Tariffs and Price-Fixing Conspiracies

Introduction

In the first days of his second administration, Donald Trump announced a series of steep tariffs on goods imported into the United States. Trump’s tariffs take two forms. First, some are country-specific, with goods from nations including Bolivia, Iceland, and Nigeria facing a 15% tariff, while goods from Sri Lanka, Taiwan and Vietnam are levied with a 20% tariff. 1 While high, these tariffs are lower than those imposed on Brazilian goods, upon which Trump levied a 50% tariff. These tariffs, however, are subject to change based on whims or negotiation. In September 2025, Trump set a new 30% baseline tariff on Chinese imports, down from the 145% tariff imposed briefly in April 2025. Second, other tariffs are sector specific. For example, Trump announced tariffs of 25% on automobiles and auto parts, heavy-duty trucks, cabinets, and upholstered furniture, 50% on copper parts and on steel and aluminum, and 100% on pharmaceuticals. While Trump’s tariffs have been wildly sporadic, overall American tariffs are at their highest level since 1934.

In addition to angering America’s trading partners, the tariffs have frustrated American consumers already worried about inflation. Despite Trump and his officials denying this economic truth, a tariff is a tax on consumption that increases consumer prices. Although importing firms may absorb some of the assessed levy, tariffs generally have an inflationary effect.

This Essay explores a less appreciated mechanism by which tariffs increase prices: facilitating the creation and maintenance of illegal price-fixing conspiracies. Tariffs can lead to industrial cartels that long outlast tariffs and trade wars. This insight is not novel, just neglected.2 Because the lessons of history have been forgotten, it is important to remind new generations of policymakers and voters how tariffs can spawn and reinforce anti-consumer collusion by businesses.

It is tempting to think that when tariffs are eliminated, prices will necessarily return to their lower pre-tariff levels. When tariffs are temporary, it may seem that their price-increasing effects will lapse as soon as the tariffs are rescinded. This Essay challenges this conventional wisdom by explaining how tariffs can raise prices in the long term by encouraging and stabilizing price-fixing activity that can continue after the tariffs have been lifted. Thus, tariff-induced higher prices can last much longer than the tariffs themselves.

This Essay proceeds in five parts. Part I presents the economic theory explaining how tariffs facilitate and strengthen price-fixing cartels. Part II briefly examines the historical role of tariff policy in framing the debates over federal antitrust laws. Part III examines how actual price fixers have used and manipulated tariff policy and shows that, in addition to facilitating domestic cartels, domestic tariffs help create and stabilize international cartels. Part IV shows how Trump’s tariff hikes could facilitate price-fixing conspiracies in the future. Part V offers policy prescriptions to ensure competitive markets moving forward.

I.  The Relationship Between Tariffs and Price-Fixing Cartels

The economics of price fixing are straightforward. Instead of competing against each other to attract buyers by offering lower prices, rival firms maximize their collective profits by conspiring to raise their prices above competitive levels. All consumers are harmed—some are priced out of the market while those who purchase the product are forced to pay an inflated price.

Fortunately, price-fixing conspiracies may be unstable when their price increases encourage market entry by new firms. New entry increases supply and puts downward pressure on prices. Foreign sellers can be particularly destabilizing for a domestic cartel because foreign production may be able to supply the entire American demand several times over. Foreign competition can effectively terminate an otherwise successful domestic cartel—to the benefit of American consumers and the detriment of price fixers.

Many price-fixing conspirators erect barriers to entry, which are designed to prevent new firms from undermining the cartel’s fixed price. For domestic cartels fearing foreign competition, tariffs are a particularly effective barrier to market entry.3  A tariff is a government-imposed tax on imports. Tariffs have the purpose and effect of raising the price of imported goods, making them relatively more expensive than domestically produced goods. This benefits price-fixing conspirators in a tariff-protected market because their higher price in that market will not invite entry from foreign firms, who will have to charge a higher price to pay the tariff.

Tariffs thereby reduce the ability of foreign suppliers to price discipline domestic sellers.4  Tariffs provide a margin for price-fixing firms to raise prices in their home markets without foreign firms being able to undercut the cartel-fixed price.5  If conspirators raise prices by an amount greater than tariffs (and shipping costs), then they may lose sales to foreign sellers.6 But as long as the conspirators’ price hikes are less than tariff levels, tariffs prevent foreign suppliers from acting as an effective check on domestic cartels. Tariffs provide a price umbrella for domestic collusion by giving American firms—including monopolists and cartels—the ability to charge supracompetitive prices without losing sales to foreign suppliers.7

Although imposing tariffs and price fixing are conceptually distinct, they can have similar anti-consumer effects. As both actions necessarily raise consumer prices, tariffs and price-fixing conspiracies can operate in tandem to elevate prices above competitive levels.8 Tariffs and price fixing have long been dual obstacles to America having truly free markets.9 Mid-century economists noted that “[t]here is a close structural interrelationship between protective tariffs and international cartels.” Cartel historians George Stocking and Myron Watkins noted that “a protective tariff is a standing invitation to monopoly or restraint of trade in domestic industry.”10

Recognizing these market dynamics, domestic firms are incentivized to enter into price-fixing conspiracies when the federal government imposes tariffs.11 Historically, domestic price-fixing cartels—fashioned as “trusts” in the late 1800s—benefitted significantly when American lawmakers impose high tariffs on their industries. Part II discusses how politicians in the early antitrust era appreciated the relationship between trusts and tariffs.

II.  Enacting Antitrust Law in the Shadow of Tariffs

During the late nineteenth century, myriad trusts controlled the trade in many important commodities, including petroleum, sugar, salt, beef, and rope. American consumers suffered as output decreased and prices rose. In theory, foreign competition could have price disciplined these domestic cartels by entering the U.S. market and driving down prices whenever the trusts raised prices above competitive levels.

