Consumers in the US benefit from customs duty rates of nearly a third lower than the global average, saving them significant amounts of money, according to a new study by UHY, the international accounting and consultancy network.
UHY found that customs duties in the US are, on average, just 1.3% of the total value of imported goods. The global average is 1.8 percent of the total value of imported goods*.
This means that consumers in the US typically pay comparatively lower prices for goods than consumers in many other parts of the world – including many emerging economies - where costs are pushed up by higher import taxes.
UHY studied customs duties levied by 22 major economies around the world as a percentage of the total value of their imports, as a simple indicator of the impact of a country’s trade barriers.
UHY points out that many regional trade blocs – and in particular NAFTA and the EU - help to keep import tariffs low. Other multi-lateral trade agreements are also under pressure.
For example, the US has signalled it wants to renegotiate the North American Free Trade Agreement (NAFTA) and has abandoned the Trans Pacific Partnership (TPP), throwing the future of both into doubt.
Eric Hananel, of UHY’s US member firm UHY Advisors, comments: “The US’s consumers are enjoying comparatively low goods costs thanks to a light customs duty burden – something the government should be keen to protect.”
“That can be increasingly challenging as globalization comes up against growing protectionism on the part of some other global economies.”
“Maintaining lower import tariffs could actually protect home-grown industries, by adding extra impetus to efforts to stimulate competitiveness and drive innovation. By contrast higher tariffs can significantly distort economies.”
Hananel adds: “Free Trade Agreements are becoming an increasing critical – as well as contentious – policy area.”
“As protectionist moves on the part of some governments are putting some Free Trade Agreements under review, other countries are embracing them with as much enthusiasm as ever, if not more.”
The US is party to 14 reciprocal free trade agreements with 20 countries including Australia, Israel, and South Korea. Additionally, the US has over 250 Foreign-Trade Zones (FTZ) which are equivalent to international free-trade zones, and they are located in all 50 states. Items transported to these zones are exempt from customs duties and can be stored, assembled, used in manufacturing or assembly.
In the US, where protectionism has been rising up the political agenda, raising the possibility that higher import duties may be levied, customs duties are currently worth just 1.3% of the value of imported goods. This compares to 1.8% in China.
Eric Hananel continues: “President Trump is a strong advocate of protectionism and made international trade agreements an election campaign issue. He has softened his stance on NAFTA and has indicated that he will look to renegotiate the deal instead of outright withdrawal.”
In the UK, where Brexit is also creating uncertainty over the future of UK trade deals, customs duties are currently just 0.5% of the value of imports.
European countries generally impose comparatively low rates - the European average is 0.4% - so British consumers could be at a significant disadvantage if the UK fails to keep duties at a similar level on leaving the EU.
Bangladesh has the highest customs duties as a proportion of total imports of any country in the study at 12.1%.
Amount of customs duties collected as a percentage of the value of total imports
*Based on World Bank data – 2015, most recent available year
**Russian Federation Federal Statistics Service, 2015
You're Invited! Not-For-Profit CFOShare
Tuesday December 10, 2019
4:00 PM - 6:00 PM
You're Invited! Annual Accounting & Business Conference
Wednesday December 4 2019
Hosted at the MSU Management Education Center in Troy, MI
You're Invited! Construction Update
Thursday November 21, 2019
Detriot Athletic Club
241 Madison Avenue
Detriot, MI 48226