Congress Should Take Back Its Authority Over Tariffs
The U.S. Constitution says Congress has complete authority to set tariffs and regulate commerce with foreign nations.
Unfortunately, that authority has been slipping ever since the unseemly logrolling process that culminated with the disastrous Smoot-Hawley Tariff Act of 1930, which raised about 900 tariffs just as the nation was slipping into the Great Depression. Though Smoot-Hawley did not cause the Depression, the ill-timed tariffs deepened and prolonged the pain. Common wisdom came to hold that Congress was too easily captured by narrow, self-serving interests to responsibly set tariff rates on specific products. As a result, starting with passage of the Reciprocal Tariff Act of 1934—which the Franklin D. Roosevelt administration used to negotiate tariff reductions with trading partners in an effort to jump-start the sluggish economy and repair the damage done to alliances by Smoot-Hawley—Congress has delegated ever more trade policy authority to the executive branch.
Too much of that authority has been ceded. The past 18 months show that Congress needs to reinsert itself into the trade policymaking process again.
The balance of authority favoring the executive branch largely produced positive results for the last 80 years. Every president since Herbert Hoover, Republican and Democrat, supported a general policy of trade liberalization to promote economic growth and as a vital strategic tool to make the world safer. This broad consensus is one of the great bipartisan policy achievements of the post-World War II era, and it largely succeeded in achieving these twin aims.
U.S.-led commercial diplomacy produced valuable trade agreements and institutions like the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), that have served both U.S. and global interests. By strongly disfavoring unilateral protectionism, the rules-based system sought to minimize beggar-thy-neighbor contagion from spreading the way it did in the early 1930s and to make trade more predictable by establishing an orderly process to resolve disputes.
The Trump administration has firmly rejected this order, preferring an aggressive brand of unilateralism and ad hoc policymaking of the sort the system is designed to minimize. The most egregious example of the administration’s antipathy toward the rules and norms that govern trade policy is its use of so-called national security tariffs under Section 232 of the Trade Expansion Act of 1962. That provision gives the president wide latitude to impose import restrictions if the U.S. Commerce Department determines that importation of certain products jeopardizes U.S. national security. Historically, this authority has been invoked sparingly and judiciously, given the gravity of the claim.
To date, the Trump administration has used Section 232 to impose stiff tariffs on steel and aluminum, and it is threatening to use the statute to levy duties on imported automobiles and automotive parts. Unsurprisingly, this has triggered widespread retaliation against U.S. exports, ensnaring unrelated industries into trade conflicts, and it is fostering distrust among longtime allies.
The national security rationale for the tariffs is exceedingly thin, and President Donald Trump’s own words have undercut the legal justifications articulated by his administration. In one instance, the president tweeted that the tariffs on Canadian steel and aluminum were a response to the country’s protectionist dairy policies. He has threatened Mexico with national security tariffs on automobiles if the country did not adequately address his concerns about immigration and drugs flowing into the United States and continues to threaten the European Union with tariffs on cars unless it bends to his will in prospective trade negotiations. These flagrant abuses of the statute are meant more to pry open foreign markets for U.S. exports than to actually protect national security.
Despite this, the U.S. Court of International Trade in late March sided with the Trump administration in a case brought by steel importers arguing that the delegation of authority under Section 232 is unconstitutional. Though the plaintiffs have appealed the decision to the U.S. Supreme Court, it is unlikely that the nation’s highest court will restrict the executive branch’s national security claims. With the judicial branch unlikely to place serious restraints on the president’s Section 232 trade authority, it is time for Congress to step in.
There are positive signs that Congress is starting to realize the dangers posed by the Trump administration’s reckless use of national security as a pretext to levy tariffs.
This year, Republican Sen. Pat Toomey of Pennsylvania and Democratic Sen. Mark Warner of Virginia introduced a bill that would require congressional approval before such tariffs could take effect. The bill also more tightly defines “national security” under the statute and transfers authority for the national security investigation from the Commerce Department to the Defense Department. This is a good way to claw back some constitutional authority to Congress without recreating the rigid process of tariff-by-tariff votes that led to the passage of Smoot-Hawley.
Republican Sen. Chuck Grassley of Iowa, the chairman of the Senate Finance Committee, with jurisdiction for trade policy, is also drafting a bill to circumscribe the president’s authority under the statute. The chairman’s bill is expected to look similar to the Toomey-Warner legislation, and there is optimism the effort could gain a veto-proof two-thirds majority.
Larry Kudlow, the director of the National Economic Council, recently told reporters that the president would likely veto a bill that restrains his use of Section 232, in part because the White House wants to preserve negotiating leverage. At least the administration is being honest about its true intentions.
The United States has a history of negotiating trade agreements that lower foreign trade barriers without resorting to preposterous claims that trading partners’ products jeopardize U.S. national security. Washington successfully negotiated numerous multilateral rounds under the GATT and WTO, along with 14 different regional and bilateral free trade agreements with 20 different countries. The Trump administration should try this approach rather than threatening would-be trading partners.
If the administration continues with its protectionist campaign and Congress fails to act, the consequences could be devastating: Individuals and firms relying on imports will continue to face higher prices, domestic products will become less competitive globally, complex supply chains will be uprooted, U.S. exports will face unnecessarily high barriers in foreign markets, and valuable foreign alliances will be damaged. As the political scientist Daniel Drezner recently argued, the world’s lurch toward protectionism could pave the way for hot wars. Certain international relations scholars and policymakers like Cordell Hull, Roosevelt’s secretary of state and the architect of today’s global rules-based trading system, have argued that freer flow of goods and investment across borders helps facilitate peaceful relations between countries.
It took an enormous amount of foresight and effort to cultivate the U.S.-led rules-based trading system. Though it is not perfect, it works well. Trump cannot be trusted to maintain this system. Congress needs to act so that the United States does not squander 80 years of goodwill with partners and of trade-facilitated economic growth.
Image credit: akatz
