Politico reporters recently sat down with Senator Chuck Grassley (R‑Iowa), and asked his opinion about the future of the world trading system and what might be going on in President Trump’s head with regard to the increasing recourse to tariffs as a policy tool. Here’s what he said:
Grassley on Trump: “He believes in tariffs as a tool to get a negotiation as opposed to being an end in themselves. Then he hasn’t changed anything. If he has used tariffs because he believes they’re good, and I know he says that, but I don’t believe he actually believes that. I don’t see how he could believe it.”
“[H]e hasn’t changed the Republican Party. We’re still a party of free trade … I surely hope that he has learned from history that lower tariffs are good.”
The first claim, that Trump is using tariffs as a negotiating tactic, was generally accepted when he first started applying tariffs. For example, the imposition of Section 232 tariffs on steel and aluminum in the name of national security were thought to be temporary, or at least, countries could negotiate exemptions. Korea, for instance, agreed to steel quotas as part of the renegotiated Korea‑U.S. Trade Agreement (KORUS). Brazil and Argentina agreed to quotas as well. Australia is the only country that has secured a full exemption from both tariffs and quotas. Canada and Mexico were led to believe tariffs would be lifted at the conclusion of negotiations of the U.S.-Mexico-Canada Agreement (USMCA), but even after the agreement was signed last November, the tariffs have remained in place. While the parties appear to be getting closer to a resolution on this, it may just end up resulting in trading the tariffs for quotas, which can be an even worse outcome than tariffs themselves, depending on how high the quota amounts are.
As it turns out, there does not seem to be an end in sight for these tariffs, as President Trump has claimed they are responsible for a booming steel industry:
But the steel industry is far from thriving. Despite evidence that only a handful of firms are benefitting through increased prices, steel consuming industries are picking up the tab, and hiring has stagnated, Trump continues to laud his policy. And when the lion’s share of imports come from our closest allies, Canada, Mexico, and the European Union, the national security rationale for these tariffs makes little sense.
If this were only about steel, perhaps we could be convinced that the use of tariffs as a tool to gain trade concessions from other countries may be a limited exercise. However, in addition to steel and aluminum tariffs under the cover of Section 232, Trump has also imposed tariffs through Section 201 on washing machines and solar products, which impact $1.9 billion and $5.2 billion of U.S. imports in these products, respectively. In addition, Section 301 tariffs have been imposed on China, and are being steadily expanded to include more products and at higher rates.
Nothing President Trump has said seems to suggest these tariffs will be going away anytime soon. In fact, he seems to accept tariffs as an end in themselves, contrary to what Senator Grassley claims. While it may be easy to brush off Trump’s tweets as bluster, he has continually shown he is willing to put his money where his mouth is (especially when U.S. consumers are paying for it):
Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do. Our Farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!
— Donald J. Trump (@realDonaldTrump) May 10, 2019
Not only is he factually wrong that tariffs will make the country rich, what’s worse is that he actually does believe this. The last tweet even reveals his preference for tariffs over trade liberalization “of the traditional kind.” In his recent book, Bob Woodward has noted that President Trump wrote “Trade is Bad” in the margins of a speech, and when asked by former advisor Gary Cohn why he espouses such views, Trump responded “‘I just do,’ Trump replied. ‘I’ve had these views for 30 years.’” A video of Trump appearing on the Oprah Winfrey show in 1998 that has been circulated on Twitter adds further evidence.
And despite all of this, Senator Grassley claims that the Republicans are “still a party of free trade.” Sure, he may have asked for Section 232 tariffs to be removed from Canada and Mexico before the USMCA can go up for a vote in Congress, but what about all the other countries affected? What, in fact, has the “party of free trade” done to combat the protectionist instincts of the president? While there have been a limited number of bipartisan efforts to limit the president’s ability to levy tariffs, none of these actions have borne any fruit. Senator Grassley has not endorsed bills from Sens. Pat Toomey (R‑PA) and Rob Portman (R‑OH), though he has vowed to put forward his own legislation.
The U.S. Constitution vests Congress with the authority to regulate commerce, but over the years it has ceded that authority. If the current environment does not invigorate Republican members of Congress to work to take back this responsibility, it is hard to take claims that they value trade as a benefit for Americans seriously. Meanwhile, polls suggest that most Americans support free trade, and Democrats have surpassed Republicans as its most ardent supporters. We have yet to see whether Democrats will take up the mantle of free traders, but in the meantime, the Republicans certainly can no longer claim that title, as they continue to make excuses for the president’s actions. The party of free trade? No. More like the Grand Old Protectionists.