Some trusts, however, exploited their political leverage to lobby Congress to impose tariffs that blocked foreign competition. For example, in the late 1800s, congressional sugar tariffs effectively raised the price that firms in the American sugar trust could charge without facing foreign competition.12 Because a tariff provides a price umbrella, the American cartel could overcharge consumers by any amount up to the tariff level and foreign firms could not economically enter the U.S. market in response to those supracompetitive prices. In testimony before a congressional committee in 1888, Henry O. Havemeyer, the leader of the sugar trust, testified that “the trust set its price by taking the London price of refined sugar and adding to it the amount of tariff protection.” Harvard political scientist Jeffrey A. Frieden explained, “the growth of the Sugar Trust, the Steel Trust, and other oligopolistic combines would have been impossible without America’s high tariff barriers.”13 Some economists of the 1880s era believed that removing tariff protection could have caused trusts to destabilize and dissolve.14

Widespread opposition to trusts mobilized consumers and farmers to demand government action. Concern over trusts often found expression in opposition to the tariffs that protected domestic trusts from foreign competition. In his 1887 annual message to Congress, President Grover Cleveland championed substantially reducing the nation’s tariffs because “tariffs often facilitated domestic cartels’ ‘regulation of the supply and price of commodities made and sold by members of the combination.’” In the 1888 election, all political parties called for addressing the problem of trusts. When Benjamin Harrison won the presidency, the Republican Party controlled the White House and both houses of Congress. Although Republicans had campaigned on reining in the trusts, some candidates were motivated by political expediency, not a genuine desire to limit the number or activities of the trusts, which generally supported the Republican Party. Nonetheless, popular hostility towards trusts—reflected in the campaign promises of the newly enacted members of Congress—created momentum for antitrust legislation.

Senator John Sherman of Ohio introduced legislation to condemn trusts in 1888. That initial effort came to naught. But he found greater success two years later. The year 1890 turned out to be momentous for large American businesses, as the issues of trusts and tariffs became linked and took center stage.15 During the early debate over the Sherman Antitrust Act on the Senate floor, senators occasionally “attack[ed] [ ] the tariff as the mother of trusts.”16 Propelled by the political moment, Congress enacted the Sherman Act, which contained two operative sections. Section 1 condemned agreements in restraint of trade, and Section 2 condemned illegal monopolization and attempted monopolization. The statute’s text was sufficiently vague that even the legislators voting for the Sherman Act were unsure what the words meant.17

Their earlier campaign promises for antitrust legislation created a dilemma for Republican politicians in 1890, which they resolved in part by enacting the vague Sherman Act, but they also “focused on tariffs that protected American monopolies from competition.” Some Republicans were conflicted. For example, while Senator Sherman followed the Republican line at the time of favoring reasonable tariffs generally, he did not support tariffs in markets controlled by domestic cartels that inflated market prices by preventing fair competition.18 As American trusts lost the battle to prevent adoption of the Sherman Act, they succeeded in convincing the 1890 Congress to also enact the McKinley Tariff Act, which on average “increased tariff rates by nearly 50 percent for many American products.” Introduced in Congress a mere three months after President Harrison signed the Sherman Act, the McKinley Tariff Act was popularly called the “Campaign Contributors’ Tariff Bill.”19

Some commentators believe that a pro-business Congress passed the Sherman Act to appease consumers while enacting tariff protections to placate business interests.20 These two pieces of legislation could be viewed as a political bargain struck with the acquiescence of big business, which explains the “business sector’s puzzling lack of opposition to the Sherman Act.”21 In important ways, the McKinley Tariff Act undermined the Sherman Act because, as Professor Maurice Stucke has explained, the new “tariffs protected the domestic monopolies and cartels from competition, and helped transfer income from consumers to producers.” The Sherman Act could not ensure competitive markets so long as tariffs insulated domestic firms from foreign competition.

In the decades following the passage of the Sherman Act, the relationship between tariffs on foreign goods and diminished competition in domestic markets remained a salient issue in American politics. The national debate over tariffs and antitrust policy played a large role in the 1912 presidential election. Democratic presidential candidate Woodrow Wilson campaigned for the White House in 1912 on a platform of fair competition that condemned monopolists who had “taken advantage of the protective tariff [to] shut out competition and to make sure that the prices are in their own control.” After Wilson won, Congress enacted the Underwood Tariff, which reduced tariffs so that “no concern shall [have] a monopoly . . . gained other than through the fact that it is able to furnish better goods at lower prices than others.”

President Wilson also created a Tariff Commission intended to dampen the anticompetitive effects of tariffs. But the looming political power of trusts interfered. To staff his new commission with appropriate experts, President Wilson turned to journalist Ida Tarbell, whose comprehensive exposé of the Standard Oil Trust galvanized the public and fueled the government’s antitrust litigation that resulted in the dissolution of the petroleum behemoth. After she wrote a series of articles and a book on tariffs, President Wilson offered Tarbell a position on the Tariff Commission at an annual salary of $7,500, a handsome sum at the time.22 Tarbell, however, declined the position because she believed that Wilson’s “commission would be sabotaged by trusts and their free-spending lobbyists” and that “[t]he commission’s research, ‘however sound, would stand no chance in Congress when a wool or iron and steel or sugar lobby appeared.’”23 As an expert in trusts and tariffs, Tarbell understood how trusts used their ill-gotten gains from price collusion to lobby for anticompetitive tariffs, which allowed domestic trusts to engage in highly profitable anticompetitive conduct undisciplined by foreign competitors, which were blocked from entering the market by the trust-purchased tariffs. History proved Tarbell prescient. Part III examines the historic relationship between trusts and tariffs.

III.  The Historic Relationship Between Cartels and Tariffs 

Tariffs have effects on both domestic and international cartels. This Part first discusses how tariffs facilitate domestic price fixing. It then demonstrates the role of tariffs in international cartels.

