Some of the biggest US tariff revenues come from sweaters

Yours too.
Yours too.
Image: Reuters/Regis Duvignau
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When Americans layer up, they often do so with a sweater made in another country. The US imported almost $14 billion dollars of sweaters in 2017, mostly from China, Vietnam, Indonesia, and Central America.

These imported sweaters, ugly and otherwise, are cheap, warm and probably bad for the environment. They are also a big source of revenue for the US government, which in 2017 charged more than $2.1 billion in import taxes on foreign-made sweaters as they entered the country. After personal cars, that made sweaters the US’s second most-taxed import product.

Overall, the US took in almost $36 billion in import customs duties and fees (also known as tariffs), accounting for just over 1% of all US federal government revenue. This is more than the US gets in revenue from the estate tax, and similar to the amount collected from the federal gas tax. The share of revenue from tariffs fell considerably after the US signed the North American Free Trade Agreement (NAFTA).

It’s not just because the US imports a ton of sweaters that the government generates so much revenue from the product; it’s also because they are taxed at the border at an unusually high rate. The US charges around 16% in taxes on most sweaters passing through the border—though some countries, like Mexico and Honduras, get a lower rate that was negotiated as part of a trade deal. There are very few other products taxed at such a high rate. The US instituted the tariffs decades ago to protect the US’s once large and still politically powerful textile industry.

The table below shows the 10 product categories the US government received the most revenue from in 2017. The item groupings, based on categories from official tariff schedules, may seem weird. That is because they are weird—for example, knitted and crocheted dresses are in a different category than dresses that were not knitted. These sometimes minute differences are a result of negotiations in which a country might have felt the need to protect a very specific piece of an industry.

* Based on 4-digit harmonized tariff schedule code.

New protectionist measures from US president Donald Trump may shake this list up. Trump recently slapped a 25% tariff on steel and a 10% tariff on aluminum. Even though many of the countries from which the US imports its steel and aluminum were excluded from the new taxes, the share of tariff revenue from these products, now small, is set to explode. Trump says he also plans to increase tariffs on a wide variety of Chinese products, which have yet to be announced.

The new import taxes will not amount to free money for the US. The tariffs will make these imports more expensive for American consumers and businesses. They should be considered indirect taxes on the people and businesses that currently buy these products. Meanwhile, US companies that produce the newly protected products benefit most, along with their employees, from such policies.