Trump Could Make Good On Tariff Threats, Thanks To Existing Laws

Jan 7, 2017
Originally published on January 7, 2017 2:49 pm
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SCOTT SIMON, HOST:

President-elect Trump unleashed a series of tweets at automakers this week. He threatened to slap border taxes of up to 35 percent on certain cars made in Mexico and sent in to the U.S. Ford, GM and Toyota have all been targets. Will President Trump have the power to actually do that? NPR's economics correspondent John Ydstie joins us.

John, thanks so much for being with us.

JOHN YDSTIE, BYLINE: My pleasure.

SIMON: Let me just read one, as an example. President-elect Trump tweeted, quote, "Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. No way!" - bold face - "build plant in U.S. or pay big border tax." Could he actually force the company to do that?

YDSTIE: Well, Scott, you're right to wonder about this because the Constitution couldn't be clearer. Article I Section 8 gives the Congress the power to regulate commerce with foreign nations. So I asked your question to Gary Hufbauer, the venerable trade expert over at the Peterson Institute for International Economics. And he said he thinks members of Congress might be surprised to find out just how much of their power they've ceded to the president.

GARY HUFBAUER: There are several laws passed over the last century which give the president enormous power to restrict trade.

SIMON: What are a couple of those laws, John?

YDSTIE: There's one that gives the president a huge amount of power - the Trading with the Enemy Act of 1917. It says the president has, essentially, unlimited power to restrict trade during time of war.

SIMON: But, of course, Congress, as it's often pointed out, hasn't declared war since the second world war, even though, of course, U.S. troops have been in combat plenty of times. Does the Congress have to declare war to activate that power?

YDSTIE: Well, no. In fact, in the 1970s, President Richard Nixon used this law to justify temporarily raising tariffs across the board on all products coming into the U.S. He cited the Korean War, an undeclared war and a war that had been over for a couple of decades by the time Nixon levied these tariffs. So according to Hufbauer, President Trump will have the power to slap a 35 percent tariff on the Mexican auto imports or a 45 percent tariff on Chinese imports and could simply cite the conflicts in Syria, Iraq or Afghanistan as justification.

SIMON: But wouldn't there be some hesitancy to use this law because, I mean, implying that Mexico is our enemy or we're at war with them would, at the least, would not seem to be neighborly. I wonder if there's any other law that could be invoked.

YDSTIE: You know, there are several more generic kinds of trade laws. One is Section 301 of the 1874 Trade Act. It allows presidents to slap tariffs on countries that discriminate against or take unjustified measures against the U.S. In fact, tariffs under that law are currently in effect, including on some fine, imported French cheeses, which you're probably already aware of.

(LAUGHTER)

SIMON: Actually, John, I only eat Wisconsin string cheese.

YDSTIE: (Laughter).

SIMON: So President Trump would have to decide that Mexico is discriminating against the U.S. to be able to slap tariffs on cars coming across the border from Mexico.

YDSTIE: That's right.

SIMON: Yeah, but these laws only allow tariffs against countries. Trump singled out Ford, GM and Toyota in his tweets, which are not sovereign nations. Could he slap any kind of tariffs on an individual company?

YDSTIE: Well, Gary Hufbauer says probably not. But he could define the type of car in a detailed way, like a hatchback vehicle weighing 1,800 pounds, to target cars from the companies that he's trying to punish.

SIMON: So what happens if President Trump follows through and he levies 45 percent tax on goods imported from China?

YDSTIE: Well, I asked that question to Doug Irwin, who's a trade expert at Dartmouth, and he says it's pretty clear from experience that China would retaliate hard.

DOUG IRWIN: They've already done that in the past when we have imposed the anti-dumping duties or special duties on some of their goods. All of a sudden, the Chinese airlines start buying Airbus instead of Boeing. They start buying Argentine soybeans instead of American soybeans. They really shift their product purchases away from the United States in response.

YDSTIE: Scott, Irwin says some limited, targeted tariffs might be successful. But if Trump uses these powers in an undisciplined way, it could spark a trade war and it could hurt the U.S. economy and the global economy.

SIMON: NPR's John Ydstie, thanks so much for being with us.

YDSTIE: You're welcome. Transcript provided by NPR, Copyright NPR.