A. Domestic Effects

Although tariffs are sometimes defended as giving domestic firms room to grow, tariffs also provide room to collude. For example, rayon yarn represented an important international commodity in the interwar period. Due in part to the higher wages of American workers, domestic rayon producers could not compete in the European and Asian markets against the major players of the time, including Japan, Italy, Germany, France, and Great Britain.24 High tariffs, however, protected American rayon manufacturers from foreign competition at home.25 After the rayon tariffs effectively blocked foreign competition, the ten largest American manufacturers agreed to restrict their output and raise their prices.26 Freed from foreign pressure, rayon producers generally operated in a lockstep fashion, “follow[ing] a uniform policy on term discounts, shipping terms, booking periods, and price guarantees.”27  The Federal Trade Commission found that ten viscose rayon producers had entered a collusive agreement in the early 1930s to fix prices and output.28 As tariffs played a role in limiting competition,29 a policy designed to protect American firms ended up facilitating collusion that injured American consumers.30

The rayon price-fixing conspirators’ reliance on tariffs to embolden and stabilize their illegal collusion is not an outlier.31  When tariffs enacted in 1897 reduced demand for foreign-produced ceramic products—such as toilets and sinks—domestic manufacturers colluded to raise prices and reduce discounts in the American market.32  In testimony before the Industrial Commission of 1900, one leader of the American sugar trust testified that “[t]he tariff is the Mother of Trusts.”33  Similarly, when discussing the American tin plate market, economist Frank William Taussig, an early trade theorist, noted that “[t]he protective tariff became the mother of a trust, and that trust exploited the possibilities of protected monopoly.”34 In 1927, carpet manufacturers in America created a trade institute with the goals of cutting workers’ wages, raising tariffs 50%, and then jacking up prices “any distance that the traffic would bear.”35

Price-fixing conspiracies generate illegal profits that the cartel members may invest in constructing barriers to entry that block new firms from competing against the cartel. Historically, evidence suggests that cartels invested some of their ill-gotten gains to bribe officials to impose, maintain, or increase tariffs, which would allow domestic price fixers the ability to raise prices unconstrained by foreign competition.36 American trade associations commonly tried to control the domestic market by lobbying for high tariffs that would exclude foreign competition.37 While many trade associations did not break the law when pursuing anticompetitive protection, many other trade associations have served as cover for illegal price-fixing activity. Moreover, rational conspirators may use trade associations to lobby for tariff protections that would stabilize an underlying cartel arrangement.

Even without trade associations, price-fixing cartels may collectively lobby to resist efforts to reduce tariffs. When successful, this creates a vicious cycle in which tariffs beget collusion which leads the conspirators to lobby for longer-lived or higher tariffs, which stabilize the cartel and increase profits, which can be invested in more lobbying for tariff protection. After the three largest U.S. producers of ferrosilicon—an alloy used in steel production and other manufacturing—illegally conspired to fix prices in the American and European markets, the conspirators met frequently and secretly at an airport hotel in Pittsburgh, in part to discuss the threat of trade treaties reducing the tariffs that insulated the conspirators from foreign competition. The prospect of ferrosilicon producers from Asia and South America entering their previously tariff-protected markets would undermine their price-fixing conspiracy because “a cartel that excluded those producers would be ineffective, while a cartel that included them would be unmanageable.” The American firms successfully lobbied for antidumping tariffs, which strengthened their domestic price-fixing conspiracy until it was eventually detected and prosecuted years later.38

Historical examples from foreign economies also document the dynamic of tariffs facilitating domestic cartels. For instance, German cartels of the early twentieth century were famous for using protective tariffs—coupled with monopoly status or price collusion—to subsidize dumping their products at lower prices in foreign markets.39 As one example, German steel manufacturers in the years surrounding the fin-de-siècle era relied on tariffs to cartelize their domestic market and raise prices to supracompetitive levels.40  In 1901, after the Norwegian parliament raised tariffs on raw tobacco and processed tobacco products, “most of the Norwegian producers joined to form a domestic cartel.”41 And in Franco-era Spain, members of the domestic nitrogen fertilizer cartel lobbied for—and benefitted from—higher tariffs.42 Studies of multiple Spanish cartels shows how “[o]btaining high levels of tariff protection from the government was the most widely used method to enable cartelization.”43

Most notably, Japanese business history is a saga of tariffs and price-fixing cartels. As a result of unequal trade treaties, Japan during the Meiji Era could not protect its domestic industries through high tariffs.44 After the Japanese government regained control over its trade policy, it imposed tariffs and encouraged domestic cartels.45  In the late twentieth century, Japan’s Ministry of International Trade and Industry (MITI) used trade barriers to protect its industries while it “approved or encouraged cartels in industries such as textile, paper and pulp, chemical fertilizer, and steel.” Famously in the 1980s, Japanese cartels sought to protect themselves through “high tariff rates” and other government-imposed barriers to entry against foreign competition—including import deposits, foreign investment restrictions, and design standards, among others. American manufacturers believed that Japanese cartel members used their tariff-protected cartel profits to fund predatory pricing in the American market.46

Modern price-fixing conspiracies are more difficult to study because all developed countries now forbid price fixing among private firms. But antitrust investigations have exposed how some illegal cartels continue to manipulate tariff policy to strengthen their collusion. During the 1990s, a price-fixing conspiracy controlled the citric acid market. The cartel illegally raised prices and overcharged American consumers by between $161 and $309 million.47 Chinese exports threatened to destabilize the citric acid cartel.48 Chinese exports threatened to destabilize the citric acid cartel.49 Chastened by lower-priced Chinese citric acid, American firms in the 1990s’ international citric acid cartel heavily lobbied the Office of the U.S. Trade Representative to impose significant tariffs on Chinese-sourced citric acid. 49 As part of the negotiation, however, Chinese officials agreed to remove export subsidies and “Chinese exports of citric acid to the United States fell substantially from 1994 levels,” which forestalled any “downward pressure on cartel prices.”50  American firms successfully lobbied U.S. leaders to include citric acid on a list of Chinese products slated for 100% tariffs.51 That tariff threat led Chinese officials to withdraw their export subsidies for citric acid, which allowed the American and European conspirators greater latitude to fix prices because Chinese exports could no longer price discipline the citric acid cartel, at least in the U.S. market.52

