. had become the most efficient manufacturer globally. Cheap American manufactured goods impacted Britain and continental Europe, even during Cleveland's era, making the call for free trade quite reasonable, which is why McKinley needed to counteract with intense protectionist policies. In 1900, U.S. steel production reached 11.4 million tons, accounting for 43% of the world total; only now, with China's massive capacity exceeding 1 billion tons, can it compare.
Even after becoming the global "manufacturing king," the U.S. still had manufacturers and unions demanding high tariffs. However, lowering tariffs better aligned with American competitive advantages, even causing splits within the Republican Party. After more than a decade of tugging, U.S. tariffs fell to a low point of 6% in 1920. One factor was that the U.S. profited greatly from the "war profits" during the outbreak of World War I in 1914, making tariffs seem less important.
In 1922, Republicans won the general election again, and tariffs began to rise. Even during the U.S.'s period of global trade dominance, the tradition of protectionism remained deeply ingrained, repeatedly becoming a focal point in elections. However, after the Great Depression erupted in 1929, this tradition encountered major problems.
From today's perspective, the causes of the Great Depression are complex, but it is impossible to attribute it to low tariffs leading to foreign product impacts. In April 1929, before the Great Depression began, Senators Smoot and Hawley proposed increasing tariffs on European agricultural products to protect American agriculture. Just like now, many politicians started adding protectionist clauses, which was a routine behavior.
On October 24, 1929, the stock market crashed, officially starting the Great Depression, with unemployment soaring and social atmosphere gloomy. American politicians needed scapegoats. After the bill passed Congress, on June 17, 1930, despite over a thousand economists jointly pleading, Hoover, driven by political atmosphere, signed the Smoot-Hawley Tariff Act, imposing high tariffs on thousands of foreign products. Canada and European countries retaliated by increasing tariffs on American products. In 1933, U.S. exports were only $2.1 billion, down 61% from $5.4 billion in 1929. Global trade volumes also plummeted, with a 66% decline in total global trade from 1929 to 1934.
Some analyses suggest that the Great Depression might not have been so severe initially, with the Dow Jones index not falling significantly. After the crazy tariff bill was enacted, the Dow Jones collapsed, losing nearly 90%, and tariff policies were considered one of the causes of the Great Depression. Whether global trade and U.S. trade significantly declined as a result of the Great Depression or were a cause of it is unclear. I tend to think that global trade volumes at the time were not high, accounting for approximately 9% of global GDP, much lower than the current 30%, and should not have been a cause of the Great Depression.
Smoot-Hawley Tariff Act initiators Reed Smoot (left) and Willis C. Hawley (right)
However, regardless, drastically increasing tariffs to blame other countries for domestic economic crises was certainly an erroneous action. Franklin D. Roosevelt was elected president in 1932 and, in 1934, passed the Reciprocal Trade Agreements Act (the aforementioned Reciprocal Trade Agreements Act), ending the adverse effects of the Smoot-Hawley Act. From then on, U.S. tariffs entered the longest period of decline in history, with average effective tariffs dropping to an extremely low 2% by the 21st century. It wasn't until Trump's drastic tariff increases in 2025 that they significantly rose again.
Roosevelt's tariff reduction was the right direction, negotiating with other countries to open markets rather than setting obstacles. It's worth noting that this event left behind an administrative procedure tradition: Congress authorizing the president to negotiate tariffs with foreign countries. Tariffs are very important policies for the U.S. government, requiring congressional approval and presidential signature in the form of a bill, as it always has been. But Roosevelt's administration faced an urgent situation and needed to transfer tariff decision-making power from Congress to the executive branch to improve efficiency.
Roosevelt couldn't have foreseen that this would leave Trump a huge loophole; he just needs to declare a state of emergency to impose tariff threats arbitrarily. In the U.S. system, presidential power can be large or small, limited too much, making it difficult to raise funds. Tariffs became Trump's favorite big move, an unfortunate historical legacy. Trump distorted the meaning of "Reciprocal" (mutual, reciprocal), claiming that other countries' surpluses with the U.S. were equivalent to tariffs, which was an economic farce.
