The reason U.S. soft drinks primarily use high fructose corn syrup instead of sugar dates back to a trade barrier imposed by former President Ronald Reagan in the 1980s. This policy echoes in today’s trade landscape, where President Donald Trump‘s tariffs continue to shape global policy.
What Happened: Reagan served as the 40th U.S. president between 1981 to 1989. During his tenure, he imposed import quotas on sugar and sugar-containing articles to protect sugarcane farmers in the U.S.
This proclamation aimed to make imported sugar more expensive, or at least limit its availability, to artificially prop up the price of domestically produced sugar. This was a form of protectionism, designed to help American sugar farmers, even if it meant higher prices for consumers on products containing sugar.
It was after this announcement that Coca-Cola Co. KO and PepsiCo Inc. PEP shifted to high fructose corn syrup, according to the New York Times.
The report acknowledged the comments by the spokesperson of both beverage companies and said that using corn syrup would be less expensive than the traditional cane- or beet-based sweetener given the shrinking market of the sugar industry.
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Why It Matters: While an import quota aims to limit the quantity of a good that can be imported into a country over a specific period, tariffs are another kind of trade barrier used by a country to tax imported goods. Both could lead to higher prices of goods domestically and create market distortions.
According to an old article by the Washington Post dated May 8, 1982, Reagan’s decision to support domestic sugar prices, which led to the need for quotas, was a result of political dealmaking. He needed votes in Congress for his budget reconciliation bill and traded his opposition to sugar price support for those votes.
David Stockman, Reagan’s budget director, was instrumental in this deal. Stockman reportedly acknowledged the policy’s flaws but prioritized securing votes.
In 2025, after Trump’s reelection, he threatened top U.S. trading partners Canada and Mexico with tariffs, which were delayed after some negotiations. However, he imposed a 25% tariff on steel and aluminum imports and a blanket 10% levy on imports from China.
In essence, while trade barriers like import quotas or tariffs could be used as a negotiating tool, they could be driven by political opportunism, undermine free trade principles, fuel prices, and damage international relations.
What Do Experts Say: Higher import taxes can lead to increased costs for U.S. importers, potentially fueling domestic inflation, explained Subho Moulik, the founder and CEO of Appreciate. “A study by the Tax Foundation estimates that these tariffs could cost the average American household an extra $800 in 2025, pushing up inflation and squeezing consumer spending,” he added.
On the other hand, Craig Shapiro, a macro strategist at the Bear Traps Report, argues that tariffs are the "only way" to fund tax cuts without expanding the federal deficit.
Beyond rebalancing global trade and boosting American manufacturing, Shapiro posits that tariffs could provide a substantial revenue source for the U.S. government. He argues this income could be used to offset the cost of Trump’s proposed tax cuts and prevent further deficit growth.
Price Action: The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 and Nasdaq 100 indices, were mixed in premarket trading on Thursday. SPY fell 0.001% to $603.35, and QQQ was up 0.10% to $528.85, according to Benzinga Pro data.
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