“The bureaucratic process established by the Trump administration to determine which American companies should be exempted from paying tariffs on imports from China is a black box of “inconsistencies” and poorly documented decision-making, according to a new audit.
In a report published last week, the Government Accountability Office (GAO) cast a critical eye on the so-called “tariff exclusion process” created in 2018 as part of the Trump administration’s efforts to slap tariffs on a wide range of imports from China. The process, overseen by the Office of the U.S. Trade Representative, allowed American businesses to appeal to the federal government for permission to not pay tariffs if they could demonstrate that a given product was not available from other sources, or if a business faced “severe economic harm” due to the tariffs.
Between 2018 and 2020, American businesses submitted more than 53,000 exclusion requests. The vast majority—87 percent—were denied, and most of the denials were on the grounds that the company failed to demonstrate sufficient economic harm to the Office of the U.S. Trade Representative, the GAO found.
In other words, federal bureaucrats reviewed tens of thousands of statements from companies pointing out how the Trump administration’s tariffs would cause economic harm—because, yes, Americans paid for the tariffs—then discarded most of those requests because the harms were not “severe” enough.
What’s even worse is that there’s very little in the way of objectivity or due process afforded to companies that had their exclusion requests denied. Soon after the tariffs were imposed, members of Congress warned that the exclusion process lacked “basic due process and procedural fairness” and that it could be “abused for anticompetitive purposes.” As Reason previously reported, business owners have complained that simply getting a decision one way or the other can take months. And there is no way to appeal the rulings.
The new GAO report confirms some of those concerns.”
“tariffs are always about protecting certain industries, and protecting certain industries always invites influence-peddling.”
“American companies were glad to see Biden review Trump’s trade policies toward China, but eight months later, they have seen little change on tariffs or other issues bedeviling their business in the world’s second-largest economy.”
“Despite being in place since 1962, the trade embargo has plainly failed to accomplish its primary goal of toppling Cuba’s regime. If anything, the policy has likely bolstered the regime by allowing the communist government to blame the U.S. for its own economic problems, as Cuban President Miguel Díaz-Canel did on Sunday. The trade embargo has contributed to the Cuban government’s impoverishing of millions of Cubans while limiting Americans’ economic freedom, too. That it remains in place nearly three decades after the fall of the Soviet Union shows that America’s foreign policy towards Cuba has failed to learn the primary lesson of the end of the Cold War: Economic freedom is the best weapon to aim at communism.”
“Cuba’s government is authoritarian, but there should be no mincing of words about this. Communism is what broke Cuba. The authoritarianism on display is merely the natural evolution of communist regimes—a pattern of economic and political repression that has been tragically repeated in too many corners of the world during the past century.
Biden’s statement is right to conflate the lack of economic freedom with long-running political repression in Cuba. That’s exactly why America’s trade embargo is such a backward strategy, one that assumes economic and political freedom aren’t fundamentally linked.
Look at what happened when the Obama administration loosened some of the rules banning Americans from traveling to Cuba as part of an effort to reestablish diplomatic relations. Even with the trade embargo still in place, that slight policy change helped create a boomlet of entrepreneurship amid then-Cuban President Raul Castro’s thawing of tight state control over private businesses on the island.”
“Since taking over as Cuba’s president in 2018, Díaz-Canel has cracked down on Cuba’s private sector. Former President Donald Trump helped him smother the nascent economic reforms by reversing some of Obama’s attempts to normalize U.S.-Cuba relations and by slapping new economic sanctions on Cuba just before leaving office in January.
Advocates for maintaining the embargo against Cuba argue that increased trade and tourism would enrich and strengthen the communist regime while failing to aid most Cubans. This was basically Trump’s approach—one that reflects longstanding hardline conservative views about how to handle the communist state just 90 miles from the Florida coast. “There is zero reason to delude ourselves into believing that ‘engagement’ will get the tyrants in Havana to change their ways,” Sen. Marco Rubio (R–Fla.) wrote in January.
This is a clever misdirection. Where is the evidence that disengagement is working? The embargo has been in place for nearly six decades. How much longer should we wait? How much longer should the people of Cuba have to wait?”
“As the people of Cuba strive to cast off their communist oppressors, the United States can do more than simply offer words of support. Undoing Trump’s restrictions on the remittances that many Cuban Americans send to their families still trapped under the communist regime would be a great place to start.