After World War II, U.S. effective tariffs repeatedly decreased, leading to a major development in global trade, which was the correct historical direction. Free trade allows win-win outcomes between nations, mutually beneficial. The WTO (and its predecessor GATT) practices also include care for poorer countries, which are good principles.
For quite a long time after World War II, the U.S. manufacturing prowess dominated the globe. The U.S. became the biggest promoter of global free trade, urging other countries to open markets equally to help its companies expand markets. During this period, even the Republican Party didn't consider tariffs a major issue; instead, global affairs related to the dollar, finance, and military were more important. The U.S. occasionally imposed tariffs on certain countries, but these were usually for political reasons, not economic considerations.
The development of the global economy far exceeded the scenarios anticipated by historical U.S. tariff practices. During the golden development phase after 2000, globalization peaked, and tariffs seemed like a historical leftover issue, expected to decrease further under WTO principles. Multiple rounds of WTO negotiations were extremely challenging, but mainly involved poorer countries striving to retain high tariff powers, with developed countries preaching free trade from a lofty position.
The U.S. government's renewed focus on tariffs stemmed from two factors: globalization-induced manufacturing offshoring and China's rise, with the latter being more critical. Starting in the 1980s, the U.S. began a comprehensive shift toward finance and services, with low-profit manufacturing migrating overseas with globalization. After 2000, offshoring accelerated, with China taking over much of the manufacturing business for U.S. companies. China developed its manufacturing industry with unprecedented intensity and speed, surpassing the U.S. in manufacturing output in 2010 and widening the gap significantly.
By the time Trump took office in 2016, he began facing these two issues but hadn’t figured out how to address them. Ultimately, he merely imposed clear tariffs on Chinese goods, with many exemptions. After Biden took office, he didn't engage in a tariff war with China; exemptions continued, and trade conflicts didn't escalate further, though competition in the high-tech sector intensified. In 2024, the U.S. average effective tariff rate was only 2.5%, though not historically the lowest, it was still a relatively low figure.
II. Trump's Tariff War Psychology
Understanding U.S. tariff history makes many of Trump's tariff motivations easier to comprehend. They are largely rooted in history, combined with Trump's habitual use of "extreme pressure" tactics, making his goals very clear.
Historically, one of Trump's main purposes for imposing tariffs was to increase government revenue. In the early days of U.S. independence, tariffs were even the primary source of federal government revenue. If Trump were to raise average effective tariffs to over 20%, based on the $4.11 trillion in imports in 2024, the "gross profit" should be around $800 billion. Considering factors such as negotiation reductions, exemptions for essential goods, and interest group exemptions, this amount would decrease significantly, but there would still be tens of billions of dollars in tariff revenue to consider.
If judged solely by intuition, we might easily assume that U.S. tariff revenue isn't significant, which is because the U.S. government hasn't relied on tariffs for many years. Combining this with the previous history, we can look at the evolution of U.S. government revenue. In the first half of the 19th century, tariffs were a pillar of income. During the Civil War in 1862, expenditures surged, consumption taxes became another important source, and personal income taxes began to be levied (shown in dark blue in the chart), but tariffs remained a major source of income for many years.
Entering the 20th century, personal income tax gradually became the largest source of U.S. government revenue. In 1935, social security contributions began, and corporate income taxes also increased. Tariff rates decreased, and its proportion in government revenue gradually diminished to negligible levels.
In 1924, tariffs accounted for 16.8% of U.S. government revenue, dropping to 1.3% by 1975, with a total of $3.676 billion. In 2024, U.S. government tariff revenue was $83.8 billion, accounting for 1.6%. Although the proportion is low, it was only $33 billion in 2017, and tariffs have increased significantly in recent years, seemingly "having potential."
If Trump raised effective tariffs significantly, even to 10% across the board, there could be $400 billion in revenue, which would be a good supplement for the strained treasury.
