This publication has for years urged Congress to take back the authority over tariffs that it needlessly delegated to the executive branch. Some legislators have introduced legislation to do so, but neither party’s congressional leadership has been interested in fulfilling their constitutionally charged power to set “taxes, duties, imposts, and excises.” This is unfortunate, to put it very mildly. Maybe, however, now that President Donald Trump has slapped historically high tariff rates on imports and seems intent on overturning a trading system that has brought prosperity to much of the world, especially the United States, Congress will get serious about the matter.
For the first almost 150 years of the republic, Congress actively engaged in raising and lowering tariffs with legislators, making deals on which goods would be taxed and at what rates. They did this to please farmers and manufacturers in their respective districts. It was not a good system in that it meant Washington was picking winners and losers, which is not something it does well. This modus operandi started to change in the Progressive Era when Congress passed the Reciprocal Trade Agreements Act of 1934, which delegated to the president the then-unprecedented power to lower or raise tariff rates unilaterally on specific imported goods.
Congress expanded these powers with the Trade Expansion Act of 1962, the Trade Act of 1974, and the International Emergency Economic Powers Act of 1977. However critical one can be of Trump’s tariffs, and we are highly critical, it cannot be argued that he is exceeding his authority. Congress goofed repeatedly by delegating these powers, and now the chief executive is using them. While the Constitution granted Congress, not the executive, the power to set tariffs, Congress has meekly handed them over, and the Supreme Court has blessed the transfer of power.
The danger of granting such far-reaching power without congressional oversight or input now lies exposed by Trump’s Liberation Day announcement. The tariff rates he chose for each country appear to have nothing to do with real monetary or non-monetary trade barriers. Instead, they seem to come from each nation’s current trade imbalance with the United States. The White House has been neither transparent about how these numbers were produced nor rational in producing them. Nor has it been transparent about what the targeted countries need to do to lower their assigned tariff rates.
The White House says the new tariffs will raise $600 billion annually and $6 trillion over the next 10 years. No matter how Trump tries to spin it, these extra revenues will be paid by the public through higher prices, just as they — that is, all of us — ultimately pay for higher corporate taxes, which get passed down the line in the form of higher prices. As it stands, this is the second-highest tax hike in the nation’s history, the highest being the Revenue Act of 1942, which Congress passed to pay for World War II.
LITERALLY JUST A LIST OF TRADE.GOV’S CONTRADICTIONS OF TRUMP’S BOGUS ‘RECIPROCAL TARIFFS’
The slapstick way these tariffs appear to have been put together belie White House claims that they will ultimately help spark a manufacturing renaissance. The tariffs are set across the board, which shows that no consideration was made for the costs of imported inputs businesses need for factories in the U.S. Furthermore, Trump has made it clear that every one of the rates issued this week is open to negotiation and change at any time. This level of uncertainty will stymie investment. Get ready for a sharp downturn in job creation, wealth, and economic growth.
Sens. Chuck Grassley (R-IA) and Maria Cantwell (D-WA) have reportedly introduced new legislation that would require congressional approval of all tariff rate changes within 60 days. Trump would probably veto such legislation if it ever got to him, but it is nevertheless encouraging to see bipartisan movement on Capitol Hill to reclaim tariff powers. If the recession Trump’s tariffs seem likely to cause is severe enough, the next president may be inclined to sign such legislation.