If Biden were to reinstate Obama’s travel and economic policies toward Cuba and call on Congress to end the failed trade embargo, it would be unlikely to immediately change the reality on the ground in Havana. But it would signal to the Cuban people—and to the country’s potential future leaders in the event of a full-scale toppling of the regime—that the United States is prepared to let trade and tourism serve as vital economic and political lifelines for the island’s long-suffering residents. And it would remove one excuse the Cuban government routinely uses to dismiss the failings of communism.”
“China had become the second-largest export market for American-made cars by 2017, the last full year before Trump’s trade war began. After a series of tit-for-tat tariff increases between the U.S. and China, however, American automotive exports to China fell by more than one-third. Higher tariffs on imported car parts from China raised costs for automakers in America, while China’s retaliatory tariffs on American-made cars hiked prices and reduced demand in China.
To avoid those costs and to evade increased uncertainty, some carmakers began shifting their supply chains—but not in the direction the White House was hoping.
BMW, for example, shifted much of the production of its X3 sport-utility vehicle from Spartanburg, South Carolina, to China after reporting that tariffs had cut the company’s American profits by about $338 million in 2018. The higher costs imposed by the trade war caused Tesla to announce that it was “accelerating construction” of a new plant in Shanghai.
Overall, the number of American automating jobs peaked in September 2018, shortly after Trump’s trade war began, and then declined during 2019 and 2020.
The signing of the “phase one” trade deal with China did little to stop or reverse those shifts. Even though China pledged to increase its purchases of American-made vehicles and car parts as part of the agreement, exports are still lagging well behind their pre-trade war totals, according to the PIIE report.”
“Trump believed that hiking tariffs would reduce America’s imports from China, allowing the gap between the value of those imports and the value of America’s exports to fall. What he failed to grasp, however, is that many of those imports—especially when it comes to manufactured goods—are materials necessary for making the items that American companies end up exporting back to China: like cars.
Higher costs imposed on imports ended up slowing American exports—and thus the trade deficit actually grew. Meanwhile, companies could avoid the cost of Trump’s tariffs by shifting production out of the United States, and some chose to do that.
Biden, so far, seems unwilling to remove Trump’s tariffs. By announcing a misguided “Buy American” policy for government procurement, Biden is also expanding on some of the Trump administration’s protectionist manufacturing policies.
If the past few years are any indication, all Biden will likely accomplish by this is to further erode America’s industrial base by trading away automaking jobs in exchange for the appearance of “toughness.””
“President Donald Trump’s declaration on March 2, 2018, that a trade war with China would be “good and easy to win” remains one of the defining moments of his four years in the White House.
That’s only because of how wrong the claim turned out to be. It deserves to live on in infamy alongside George W. Bush’s “mission accomplished” speech and Barack Obama’s “if you like your doctor, you can keep your doctor” promise. Like those, it oversold a complex, messy policy as simple and straightforward. Trump naturally took that presidential hubris to another level, and he paired it with unprecedented policy naivety. If winning a trade war were as simple as tweeting victory into existence with fake statistics, faulty economics, and the veneer of toughness, Trump likely would have succeeded. Unfortunately, that didn’t work.”
“Trump deserves some credit for reorienting America’s economic and foreign policies to recognize the threat posed by the Chinese Communist Party to freedom around the world. But his approach—which amounted to little more than levying higher taxes on $460 billion of imports and forcing Americans to foot the bill—was an abject failure.”
“China, of course, did retaliate. It drastically reduced agricultural imports from the United States. In 2017, the last year before the trade war began, China imported more than $19 billion in American farm goods, which fell to $9 billion in 2018 and rebounded weakly to $13 billion in 2019. Exports to other countries have been unable to make up the difference, leaving American farmers in the lurch.
The Trump administration responded by spending more than $28 billion in new farm subsidies to mitigate the totally predictable mess it made. By the end of 2020, federal payments accounted for one-third of all American farm income—as Trump’s trade war bailout was piled atop existing subsidies. Rolling back those payments will be politically difficult for future administrations, so they might be here to stay.”
“During his first week in office, Trump signed an executive order withdrawing the United States from the Trans-Pacific Partnership (TPP), a proposed 12-nation trade agreement that was a work-in-progress holdover from the Obama administration. In 2018, Trump launched his trade war by nonsensically declaring that steel and aluminum imports from places like Canada and Europe were somehow threats to U.S. national security.
All of that made a difficult confrontation with China more complicated than it otherwise would have been. A go-it-alone strategy was meant to project America’s toughness but a multilateral approach that lowered tariffs on imports from countries that compete with China would have been more effective.