B. International Cartels

In addition to protecting domestic price-fixing conspiracies, tariff policy plays an important role in international cartels. Historically, international cartels were created and maintained by governments. With the passage of the Sherman Act in 1890, the United States became an outlier in condemning price-fixing arrangements, whether structured as a trust, a cartel, or otherwise. In Europe, governments at the time actively condoned and participated in international cartels controlling dozens of important commodities, including steel, copper, nitrate, sugar, tea, and rubber.53 During this Golden Age of Cartels in the early twentieth century, many international cartels depended on tariffs to create and stabilize their price-fixing activities.54 One noted economist of the era, Gottfried von Haberler, observed that “[m]any of the present international cartels owe their existence to tariffs,” and he opined that “the majority of cartels hold together only because of protective tariffs.”55  Even when international cartel agreements provided that members would stay out of each other’s home markets, member governments would often nonetheless impose tariffs as a safety net to ensure that cartel members could not easily break their word.56  At a minimum, many cartels fine-tuned their decision-making in light of relevant tariffs.57  European cartels would generally fix different prices for different countries based on the importing country’s tariff policies.58

U.S. tariffs have facilitated the participation of American firms in international cartels. After World War I, American political, military, and business leaders were concerned about the dominance of German chemical companies. American chemical firms leveraged this anxiety to lobby for tariff protection.59 DuPont was simultaneously attempting to convince IG Farben—Germany’s largest chemical giant—to divide various world markets such as the ammonia market.60 After Farben declined its American counterpart’s entreaties, DuPont lobbied more aggressively for tariffs to impede Farben’s exports to the U.S. market.61 Once DuPont secured these tariffs, it used that leverage to persuade Farben to enter a so-called “gentlemen’s agreement,” whereby the firms divided the international markets for several chemicals.62 Similarly, the Dow Chemical Co. agreed with Farben and Alcoa to cartelize and divide the world market for magnesium.63  One post-war economist noted that “[t]he United States government is a chief contributor to cartels indirectly through application of a restrictive high tariff policy. Tariffs and cartels go hand-in-hand.”64  Ultimately, members of an international cartel may coordinate their tariffs to prevent market entry by any firms that are not members of the cartel.65 Properly implemented, this strengthens the overall cartel arrangement.

In short, tariffs and cartels are connected. Some mid-century economists considered international cartels to be a response to tariffs.66  In some markets, when a formal cartel agreement expired or broke down, European governments imposed new tariffs or import restrictions, as happened when 1930s nitrate cartel terminated its agreement.67

IV.  New Tariffs and New Cartels

If history and economic theory are any guide, tariffs increase the danger of anticompetitive collusion, in the forms of both domestic price-fixing conspiracies and international cartels. This has important implications for American trade and industrial policy.

Trump’s tariffs risk encouraging American firms to conspire to raise prices. Rational businesspeople are less likely to fix prices in the U.S. market if they believe that foreign firms will increase their exports of competing products and drive the price back down toward competitive levels. High tariffs assure potential price fixers that their inflated prices will not attract foreign competitors. As long as conspirators raise prices by less than the tariff margin, foreign firms cannot charge a profitable price in the U.S. market.

Trump’s sectoral tariffs are particularly dangerous. Tariffs measuring 25%, 50%, and especially 100% allow American firms to steeply raise their prices while still making foreign entry uneconomical. Moreover, many of these Trump-tariff-protected industries have historically participated in price-fixing conspiracies. For example, copper parts, steel, and aluminum—products which Trump has imposed 50% tariffs—have all previously been controlled by international cartels. Product markets that have been previously cartelized are often more susceptible to future cartelization. 

Given the erratic nature of Trump unpredictably imposing, shifting, and lessening tariffs, it is possible that these high tariffs will not last in the long term. But that does not fully mitigate the harms inflicted by Trump’s erratic tariffs. First, short-term harms would be inflicted on American consumers who pay inflated fix prices while the tariff is in place.

Second, even if Trump—or his successor—substantially reduces or eliminates his tariffs, a price-fixing conspiracy can endure long after tariffs have ended. Historically, price-fixing cartels form and re-form.68 A conspiracy that fails in the short term can be resuscitated and come back stronger in the long term. Price-fixing conspirators can learn from their previous collusion; they evaluate what went wrong and develop ways to address prior problems.69 For example, although a lack of trust dooms many an attempt at price collusion, tariff-era cartels give rival firms an opportunity to learn to trust each other.70 Price fixers fashion new ways to strengthen their cartel arrangements by plugging loopholes and fashioning more effective enforcement protocols. Once firms figure out how to fix prices, their collusion often becomes long lasting, even if episodic. In short, if American tariff policies encourage the formation of cartels, it could have long-term consequences.

