Trump admits tariff failure and then abuses national security tariffs anyway
This round of protectionism will almost certainly fail, but it should serve as a wake-up call to Congress that it is time to restrict the president’s discretionary authority to raise tariffs unilaterally.
How did we get here? In March 2018, after dubious studies from the Department of Commerce determined that imported steel and aluminum jeopardized America’s national security, the president imposed tariffs of 25% and 10% on the products, respectively, pursuant to Section 232 of the Trade Expansion Act of 1962.
It is worth mentioning that before imposing the tariffs, then-Secretary of Defense Jim Mattis wrote to Commerce Secretary Wilbur Ross and noted that “the U.S. military requirements for steel and aluminum each represent about 3% of U.S. production. Therefore, [the Defense Department] does not believe that the findings in the reports impact the ability of DoD programs to acquire the steel or aluminum necessary to meet national defense requirements.” A stunning admission.
But the tariffs were never really about national security. They were about protecting politically important constituencies for the president.
The tariffs have exacted a heavy cost. The Peterson Institute for International Economics estimates that consumers will pay about $650,000 for every steel job saved by the tariffs. Likewise, the tariffs have made American manufacturers, reliant on imported metals, less competitive in the global market. It is unsurprising, then, that the manufacturing sector is struggling despite robust growth in the broader economy.
The president’s new tariffs broaden the scope of the “national security” tariffs to cover derivative products made from steel and aluminum such as nails and staples. The stated rationale is that companies are circumventing the tariffs and “erod[ing] the customer base for U.S. producers of aluminum and steel.” Importers of these derivative products have a very sound legal case if they wish to challenge the new tariffs at the Court of International Trade, which recently issued a preliminary opinion in a similar case that provided a narrower interpretation of Section 232 than that of the Trump administration.
The president’s tariffs are not only born out of economic ignorance and questionable legal theories: They represent the triumph of swampy crony capitalism from an administration that promised to target Washington’s entrenched lobbyists. With an avalanche of tariffs coming from the most protectionist president since Herbert Hoover, it has been a golden era for trade lobbyists fighting for exemptions and exclusions or protesting competitors’ exemption and exclusion requests.
In an early January piece for ProPublica, Lydia DePillis provided an in-depth look at the broken tariff exclusion system that rewards well-connected companies with expensive lobbyists and law firms at the expense of average Americans. DePillis notes, “Records compiled by the Center for Responsive Politics show that the number of clients lobbying on tariffs and other trade issues are higher than any year on record. In 2018, the number jumped by 28% to 1,372, and 2019 will significantly exceed that once the final figures are in.” Last year, the Wall Street Journal documented how the domestic steel industry was extremely successful at gaming the tariffs, while other industries struggled to notch similar wins.
National security tariffs may not be limited to steel and aluminum. In May, after a finding in a report by the Commerce Department that automobile and automotive parts imports threaten national security, the White House issued a proclamation directing the U.S. Trade Representative to negotiate agreements to address the situation with several trading partners. The department’s report is still not public despite a provision requiring its release inserted into December’s spending package by Sen. Pat Toomey of Pennsylvania.
At the World Economic Forum’s annual confab in Davos, Switzerland, last week, Trump suggested he may impose national tariffs on European autos unless the United States and the European Union can strike a trade deal in short order. But Section 232 is meant to protect national security, not increase leverage for trade negotiators to extract more favorable treatment of American exports from trading partners.
These decisions have been made without input from Congress under Section 232. Toomey has put forward a thoughtful approach to rebalance trade policy authority between the branches, which would require Congress to approve national security tariffs before they can be implemented. This is a good first step, and Congress should move forward with it expeditiously.
The president’s threats lay bare how flimsy the national security rationale really is. It is well past time for Congress to restrict the president’s trade authorities. Inserting itself back into the process can help steer the country away from more protectionist failures.
