Trump pledged to drain the swamp – his tariffs are making it grow
In this environment, many industries instead seek to be “kings of the swamp,” with high-priced lawyers and lobbyists feasting on greater opportunities for rent-seeking. But none is more deserving of the title than the domestic steel industry.
Right from the beginning, the president’s choices to lead the top trade-related federal agencies raised eyebrows for their obvious connections to domestic steel. Commerce Secretary Wilbur Ross has owned a domestic company that benefits from steel protectionism, while U.S. Trade Representative Robert Lighthizer and numerous high-ranking USTR officials have represented the domestic steel industry in protectionist legal and lobbying work.
When the Trump administration announced earlier this year it would levy tariffs on imported steel, under the guise of protecting national security, the domestic steel industry was ecstatic. For years, the industry has argued that China subsidizes the production of steel, creating excess capacity that it then dumps on the market, pushing down global steel prices, and undercutting domestic steel mills.
But the “national security” rationale for import restrictions on steel is exceedingly thin. The president recently acknowledged that he’s “using the tariffs to negotiate” with trading partners, which is a clear abuse of the law. The rationale was chosen not because steel imports pose a real risk to national security but because claiming they do grants the executive branch wide latitude to pursue its preferred trade policies, including rewarding well-connected industries.
According to data compiled by Christine McDaniel and Danielle Parks of the Mercatus Center, nearly 35,000 steel and aluminum tariff exclusion requests has been filed as of mid-October. The data show that the overwhelming majority of the exclusion requests have been for steel products, while steel manufacturers have filed more than 14,000 objections to the requests. Each request represents hours of costly legal and lobbying fees – money not spent by producers improving their products.
At the same time, as the Wall Street Journal recently reported, the domestic steel industry has been extremely successful in getting products excluded from tariffs levied on imports from China, which are intended to combat allegedly unfair and abusive trade practices. The Journal notes the domestic steel lobby petitioned USTR for 132 tariff line exclusions and was successful in 66 requests; this 50 percent success rate is well above that of other powerful lobbies, including the National Retail Federation, the National Restaurant Association, and the National Association of Homebuilders.
Confusion from these odd exclusion decisions has been pervasive. In September, USTR issued its final list of exclusions from the solar tariffs imposed in January. What was notable was that virtually identical products received differing treatment; one exemption was granted, while others were denied. Perhaps this was an oversight by USTR, but it adds to the confusion and opaque nature of the exclusion process.
Recently, a bipartisan group of nearly 150 House members wrote to Lighthizer urging USTR to create a clear process for exclusion requests from the president’s recently announced $200 billion in additional tariffs on Chinese products.
We shouldn’t begrudge businesses trying to exempt themselves from tariffs, with the exception of those hypocritical businesses who beg at the trough of protection. Likewise, we shouldn’t begrudge members of Congress who try to mitigate the pain the president’s tariffs would have on their constituents, with the exception of those lawmakers who cheered as the president escalated his trade war.