In addition to fostering and stabilizing domestic cartels, the Trump tariffs have implications for international cartels. Many American firms participate in international cartels. The Trump tariffs can strengthen American firms’ leverage in international cartels. When American firms participate in international cartels, they use the threat or reality of U.S. tariffs as leverage. For example, in the mid-twentieth century, American tariffs on aluminum ingot protected Alcoa from foreign competition and “doubtless strengthened the company’s hand in foreign cartel negotiations and contributed to the extraordinary profits of this decade.”71 When Congress raised aluminum tariffs, American aluminum giant Alcoa would raise its prices by the tariff amount.72

This is a tried-and-true strategy. In historical international cartels, domestic firms used their nation’s tariff policies to strengthen their hand during cartel negotiations allotting market shares to cartel members. For example, members of the 1930s-era international steel cartel used tariff protection—actual and potential—as leverage.73 When Great Britain entered the cartel in 1935, the British government increased “import duties on steel commodities . . . from 33 1/3 per cent of their value to 50 per cent in order to place the British industry ‘in a position to negotiate satisfactory agreements with its competitors.’”74  The British steel industry secured higher tariffs against foreign steel in order to strengthen their bargaining position when negotiating to enter the European steel cartel.75 Although the French and Belgian embassies protested the British tariffs ahead of cartel negotiations, “the British delegates had warned that their government would raise the duties if the negotiations failed.”76 The British tariff tactic worked in securing relatively good terms for the British steel manufacturers entering the European steel cartel. Indeed, the British officials had “not expected the cartel to cave in so quickly,” and one official commented that “‘the Cartel’s complete and instant surrender’ had ‘come as a surprise.’”77 Ultimately, the British government successfully employed tariffs to strengthen the British steel industry’s cartel position.78 While trade wars differ from price wars, they involve a similar dynamic of imposing costs on one’s business (for price wars) or one’s citizens (for trade wars) in order to secure bargaining power during a cartel negotiation. The support of their government afforded British steel producers significant leverage against their cartel partners when it came to determining cartel quotas.79 Because the British government had already imposed significant tariff barriers to entering the British market, this strengthened the bargaining position of the British members of the international steel cartel.80

Historically, cartel negotiations happened in the shadow of the tariff policies of the cartel’s member states.81 Scholars have noted that “in the inter-war period some governments in Europe actually imposed tariffs in order to strengthen the hands of their producers in negotiating membership of international cartels.”82 When international cartels were legal in Europe, many governments would regularly impose “tariff protection to increase the bargaining position of their nationals in cartel quota allocations.”83 In 1937, Haberler observed that “in recent years many tariff increases have taken place or have been definitely threatened with the expressed intention of strengthening the position of the national industry in its international cartel.”84 When governments have used tariffs to nurture their domestic industries, protected firms have turned this to their advantage in cartel negotiations. During the 1920s when Germany, the United Kingdom and Norway dominated the synthetic nitrogen industry, the governments of France, Italy, Poland, and Czechoslovakia employed tariffs to protect and grow their domestic production of synthetic nitrogen.85 But after their productive capacities grew large enough to supply their domestic needs and to begin exporting, these new entrants used tariffs to negotiate favorable terms in the international nitrogen cartel.86

Some might argue that the risks of tariffs encouraging price fixing are minimal because antitrust law, which makes price fixing per se illegal, should deter tariff-inspired cartel activity. Unfortunately, federal courts have been undermining antitrust deterrence by making it unreasonably difficult for plaintiffs to prove price-fixing claims. Price-fixing conspirators conceal their illegal collusion through myriad methods, including using code names, encrypted messages, secret assignations, false cover stories, and fraudulent documents. Consequently, as a matter of law, antitrust plaintiffs are allowed to rely on circumstantial evidence. Despite this, federal courts have made it harder for price-fixing claims to survive summary judgment, often requiring plaintiffs to proffer direct evidence of price fixing in order to survive summary judgment. This fundamentally undermines antitrust deterrence of price-fixing conspiracies.

V.  The Path Forward

A robust competition policy would eliminate tariffs.87  Even without explicit price-fixing, tariffs that effectively exclude foreign competitors can create domestic oligopoly markets that encourage interdependent price increases. But tariffs also create market conditions that serve as an incubator for domestic price-fixing conspiracies. In the absence of tariffs, price-fixing conspirators must take care not to raise prices so high that they invite new entry into the market.

Just as tariffs can stabilize some cartels, their removal can potentially destabilize price-fixing conspiracies. Even short of killing a conspiracy outright, reducing tariffs can pressure undiscovered cartels to lower prices.88 This, however, can lead to the long-term demise of cartels. Lessening the expected profits from price fixing makes firms less likely to risk breaking the law by colluding with rivals to fix prices.

Eliminating or reducing tariffs alone, however, is not sufficient. Eliminating public tariffs alone would not restore free market conditions and outcomes so long as private, undiscovered collusion remains in place.89 Beyond prudent management of tariff policy, efficient markets require antitrust agencies to aggressively enforce laws against price fixing and other forms of anticompetitive collusion.

* * *

Christopher R. Leslie is a Chancellor’s Professor of Law at University of California Irvine School of Law. The author thanks Kieran Lundy and Nick O’Rilley for excellent research assistance.

