Arguments over tariffs invariably cast the protagonists as large, impersonal units: the U.S., China, the EU, corporations such as Toyota and Harley-Davidson. We are asked to take a side between actors too big to comprehend, perhaps in the hope that we will slip into a team mentality and assume that any costs incurred are simply coming out of the pockets of the rich or abstract, with little real effect on the rest of us. This is a grave mistake. Tariffs, both those enacted by the U.S. and those they provoke in retaliation, impose limitations on the behavior and livelihood of individuals. This has been made vividly clear recently by the plight of Maine’s fishermen, who are caught right in the middle of the White House’s trade war.
China is one of the largest markets for Maine shellfish, but because the Chinese have reacted to the U.S. tariffs by imposing some of their own, that is beginning to change. With tariffs now set at 40 percent for live lobster and 35 percent for processed lobster, Maine’s seafood producers are taking a hit. Rather than pay a considerably higher amount in taxes by importing from Maine, Chinese businesses are shifting to Canadian suppliers, whose lobster exports have not been subject to the new tariffs. Canadian waters are home to the same species of lobster, so the trade war makes their product a direct, cheaper substitute.
The fact that Chinese businesses are still importing the same type of lobster shows that this shift is not the product of market forces. It is the completely avoidable result of government interference. Indeed, before the advent of the trade war, exports of Maine lobster to China had been increasing. Last year alone, they tripled, and fishing companies in the state have invested in larger facilities to in response to the boom in sales. One business (among many), The Lobster Co., had expanded its capacity so that it could ship out 100,000 pounds of lobster a day (up from the 15,000 pounds a day it sent to China last year). Businessmen spent more, knowing that they were set to sell enough to make up for the investments. Now, they continue to face those costs, but without the expected profits. The co-owner of The Lobster Co., Steph Nadeau, is not sure if her business, which employs 18 people, will survive the year. In addition to its direct employees, it sources its lobster from dozens of lobstermen. These freelancers may now find themselves without a market to sell their catch to.
There was no need to impose these tariffs, let alone at such a high rate. The tariffs have no effect on actual unfair business practices in China. The fact that countries such as China would retaliate with tariffs of its own was no secret. And the problem is going to get even worse, as the administration is proposing yet another escalation in this trade war.
The imposition of new taxes, as much as anything else, hurts the ‘forgotten man.’
The first round of American tariffs on China amounted to a staggering $34 billion, which was matched by China in its response. Undeterred by the havoc American businesses are facing, the White House now wants to impose $550 billion in tariffs, with $200 billion planned as the first installment. Let’s put this in perspective: Trump and the congressional GOP have boasted non-stop about the approximately $150 billion tax cut they passed last year, attributing all kinds of economic benefits to it. Now, Trump is unilaterally levying well over that amount in new taxes — specifically tariffs, which are one of the most anti-growth types of taxes around. In addition to new taxes that American businesses will be paying, we should expect the sales of American products to drop further when China retaliates again. The GOP was once stereotyped as being the party of business, tax cuts, and not much else — is it now aiming to be the anti-business, pro-tax party?
It is fashionable on the right to emphasize the idea of the “forgotten man” — those individuals trampled underfoot when the state takes on grand programs — as an example of the human cost of government action. These are the people whose lives and livelihood end up ruined simply as a result of government activity. But it is not only the formation of new federal agencies, welfare programs, or regulatory regimes that impose such costs. The imposition of new taxes can have just as radical an effect.
As the small businesses who had been helped by tax reforms suffer under the new planned tariffs, will they speak out? The U.S. is already losing from these attempts to tax China, whereas Chinese buyers have found that much of American agricultural products are just as easily sourced from Canada.
Congress can try to sign legislation to take away this unilateral tax authority from the president. After all, this authority was originally designed for tariff cuts. Last week 88 senators voted on a nonbinding resolution to censure unilateral tariff-making. Even should the president veto a bill that restricts his tariff-making power, given pro-trade sentiment among Republicans and anti-Trump sentiment among Democrats, passing such a bill with a congressional supermajority could, in theory, be achievable. In any case, it is the right thing to do. The framers of our Constitution wrote that the power to tax should rest with the body most responsive to the people — the House of Representatives. That one man exercises it today would horrify them.
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