Report: Trump considering a five-percent tariff on foreign goods via executive action; Update: 10 percent?
After I tweeted this link this morning, various Trump fans tweeted back that the sourcing for the piece is thin. It’s nothing but anonymous people, some of them representing “business interests” that are hostile to Trump’s protectionism, discussing a proposal that might happen. Okay, but why the rush to shoot down a story that jibes with the new Republican political and economic orthodoxy? We support bold acts of executive action now. And we support tariffs, no? Making foreign goods more expensive by slapping new taxes on them is how we’re going to help the American working man, or something.
Free-trader Paul Ryan will be upset, but who cares? When push comes to shove, he and his “conservative” caucus will roll over. Especially if it’s a “small” tariff like this one.
Two sources who represent business interests in Washington tell CNN that the man in line to be White House chief of staff, Reince Preibus, has told key Washington players that one idea being debated internally is a 5% tariff on imports.
These sources, who spoke on condition of anonymity because the conversations with the Trump team were arranged as confidential, said the reaction was one of fierce opposition. Priebus, the sources said, was warned such a move could start trade wars, anger allies, and also hurt the new administration’s effort to boost the rate of economic growth right out of the gate…
[One] source voiced new alarm Tuesday after being told by allies within the Trump transition that defending new tariffs was part of the confirmation “murder board” practice of Wilbur Ross, the President-elect’s choice for commerce secretary…
“The way it was cast to me was that (Donald Trump) and Ross are all over it,” said one source. “It is serious.”
One business lobbyist group which CNN didn’t name has already prepared talking points attacking the would-be tariff, a sign of how seriously they’re taking the threat. The executive action angle to all of this seems not so controversial, frankly, as current trade laws already give the president power to impose tariffs if he concludes that the U.S. has been subjected to unfair trade practices or faces some sort of security threat. Bush, for instance, imposed steel tariffs in 2002 only to lift them the next year. What’s interesting about Trump doing this unilaterally is that it would leave the congressional GOP freer to disagree with him — if they wanted to — than they’d be if they had to vote on the proposal and risk embarrassing Trump by shooting it down. Would a Republican from a working-class district speak out against Trump’s tariff, knowing that the policy will take effect even if he opposes it, or would he keep his mouth shut for fear of alienating blue-collar Trump voters who support protectionist policies? If Republicans hold their tongues now, Trump might take that as a sign that he can be more aggressive on trade later, including imposing larger tariffs, with minimal political blowback.
That raises another question. Why five percent? This is a guy, after all, who’s talked at times about dropping a 35-percent bomb on goods produced in Mexico by American companies that outsourced jobs. He told the New York Times this summer that he’d like a 45 percent tax on all Chinese imports, the trade-war equivalent of a nuclear exchange. Five percent seems like a combination of testing the water economically, i.e. starting small with protectionism to gauge the effect on jobs and reaction abroad before getting more aggressive, and pandering politically, a small gesture to show loyal Trump voters that he meant what he said about putting America first. That’s another reason why business-friendly Republicans might hold their fire. With Trump in his honeymoon period and expected to keep some campaign promises early, they might tolerate a modest tariff as candy for the base in the hope and expectation that Trump, having now checked this box, won’t try to add further tariffs in the future. According to CNN, business lobbyists are leaning on him to skip the tariffs altogether and try to please his voters instead by pressuring Canada and Mexico to modernize aspects of NAFTA. I don’t know, though — a man who just appointed Peter Navarro, author of “Death by China,” to a top position is a man who seems to want a wartime consigliere on trade. And war implies more than just kibitzing with Justin Trudeau about automation over lunch.
Wal-Mart, Target, and Macy’s shares were all down sharply as of early afternoon, as I write this, presumably in part because of CNN’s tariff report. That might be the best way to get Trump to rethink tariffs. A man who promises so much winning that you’ll get bored of winning won’t react well if his administration begins with a market downturn driven by unfavorable reaction to his new trade policy. Stay tuned.
Update: Sounds like Trump has already altered the deal, with CNN now reporting that the tariffs might go as high as 10 percent. Pray that he doesn’t alter it any further.