Tariffs Are Here to Stay

T ariff foes are hoping that bilateral negotiations and market pressure will force President Donald Trump to retract his controversial tariffs. They’re surely celebrating now that Trump has paused his large tariffs for 90 days in favor of a 10 percent uniform “reciprocal tariff,” even though he has also increased the rate imposed on China to 125 percent.

All this shows how committed Trump is to the use of tariffs as a means of changing the global trading system. The fact is that Trump holds all the cards in this game. If he’s committed to using some level of tariffs to remake the global trading system — and he seems to be — he’s going to get his way.

Economists deride Trump’s deep, decades-long belief that the balance of trade is akin to a national profit and loss statement, but Trump thinks that it’s bad for the United States to send hundreds of billions of dollars a year out of the country in exchange for cheaper or better goods. His sense of loss is compounded given which nations are receiving this money and how they treat American exports. NATO allies like Germany, Italy, and Canada, for example, run up massive trade deficits with the U.S. yet massively underspend on their own defense.

America, in Trump’s view, is paying twice: once indirectly for these allies’ economies, through the trade deficit, and again directly for their defense. As the kids say, he’s not wrong about that.

Then there’s China. Our major global competitor is also the leading recipient of U.S. dollars through trade. We’re indirectly paying for the military that is challenging our allies in the Pacific. Why should we keep selling them the rope with which they intend to hang us?

Many nations also impose massive trade barriers to some American goods and services, preventing us from narrowing the trade deficit through competition. The European Union, for example, keeps much of America’s beef, chicken, and corn out by a variety of nontariff barriers. China’ state-driven economy, to subsidize the growth of domestic firms, systematically limits the ability of U.S. producers to establish a strong position in a host of markets.

Given these facts and Trump’s concerns, there’s little chance that an offer for reciprocal zero tariffs would break the logjam. Trump would likely insist, instead, that any deal with any nation be comprehensive and fair, with the goal of dramatically reducing the U.S. trade deficit.

Besides, agreeing to zero tariffs with the U.S. would severely damage the economies of nations that have used public policy to artificially create a trade surplus. They would not do that unless they absolutely had to, and they likely won’t get to that point until the tariffs really start to bite.

Even that probably wouldn’t eliminate tariffs completely. Trump would be a fool to drop his most potent weapon in exchange for promises. It would be much smarter to retain either a lower tariff, the future removal of which would be an incentive to enforce any deal, or make clear his intention to reimpose tariffs in the event the deal’s terms are not upheld.

“Trust but verify” was Ronald Reagan’s approach to arms control treaties with the Soviet Union. It will likely be Trump’s approach to trade, too, and Trump’s recently announced pause — plus the baseline 10 percent tariff policy — would seem to reinforce that conclusion.

Trump also holds the cards with respect to Congress’s ability to remove or limit his power to impose tariffs. That’s because he can veto any appropriations bill, which could be overridden only by a two-thirds vote in both houses. He has already threatened to veto any bill that would restrict his tariff powers. It would take the defection of 20 GOP senators and about 80 GOP representatives, who would need to vote in step with a unanimous Democratic contingent, to override that veto. That’s not going to happen in the foreseeable future.

Trump’s use of the annual appropriations process will likely result in Congress’s writing some level of tariffs into federal law, too. Trump touts the massive amount of revenue that tariffs bring in, and that revenue would dramatically reduce the federal budget deficit.

That’s money that would also help fund Republican priorities such as extra defense spending, Trump’s immigration agenda, and additional tax cuts to his 2017 bill. Republicans are not going to want to jeopardize the one bill that can avoid a filibuster by Senate Democrats simply to fight their own, popular president on his major priority.

The fact is that the era of globalization is over. That doesn’t mean global trade will fade away, but it does mean that government policies that favor return on investment and cheap goods over national security and the real wages of Americans without four-year degrees are going away.

Trump has fought for a decade to get to the point where he can do this. A supermajority of Republican primary voters want this outcome, even if they are not yet completely sold on tariffs as a means to it. His popular-vote victory shows that a plurality of Americans want it too.

Ideas have consequences, intended and unintended. The globalization ideal led to massive global wealth and social dislocation in the wealthy world, as well as to China’s threatening rise. Trump was elected to stop these unintentional consequences from destroying the American way of life. He sees tariffs as an essential part of fulfilling that mandate. Expect him to use every weapon at his disposal to get his way.