• 1Data is regularly updated in Tony Romm, Lazaro Gamio & Agnes Chang, Tracking Trump Tariffs on Countries and Products, N.Y. Times, (last visited Nov. 10, 2025), https://www.nytimes.com/interactive/2025/07/28/business/economy/trump-tariff-tracker.html.
• 2For centuries, the history of mercantilism is a litany of economies with “high protective tariffs against manufacturers of its trading partners; subsidies to its inefficient industries; and monopolies and price-fixing in its domestic economy.” Joseph C. Sweeney, From Columbus to Cooperation-Trade and Shipping Policies from 1492 to 1992, 13 Fordham Int’l L.J. 481, 487–88 (1990).
• 3Switgard Feuerstein, Collusion in Industrial Economics—A Survey, 5 J. Industry, Competition & Trade 163, 175 (2005) (“Import tariffs and quotas may serve as entry barriers for foreign firms and thereby facilitate collusion among domestic firms.”).
• 4George W. Stocking & Myron W. Watkins, Monopoly and Free Enterprise 382 (1951) [hereinafter Stocking & Watkins, Monopoly and Free Enterprise] (“The direct effect of a tariff schedule is to limit competition in domestic markets. Customs duties restrict the entry of foreign products and thus reduce the sources of supply.”).
• 5Christopher R. Leslie, Foreign Price-Fixing Conspiracies, 67 Duke L.J. 557, 589 n.177 (2017) (noting how European cartels could use tariffs and transportation costs as a buffer to raise prices without losing sales to American exporters).
• 6John G. Fuller, Gentlemen Conspirators: The Story of the Price-Fixers in the Electrical Industry 22 (1962) (discussing how U.S.-based electrical equipment cartel lost sales to English supplier that charged lower price “in spite of tariff, insurance, and shipping costs”).
• 7See United States v. Aluminum Co. of America (Alcoa), 148 F.2d 416, 426 (2d Cir. 1945) (“[W]ithin the limits afforded by the tariff and the cost of transportation, ‘Alcoa’ was free to raise its prices as it chose, since it was free from domestic competition.”)
• 8Eric Kades, Windfalls, 108 Yale L.J. 1489, 1548 n.229 (1999) (“An external cartel benefits domestic producers in ways similar to a tariff: A cartel maintains an artificially high price worldwide, while a tariff maintains an artificially high price domestically.”).
• 9Daniel Shaviro, The Forgotten Henry Simons, 41 Fla. St. U. L. Rev. 1, 15 (2013) (noting that American economist Henry Simons “argued that the greatest social and economic ill that the U.S. faced was monopolistic price-fixing, along with ‘excessive political interference with relative prices,’ such as through tariffs and industry subsidies.” (quoting Henry C. Simons, A Positive Program for Laissez Faire: Some Proposals for a Liberal Economic Policy, in Economic Policy for a Free Society 40, 42 (1948)).
• 10Stocking & Watkins, Monopoly and Free Enterprise, supra note 4, at 383.
• 11Id. (“Shutting out foreign rivals very greatly simplifies the job of restraining competition in the domestic market.”).
• 12Alfred S. Eichner, The Emergence of Oligopoly: Sugar Refining as a Case Study 96 (1969) (“After the trust was formed, . . . Congress, in drawing up the schedule of sugar tariffs, had to recognize that it was also setting the upward limit on sugar prices.”).
• 13Jeffry A. Frieden, Global Capitalism: Its Fall and Rise in the Twentieth Century 66 (2006).
• 14William Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act 76–77 (1965) (discussing the theory that “artificial” trusts “could be destroyed by withdrawing the tariffs and other legal privileges that protected them.”).
• 15Professor Alan Meese has argued that “the Sherman Act had its genesis in a controversy about tariff policy.” Alan J. Meese, Antitrust Regulation and the Federal-State Balance: Restoring the Original Design, 70 Am. U. L. Rev. 75, 149 (2020).
• 16John D. Clark, The Federal Trust Policy 29 (1931).
• 1721 Cong. Rec. 4092 (1890) (statement of Rep. William L. Wilson) (“[J]ust what these ‘contracts, combinations, and conspiracies’ will be can not be known until the courts have construed and interpreted this section.”).
• 18Meese, supra note 15, at 150 (citing 19 Cong. Rec. 187, 190 (1888) (statement of Sen. John Sherman)); Hans B. Thorelli, The Federal Antitrust Policy: Origination of an American Tradition 167 (1954)).
• 19William F. Shughart II, Jon Silverman & Robert D. Tollison, Antitrust Enforcement and Foreign Competition, inThe Causes and Consequences of Antitrust: The Public-Choice Perspective 179, 179–80 (Fred S. McChesney & William F. Shughart II eds., 1995).
• 20Id. (“DiLorenzo (1985) has argued that the Sherman Act was passed in 1890 partly as a means of pacifying opponents of protective tariffs.”); Keith N. Hylton, Antitrust Law: Economic Theory and Common Law Evolution 38 (2003) (“The cynical view is that the Sherman Act was a harmless way of appeasing public demands for regulation, and at the same time allowing members of Congress to garner support for and deflect criticism regarding the protective tariff legislation.”).
• 21Shughart II, Silverman & Tollison, supra note 19, at 180.
• 22Steve Weinberg, Taking on the Trust: The Epic Battle of Ida Tarbell and John D. Rockefeller 265 (2008).
• 23Id. (apparently quoting Ida M. Tarbell, All in the Day’s Work: An Autobiography 279 (1939).
• 24Jesse W. Markham, Competition in the Rayon Industry 38 (1952).
• 25Id. at 36: 

  Several factors have contributed to a closed rayon market in the United States. The industry has operated behind such high tariff walls that foreign producers would have had to produce and ship their yarn to the United States market at practically zero cost in order to absorb the tariff and meet domestic prices since 1931.

