According to CNN, the incoming Trump administration is considering imposition of a 10 percent across the board tariff on American imports. That’s bad economic policy. But even worse, the Trump team wants to impose these tariffs through “executive action or as part of a sweeping tax reform package they would push through Congress.” In other words, the Trump team either wants to utilize either pure presidential power, or they want to use the desire for tax reform to cram down counterproductive tariffs.
There are two issues to discuss here: the tariff policy, and the use of executive orders. Both are disastrous.
First, the tariff policy. Trump has apparently put Democrat Wilbur Ross in charge of economic policy, and Ross wants tariffs. He’s also put Peter Navarro, author of Death by China, on his National Trade Council; Navarro believes we’re in an undeclared trade war with China already. Noah Rothman of Commentary sums up the dangers well:
According to experts, China could move to block the import of the 30 million tons of U.S. soybeans it is expected to import next year, specifically targeting Republican-led agricultural states. It may also cancel some of the existing orders for 292 Boeing jets, creating severe economic pressure on the U.S. manufacturing industry and on firms that lobby Washington for giants like Boeing. Large multi-national corporations like General Motors may find their access to the world’s largest consumer market blocked…. Absent the TPP or something similar, U.S. agricultural goods will continue to face steep barriers in Asian markets (U.S. beef, for example, faces a 38.5 percent tariff in Japan), and Australian cattle ranchers will almost certainly displace U.S. ranchers in the Japanese market. According to the Wall Street Journal, this condition already costs U.S. cattle ranchers $400,000 per day in sales, and the loss of the TPP is going to further erode U.S. market share in Japan, its largest export destination.
A 10 percent tariff would also harm American consumers, who would have to shoulder an indirect tax of at least $200 billion. Tariffs have always been bad policy for the United States. As I wrote at National Review in June:
The history of protectionism in the United States is long and inglorious. The so-called Tariff of Abominations, initiated under John Quincy Adams in 1828, helped drive distrust and conflict between the North, which wanted it, and the South, which didn’t. The McKinley Tariff of 1890 was so unpopular that it resulted in the Republicans’ being booted from control of Congress and the presidency. One of the worst political deals of all time — the passage of the 16th Amendment, allowing the federal government to collect an income tax — occurred only because Republicans were so addicted to protectionism that they agreed to accept the income tax in return for Democratic support for tariffs. The disastrous Smoot-Hawley tariff, which helped deepen and lengthen the Great Depression, was the last gasp of a failed ideology; the revival of protectionist ideology in Latin America has doomed the people of Venezuela, among others, to breaking each other’s heads in disputes over loaves of bread. The history of free trade on the other hand demonstrates that, when unshackled from government bureaucracy, private parties trading with one another both see benefit. The American Revolution was fought largely in an attempt to break free of protectionist measures from the mother country. The early republic placed low tariffs on foreign goods to raise government revenue, but not out of a widespread desire to “protect” domestic industry. America’s economic growth during the Tariff of Abominations period came largely from territorial expansion to the West, not from locking out competitors from domestic markets. In the aftermath of World War II, free trade helped America outcompete the Soviet Union and raise the standard of living more dramatically both in the United States and across the world than ever before. America’s global power was built not on the back of protectionism, but on the back of free trade.
Second, the use of executive authority. The Constitution itself gives Congress the power to “regulate commerce with foreign nations.” The only excuse for a president using executive authority to unilaterally impose tariffs is delegation of power by Congress to the president. Justin Wolfers of The New York Times summed up the laws that could give Trump authority on tariffs:
Trade Agreements Themselves. Most major trade agreements include the ability for a nation to withdraw with six months’ notice. Trump could take advantage of that to pull out of NAFTA unilaterally, or the World Trade Organization.
Trading With The Enemy Act of 1917. During World War I, Congress delegated power to the president to regulate international trade generally under the Trading with the Enemy Act; this has generally been used during times of national emergency, however, not merely as an instrument of policy. As Wolfers points out, Nixon added a 10 percent “import surcharge” in 1971 by declaring economic emergency.
International Emergency Economic Powers Act of 1977. This was designed to allow the president to levy sanctions on foreign nations in case of “unusual and extraordinary threat.”
Trade Expansion Act of 1962. Congress delegated to the president the power to raise tariffs on national security grounds.
Trade Act of 1974. Congress gave the president the ability to raise tariffs to punish “unfair trading practices.” This is the law George W. Bush invoked to unilaterally raise tariffs on steel.
There’s no question that Trump could invoke many of these laws to justify his use of executive authority. But it would be unprecedented in modern times, and it would be unjustified by the Constitution. The fact that the president could singlehandedly cripple American industry with the stroke of a pen is a testament to the cowardice of Congress over the course of the century, handing over increased power to the president to regulate commerce and abdicating its own duty in the process.
Congress should force Trump to own his tariffs. If he wants them, let him pursue them himself. Or, even better, they could strip the president of his authority on trade. That would certainly be the better practice. Executive authority was never meant to extend this far.