Trump's other motivation, and perhaps his greatest goal, was to return to the high-tariff protectionist tradition represented by McKinley historically, promoting the development of American manufacturing. This isn't something Trump invented but rather a historical tradition of the Republican Party. Trump intuitively believed that raising tariffs could both increase fiscal revenue and bring manufacturing back. Including tax cuts to help businesses operate, these were development experiences in American history.
Trump also had a tactical motivation, using tariffs as a weapon of "extreme pressure." He had tried this in his previous term, launching a full-scale offensive this time. Shortly after taking office, he initiated tariff threats against Canada, Europe, BRICS countries, and others.
On April 2, Trump unveiled a fabricated "reciprocal tariff" table, calculating tariffs based on a country's surplus with the U.S. divided by its exports. This is a typical "extreme pressure" move, and the formula makes economists cringe, substituting concepts for international ridicule, but Trump was already bullying, long having abandoned such decorum, using it as an extortion tool.
The calculation formula released by the Office of the U.S. Trade Representative (note: the U.S. Trade Representative gave coefficients ε and φ values of 4 and 0.25 respectively, so their product is 1, which can simplify the expression to, composite tax rate = U.S. exports - U.S. imports / U.S. imports.) U.S. Trade Representative website
Starting in 2018, Trump began a trade war and tariff war with China, believing it to be a successful operation. On January 15, 2020, the first phase of the U.S.-China economic and trade agreement was signed in the U.S., with China agreeing to some conditions in areas such as intellectual property protection, technology transfer, and the opening of financial service markets, as well as committing to purchasing an additional $200 billion worth of U.S. products and services over two years. China's intention was to stabilize expectations through deepening cooperation in the economic and trade field, consistent with previous approaches, except for the larger amount. Trump would view this as extreme pressure working and a successful experience.
Originally, Trump planned to hold onto these major achievements, secure re-election, and then expand the tariff war globally. But fate didn't favor him; the pandemic left Trump in a very awkward situation, filled with shame and anger, and ultimately ruined his re-election bid.
In 2025, Trump made a comeback, unleashing the "extreme pressure" weapon again, threatening to impose tariffs on many countries. This kind of pressure worked for smaller countries multiple times, with Panama and Colombia caving in. This time, Vietnam was slapped with a 46% tariff and quickly communicated to offer zero tariffs to the U.S.; Trump tweeted declaring victory, both considered successful examples of extreme pressure.
In the "North American Tariff Civil War" with Canada and Mexico, Trump generally controlled the situation, but it was more complicated. Canada has a long and deep relationship with the U.S., with plenty of fighting experience, making it hard to deal with. Trump admitted it was tough. Trump used the excuse of combating fentanyl and illegal immigration to announce 25% tariffs on Canada and Mexico, later delaying, canceling the tariff increase, and giving time for negotiation. Through repeated operations, Trump gradually negotiated some compromises from Canada and Mexico, which can be considered a "win."
Trump used the fentanyl issue to impose two 10% tariff increases on China, but neither caused a significant reaction. China only imposed tariffs on some U.S. products in retaliation, mainly to clarify its position on drug issues.
Market reactions to these moves were minimal; the U.S. stock market even hit a record high in mid-February.
Through a series of tariff operations, Trump considered himself a "natural winner." Those around him blindly praised him, claiming 50 wins in 50 days, winning big. Thus, Trump became incredibly confident and, on April 2, declared a "Liberation Day," unveiling an extreme tariff plan to extort globally!
Trump believed that the subsequent script would follow what Treasury Secretary Bechtent said:各国 would rush to compromise with the U.S. government as soon as possible, and then Trump would reduce some pressure, observing how to extract more oil. Many countries indeed intended to do so.
But what happened next was unexpected by Trump. The U.S. stock market plunged for two consecutive days, with indexes falling about 10%, wiping out $6.4 trillion in market value. On April 4, China announced strong countermeasures, firing 11 arrows, imposing a 34% tariff on all U.S. goods, causing the stock market to plummet again that day.
In my view, this is exactly the countermeasure opportunity China has been waiting for, and the timing is ripe.