• 26Stocking & Watkins, Monopoly and Free Enterprise, supra note 4, at 384 (1968).
• 27Markham, supra note 24, at 78 (citing Rayon Organon, Feb. 1944, at 34–36).
• 28Id. at 185.
• 29Ervin Hexner, International Cartels 380 (1943) [hereinafter Hexner, International Cartels] (“Tariffs on rayon yarn influenced exports, imports, and prices. Corporate and co-operative agreements in these industries were intertwined in a vast network.”).
• 30Rayon tariffs in 1937 and 1938 alone raised prices for American consumers by almost $140 million (in 1940 dollars). SeeTemp. Nat’l Econ. Comm., 76th Cong., Investigation of Concentration of Economic Power: Industrial Concentration and Tariffs, 11 (Comm. Print 1941) (written by Clifford L. James).
• 31See Charles J. Bullock, Trust Literature: A Survey and a Criticism, 15 Q.J. Econ. 167, 178 (1901) (noting the importance of determining “to what extent the prices of tin plate, steel rails, wire nails, window glass, paper, salt, sugar, and other articles controlled by trusts or pools, have been raised to exorbitant figures under the shelter of protective duties”); id. at 209 (“Competition is restricted by protective duties in most of the industries where combinations are formed . . .”).
• 32Marc J. Stern, Industrial Structure and Occupational Health: The American Pottery Industry, 1897–1929, 77 Bus. Hist. Rev. 417, 426 (2003) (“Between 1900 and 1904, the generalware division instituted collective responses to competition. When the depression ended in 1897, the protectionist Dingley tariff resulted in more demand for domestically produced ceramic products. Manufacturers agreed to formal trade arrangements in order to control prices and discounts.”).
• 33Gottfried von Haberler, The Theory of International Trade 324 (Alfred Stonier & Frederic Benham trans., William Hodges & Co., Ltd. 1936).
• 34Frank William Taussig, Some Aspects of the Tariff Question 177–78 (1915).
• 35Simon N. Whitney, Trade Associations and Industrial Control 78 (1934).
• 36See, e.g., Margaret C. Levenstein & Valerie Y. Suslow, What Determines Cartel Success?, 44 J. Econ. Lit. 43, 74 (2006) (noting that members of potash cartel convinced their governments to impose tariffs); Eichner, supra note 12, at 96 (noting that in 1894, Havemeyer testified “before a special Senate committee investigating charges of bribery in connection with the tariff bill enacted that year”).
• 37See, e.g., Whitney, supra note 35, at 78 (“The original aims of the founders of the Institute [of Carpet Manufacturers of America] have been summarized . . . as follows: wages were to be cut 10%; the tariff . . . was to be raised 50%; and prices were to be put up any distance that the traffic would bear.”).
• 38Kara M. Reynolds, Under the Cover of Antidumping: Does Administered Protection Facilitate Domestic Collusion?, 42 Rev. Indus. Org. 415, 415–416 (2013); Margaret Levenstein & Valerie Y. Suslow, Contemporary International Cartels and Developing Countries: Economic Effects and Implications for Competition Policy, 71 Antitrust L.J. 801, 822 (2004).

  Antidumping tariffs also create the risk of American firms becoming effective domestic monopolies. For example, after U.S. Magnesium sued Chinese and Russian magnesium-alloy manufacturers in 2005 for dumping, federal officials imposed tariffs on imported magnesium. This converted U.S. Magnesium “into a virtual monopoly,” allowing the company to increase its “prices $0.80 to $1.00 higher per pound than the price of magnesium alloy in any other country.” Leslie Gordon, Magnesium Tariffs Harm U.S. Die Casters, Says NADCA, Machine Design, (Jan. 21, 2011), https://www.machinedesign.com/news/article/21818883/magnesium-tariffs-harm-us-die-casters-says-nadca.

