Itemoids

Derek Thompson

The Trouble With Trump’s Tariffs

The Atlantic

www.theatlantic.com › ideas › archive › 2023 › 08 › trump-tariff-foreign-imports-trade-policy › 675169

Last week, before taking the mug shot seen around the world, Donald Trump made news in a different way, suggesting in an interview with Fox Business that if he’s elected president, he’ll impose a 10 percent across-the-board tariff on foreign imports. “When companies come in and they dump their products in the United States, they should pay automatically, let’s say, a 10 percent tax,” Trump said. “I do like the 10 percent for everybody.”

This proposal provoked a predictable storm of criticism from pundits and economists, who correctly pointed out that a universal tariff would raise prices for consumers, hurt American businesses that rely on imported goods, and lead inevitably to a trade war that would do serious damage to American exporters. (It would also almost certainly violate World Trade Organization rules, not that Trump cares.) Less remarked on but perhaps more striking about Trump’s tariff plan was something else: its blithe confidence that the president can, if he wants, unilaterally raise prices for American consumers and businesses.

Though the fact is easy to forget, the Constitution does not give the president the power to impose tariffs or make trade policy more generally. Instead, it explicitly assigns responsibility over trade to Congress alone, awarding it the authority to set “duties” and “imposts” (taxes on foreign goods) and to “regulate Commerce with foreign Nations.” Yet when Trump talks about imposing a 10 percent tariff on imports, he’s not talking about getting Congress to do it—as we know from his record of issuing such orders, he means to do so himself.

[Peter Beinart: Will Trump start a trade war?]

How? Well, as with several other aspects of government, Congress has effectively outsourced its trade-policy power to the White House in a series of laws over the past 60 years, while putting in place few guardrails or limits on the president’s authority.

Section 232 of the Trade Expansion Act of 1962, for instance, lets the president impose tariffs as high as he wants on specific industries, as long as the Department of Commerce determines that imports in those industries pose a threat to “national security” (a term the law does not define). Section 301 of the Trade Act of 1974 lets the president, through the U.S. trade representative, take action against any “act, policy, or practice” of a foreign country that’s “unreasonable or discriminatory” (whatever that means). And the International Emergency Economic Powers Act of 1977 invests the president with the power to impose tariffs during a “national emergency” (which the president can declare at will).

The vague, ill-defined language in these laws gives the president enormous latitude to do pretty much what he wants, particularly because the courts tend to be deferential to presidential judgments about what constitutes a national-security threat or whether a foreign country’s policy is “unreasonable.” For the most part, past presidents have nonetheless been cautious about exercising unilateral trade authority under these laws. Prior to Trump, the “national security” exception had been invoked only to embargo oil imports from Iran and Libya. And although Section 301 has been cited more, since the mid-1990s it has typically been used to initiate or implement WTO settlements.

Trump, as was his wont, ignored these norms and took full advantage of the loopholes Congress left for him. According to the Peterson Institute for International Economics, he issued 41 executive orders on trade, compared with an average of 19 during the Clinton, Bush, and Obama presidencies. In 2018, Trump imposed tariffs on steel and aluminum on the grounds that the imports threatened national security, even though the Department of Defense has noted that only about 3 percent of U.S. steel production goes toward national defense, and even though the countries Trump put tariffs on included close allies such as Canada and the European Union. A year later, he announced a plan to impose a new 5 percent tariff on all imports from Mexico unless the country “substantially” stopped the flow of undocumented migrants into the U.S.; he withdrew the threat only after Mexico agreed to send more troops to its border with Guatemala.

[Derek Thompson: Trade wars are not good, or easy to win]

Most dramatically, of course, Trump used Section 301—the unfair-trade-practices clause—to unilaterally impose 25 percent tariffs on roughly $250 billion in Chinese goods, and when China retaliated, he imposed a second round of tariffs that hit another $120 billion or so in Chinese imports. Trump’s tariffs were at best loosely connected to the unfair trade practices they were supposed to remedy—which included, most notably, China’s violation of intellectual-property rules—but the language in Section 301 is, again, vague enough that this didn’t matter.

Aside from whether Trump’s tariffs accomplished any of his supposed goals, evidence that they were good for the U.S. economy is hard to come by. No meaningful revival in manufacturing jobs occurred during his presidency. And the cost of his tariffs was borne, a 2020 study by the National Bureau of Economic Research found, almost entirely by American businesses and consumers. According to an analysis by the research and consulting firm Trade Partnership Worldwide, after three years of his administration, the total cost of Trump’s tariffs to U.S. enterprise was $45 billion.

Even as Trump’s various trade wars raised prices for consumers, they were especially hard on American producers and workers, particularly in parts of the country that supported him. That’s because, as a 2020 study found, China targeted its retaliatory tariffs against pro-Trump areas. Farmers were hit by those, which by the end of Trump’s term covered 98 percent of U.S. agricultural exports. And American businesses reliant on equipment and other imports from China saw their costs rise and profit margins fall, while exporters in a wide range of industries saw sales fall, thanks to retaliatory moves by the EU and China.

The real problem with the tariffs, though, was not their macroeconomic impact. It’s the fact that they were imposed, in effect, at Trump’s whim. The rise of the “imperial presidency,” together with seemingly permanent deadlock in Congress, may have inured us to the unilateral exercise of presidential power, as more and more policy gets done by executive order rather than legislation. As a result, we’ve come to accept that a president can fight a war without Congress ever bothering to declare it, and can exercise near free rein over immigration policy without congressional authorization.

[Read: Globalization doesn’t make as much sense as it used to]

Arguably, such cases might call for a national-security exception. Yet no plausible justification exists for handing unilateral power over trade policy to the president. The imposition of tariffs is not something that demands immediate action—it can, and should, be done through the legislative process. And unlike the waging of war, in which case the Constitution does make the president the commander in chief of the military, tariffs are entirely Congress’s responsibility. It has simply abdicated that responsibility.

Typically, when you talk about policy problems in Washington, identifying what’s wrong is easy; what’s harder is finding a way to make it right. Where trade is concerned, however, the solution is easy: Congress can amend existing statutes and pass a new law to take away, or severely curtail, the president’s ability to impose tariffs. The simplest way to do this would be to set a time limit on any tariffs imposed by the president, a “sunset clause” that would require congressional approval for them to continue. In fact, Senator Mike Lee, a Republican representing Utah, offered a bill on the very first day of Trump’s presidency that would do precisely this.

Unfortunately, Lee’s bill went nowhere, and getting a similar law passed would be a major political challenge because skepticism about free trade is now common in Washington while protectionism is seen by many as a political winner. (The Biden administration has, in fact, kept Trump’s China tariffs in place.) But the issue isn’t really about whether to impose tariffs or not—after all, if Congress likes tariffs, it can enact them itself. The issue is power: the fact that the president can wake up one morning and decide he likes “10 percent for everybody”—and that changes what Americans pay for imported goods.