III. China's Tariff Counterattack
From the U.S. tariff history, we can also analyze the confidence behind China's strong counteroffensive against the U.S.
Trump has played all his cards in tariffs, crazily extorting the world. This is when he is weakest, and it is the best time for a counteroffensive.
I believe that Trump's mistake in the rhythm of "always winning in the tariff war" was overconfidence. Hoover became one of the worst presidents in U.S. history because of bad luck during the Great Depression. However, Hoover agreed to impose heavy tariffs on the globe in 1930, driven by domestic political pressure and making a wrong choice. But Trump, in 2025, unilaterally triggered a global black swan event in the economy, being overly ambitious to start a trade war, and became crazed.
Since 2018, China has been seriously preparing for the fight against the U.S. During this process, the U.S. kept making moves, and China basically figured out the套路. However, Trump's "Liberation Day" action on April 2, 2025, had no serious follow-up plans, wanting to follow the old套路, waiting for other countries to compromise. China's strong counteraction was completely unexpected by Trump and was an ultimate kill that the U.S. found difficult to handle.
The fundamental reason for America's weakness is the decline of its manufacturing sector. Increasing tariffs can promote the development of American manufacturing, but it's just an empty idea without understanding the actual operation of enterprises. Trump lacked a complete set of measures to develop American manufacturing, worse than Biden's mature system supported by think tanks.
Balaji Srinivasan is a renowned Indian-American Silicon Valley investor, serial entrepreneur, technical expert, and futurist whose thoughts and views have considerable influence in the tech industry. He commented that one symptom of America's deindustrialization is that many commentators have never actually managed physical enterprises.
The above image shows the sources of parts for American car production, with most cars heavily dependent on foreign supply. A U.S. company importing $1 million worth of parts and selling the product for $1.2 million, with a gross profit of $200,000. Facing a 30% import tariff, it wouldn't move to local production because "it's like being asked to plant a maple tree just to get a little maple syrup" and "building a screw factory is much more expensive than paying high tariffs for foreign screws." In this situation, companies will respond in two ways: first, selecting $750,000 worth of cheaper components and still selling the product for $1.2 million, hoping users accept it; second, paying $300,000 in tariffs but selling the product for $1.5 million, hoping to sell it, and borrowing money to pay the tariff beforehand.
During McKinley's era, the U.S. had the most efficient workforce and industrial development system globally, and advocating for high tariffs to develop manufacturing made sense. Now, American workers are highly inefficient, and tariffs cannot solve this problem. Trump thought he could emulate McKinley, but this is akin to "cutting the boat to find the sword" and "imitating clumsily."
China's counterattack also rests on the world's strongest manufacturing strength, providing backbone for tariff hikes and ensuring merchants don't compromise and the renminbi doesn't depreciate.
After multiple rounds of U.S. tariff impacts, local Chinese merchants have formed a consensus: to increase prices in response to U.S. tariffs. U.S. buyers demand that Chinese sellers bear the extra tariffs, but Chinese merchants distribute the burden evenly, leaving no room for compromise. If Trump adds a 54% tariff, U.S. buyers ask Chinese sellers to shoulder half, so sellers raise prices by 27%; if sellers take it all, prices go up by 54%. There are no competitors for Chinese manufacturing globally, it's all internal competition. U.S. buyers can choose any supplier they want, and if they can find suppliers abroad, they would have done so already. Canceling orders isn't an option either; no loss-making business can be done.
Many U.S. and foreign-funded enterprises produce in China and export to the U.S., and their businesses are affected by tariffs, with Apple being the most impacted. These enterprises only produce in China; how they pay extra tariffs and negotiate exemptions are unrelated to China. If these enterprises wish to relocate production lines, after years of practice, the situation has become clear—it's not as simple as imagined. Even if they resolve to relocate, they need cooperation from China's supply chain. Trump won't wait; he needs answers now.
In 2018, when Trump imposed tariffs on China, the renminbi depreciated, effectively lowering the prices of all goods for the U.S. market, reducing the pressure on