• 39Whitney, supra note 35, at 116.
• 40Steven B. Webb, Tariffs, Cartels, Technology, and Growth in the German Steel Industry, 1879 to 1914, 40 J. Econ. Hist. 309, 328 (1980) (“Tariffs and cartels functioned together as a system that raised German steel prices above the world level and, therefore, also raised input costs for domestic customers of the cartels.”).
• 41Pal Thonstad Sandvik & Espen Storli, Taming the Leviathans: How Norway Managed to Regulate the Strongest International Cartels and Trusts, 1900–1940, inA History of Business Cartels 63, 68 (Martin Shanahan & Susanna Fellman eds., 2022).
• 42Ana Rosado-Cubero, The Relationship Between Spanish Cement, Sugar and Fertiliser Cartels and Their European Counterparts Under Franco, in A History of Business Cartels 205, 220 (Martin Shanahan & Susanna Fellman eds., 2022).
• 43Id. at 208 (“Obtaining high levels of tariff protection from the government was the most widely used method to enable cartelisation, as well as import authorisations, tariff quotas and exchange controls. Taken together, these measures created much greater protection in dealings with foreign countries than a simple tariff.”).
• 44Harry First, Antitrust in Japan: The Original Intent, 9 Pac. Rim L. & Pol'y J. 1, 8 (2000); Alex Y. Seita & Jiro Tamura, The Historical Background of Japan's Antimonopoly Law, 1994 U. Ill. L. Rev. 115, 130–31 (1994).
• 45Jingyuan Ma & Mel Marquis, Business Culture in East Asia and Implications for Competition Law, 51 Tex. Int'l L.J. 1, 4 (2016); First, supra note 44, at 12.
• 46Christopher R. Leslie, False Analogies to Predatory Pricing, 172 U. Pa. L. Rev. 329 (2024).
• 47John M. Connor, Global Price Fixing: Our Customers Are the Enemy 158 (2001).
• 48Id. at 142.
• 49 a b Levenstein & Suslow, supra note 36, at 822–23. After an agreement staved off the imposition of tariffs, some U.S. citric acid producers subsequently petitioned the Department of Commerce and the International Trade Commission to impose antidumping duties of 350% on Chinese citric acid, id. at 823, which would prevent Chinese producers from price disciplining the price fixers in the American market.
• 50Connor, supra note 47, at 143.
• 51Id. at 142–43; Michael A. Utton, Cartels and Economic Collusion: The Persistence of Corporate Conspiracies 50 (2011) (“Members of the (secret) citric acid cartel determined to use the weapon of a threatened tariff to see off the problem posed by China.”).
• 52Utton, supra note 51, at 50 (“Export subsidies were withdrawn by the Chinese and the resulting increase in price caused their imports to the US to decline.”).
• 53See generallyGeorge W. Stocking & Myron W. Watkins, Cartels in Action: Case Studies in International Business Diplomacy (1946) [hereinafter Stocking & Watkins, Cartels in Action].
• 54Hexner, The International Steel Cartel 246 (1943) [hereinafter Hexner, Steel Cartel] (“According to many authors large international marketing control schemes were conditioned by tariff policies of governments, and without appropriate tariff policies these international organizations would have disintegrated.”).
• 55Haberler, supra note 33, at 324, 331.
• 56Hexner, International Cartels, supra note 29, at 130–31 (“Participating national groups did not trust sufficiently home protection and similar clauses in cartel agreements, at least not to the extent of giving up protective tariffs.”).
• 57See, e.g., Hexner, Steel Cartel, supra note 54, at 246–47.
• 58Fritz Machlup, Characteristics and Types of Price Discrimination, in Business Concentration and Price Policy 397, 410 (Universities-National Bureau Comm. for Econ. Rsch. ed., 1955) (noting that for “various European cartels,” “the price differentials these cartels fixed for exports to different countries distinctly reflected the differences in the elasticities of demand resulting from national tariff policies and domestic competition within the various countries.”).
• 59V.J. McGill, Cartels and the Settlement with Germany, 9 Sci. & Soc’y 23, 26–27 (1945).
• 60Id. at 28.
• 61Id.
• 62Id.
• 63Id.
• 64Kenneth L. Mayall, International Cartels: Economic and Political Aspects 128 (1951).
• 65Levenstein & Suslow, supra note 36, at 820 (“In order to ensure cartel survival, international cartels may engage in activity that blocks or slows entry by developing country producers. For example, cartel members may use tariff barriers and antidumping duties to prevent entry by developing country participants.”).
• 66Hexner, Steel Cartel, supra note 54, at 247 (“Several economists and politicians regarded national and international marketing controls as a means to eliminate or restrain tariff protection. Louis Loucheur considered international cartels the ‘only course’ to be followed to solve the problem of custom barriers.” (citing Report and Proceedings of the World Economic Conference, League of Nations Doc. C.356M.129 1927 II, at 1, 132–33 (1927))).
• 67Stocking & Watkins, Cartels in Action, supra note 53, at 144 (“With the breakdown of private negotiations, the German Government imposed a tariff on Chilean nitrate . . .; France, Poland, and Czechoslovakia prohibited imports of several nitrogenous products; Italy increased import duties on all these products; while Belgium and Japan issued decrees requiring licenses to import them.”).
• 68Levenstein & Suslow, supra note 36, at 54 (“Some cartels re-formed several times within a very short span of years, while others continued on and off over fifty years or more.”).
• 69Id. at 54–55 (“In some cases, such as the copper cartel, each period of cartelization appears to endure for longer than the previous one. This suggests a pattern of learning on the part of cartel members.”).
• 70Christopher R. Leslie, Trust, Distrust, and Antitrust, 82 Tex. L. Rev. 515, 581 (2004) [hereinafter Leslie, Trust, Distrust, and Antitrust] (“Cartel members learn to trust each other as they have more meetings with each other and reestablish an absence of cheating or defection in earlier time periods.”); Levenstein & Suslow, supra note 36, at 46 (“Repeated interaction (over time or across markets) can, in principle, by providing the incentive of future collusive profits, deter firms from cheating . . . .”).
• 71Joel B. Dirlam & Alfred E. Kahn, Fair Competition: The Law and Economics of Antitrust Policy 160 (1954).
• 72See, e.g., id. at 161 (“Alcoa promptly raised its price by the full amount of the 1922 tariff increase.”).
• 73Hexner, Steel Cartel, supra note 54, at 249 (“Without tariff protection [international steel cartel (ISC) members] would have regarded themselves as considerably weakened in ISC negotiations.”).
• 74Ervin Hexner, International Cartels, supra note 29, at 128–29 (1946) (quoting The Economist, March 23, 1935, at 653).
• 75Clemens Wurm, Business, Politics, and International Relations: Steel, Cotton and International Cartels in British Politics, 1924–1939, at 140 (Patrick Salmon trans., Cambridge University Press 1993) (citing Times (London), March 27, 1935, at 13).
• 76Id. at 143.
• 77Id. at 149.
• 78Id. at 174 (“The British steel industry had the government to thank for its strong position.”).
• 79Leslie, Trust, Distrust, and Antitrust, supra note 70, at 607–08.
• 80Stocking & Watkins, Cartels in Action, supra note 29, at 197 (“Confronted with a tariff wall so high that they were bound to lose a substantial portion of their British markets, the continental members acquiesced in the Federation’s demand that imports be restricted to 670,000 tons for the first year of the agreement and thereafter to 525,000.”).
• 81Hexner, International Cartels, supra note 29, at 129 (discussing the international rubber cartel);  id. (“German, Italian (and other) members in international cartels often referred to their national restrictions and policies (concerning all kinds of trade and exchange items) and tried to influence the line of cartel action. Thus these national clearing and barter systems had to be respected by international cartels.”).
• 82Utton, supra note 51, at 50; Dep’t of Econ. Affs., International Cartels: A League of Nations Memorandum, at 21, U.N. Sales No. 1948.II.D.2 (1947) (“[T]ariffs are used and imposed to strengthen the bargaining position of prospective cartel members in the cartel negotiations.”).
• 83Edward S. Mason, The Future of International Cartels, Foreign Affs., July 1944, at 604, 613.
• 84Haberler, supra note 33, at 331.
• 85Dep’t of Econ. Affs., supra note 82, at 21.
• 86Id.
• 87Feuerstein, supra note 3, at 175–76 (“By threatening an existing collusion, trade liberalization acts procompetitively.”).
• 88Rambod Behboodi, Competition Law and Trade Policy: “Never the Twain Shall Meet”?, 84 Antitrust L.J. 127, 141 n.65 (2021) (“[P]rogressive reduction of tariff and non-tariff barriers helps reduce domestic rents, identify uncompetitive industries, and challenge domestic cartels that have yet to be caught or prosecuted.”).
• 89See James J. Friedberg, The Convergence of Law in an Era of Political Integration: The Wood Pulp Case and the Alcoa Effects Doctrine, 52 U. Pitt. L. Rev. 289, 295 (1991) (noting in context of coal and steel that “[i]t would be insufficient to eliminate public obstacles to free trade, such as tariffs, while allowing private obstacles, such as price fixing and monopolization, to remain unchecked”).