Ironically, Trump also left America less capable of standing up to China in other ways—the president was reportedly hesitant to condemn China’s takeover of Hong Kong and was unwilling to speak out against China’s abuse of Uighurs because doing so might hurt trade negotiations.”
“When a Missouri-based power tool manufacturer was facing the prospect of higher costs due to new tariffs on imported saw blades, it turned to friends in high places for help—including Sen. Josh Hawley (R–Mo.).
Hawley has been an outspoken supporter of President Donald Trump’s destructive trade policies. In fact, he’s suggested that the president should have done more to dismantle the system of global trade. But Hawley was one of four members of Missouri’s congressional delegation to sign onto a letter sent in September 2019 asking the U.S. trade representative to grant a special exemption for SM Products, which is based in Kansas City.”
“The tariff costs facing SM Products were also hitting many other American manufacturers since much of American manufacturing is dependent on the ability to import low-cost inputs from China and elsewhere. But while some companies were able to find members of Congress willing to lobby on their behalf before the unelected board of trade officials who get to decide which tariff exemptions to grant and which requests to ignore, most other American businesses were less fortunate.”
“Once the tariffs were in place, the Trump administration set up a murky, confusing process for companies to request exemptions. It was, and is, a system that almost seems designed to be exploited by politically connected firms and individuals. Indeed, right from the start of the Trump trade wars, some major American steel manufacturers appeared to be exercising undue influence over the exemption process. Members of Congress have warned that the process lacks “basic due process and procedural fairness” and that it could be “abused for anticompetitive purposes.” After two years, the government’s own data suggest that’s exactly what has happened.”
“businesses that could afford to do so started hiring lobbyists to navigate the new tariff regime. The amount of money spent on lobbying work related to tariffs increased 900 percent as the trade war was getting started.”
“Most businesses, however, can’t afford to hire lobbyists and don’t have easy access to a sitting senator. They just have to pay the tariff bill.
These are all unintended but completely expected consequences of Trump’s trade war and his poorly thought-through plan to use higher tariffs as a cudgel against China. Not only did Trump’s trade policies run directly counter to his promises to “drain the swamp” by creating opaque bureaucracies that can decide the fates of small businesses all over the country, but they actually created incentives for the swamp to get even swampier.
In the warped reality the trade war helped to create, a company in Kansas City might not succeed or fail based on the quality of the power tools it is manufacturing, but on whether its owners know the right men in Washington.”
“Early on in his administration, Trump raised tariffs. The Cato Institute’s Scott Lincicome describes the president’s trade war as having “implemented five different tariff actions on almost $400 billion in annual U.S. imports (as of 2018) under three different laws with different rationales: ‘safeguards,’ ‘national security,’ and ‘unfair trade.'” We were promised ever-more jobs thanks to the tariffs. But as numerous academic studies have shown, the people who shouldered nearly all of the burden of these import taxes were not foreigners but, rather, Americans.
Protectionism reduces the overall wealth of the nation. Aside from a few favored and protected producers, Americans, in general, are made poorer. Consumers have to spend a higher share of their incomes to buy goods that they could otherwise get for less. As a result, ordinary Americans save less and have less to spend—even on nontariffed goods and services. The American producers of goods that use tariffed foreign inputs also see their production costs driven up, which drives their ability to compete down.
Unsurprisingly, the administration’s belligerent trade policies disturbed our trading partners. They retaliated with their own tariffs on American exports (to the detriment of their consumers). Adding insult to injury, the president’s erratic behavior, threats, and contradictory tweets about his trade policy likely spooked investors. The overall uncertainty and negative effects of the trade disputes surely dampened the beneficial effects of the president’s few good fiscal policies and regulatory reforms.
Take, for instance, the corporate income tax reduction as part of the Tax Cuts and Jobs Act of 2017. This reform should attract to the United States much foreign direct investment, or FDI. Yet, FDI flows into the United States were 10 percent lower in 2019 than during the two previous years. Simeon Djankov and Eva Zhang of the Peterson Institute for International Economics recently looked into the fall of FDI flows into the United States. “It is likely that the positive effect of the corporate tax cut in attracting FDI to the US,” they concluded, “was outweighed by trade disputes and threats of withdrawal, as well as actual withdrawals, from international treaties and organisations, which may have scared investors away.”
As for trade treaties, the Trump experiment is one that I hope we won’t repeat. First, he impulsively withdrew the United States from the Trans-Pacific Partnership, a multilateral trade agreement designed to oblige China to behave better on trade while opening up a large free-market zone with other Asian nations.
Trump renegotiated the North American Free Trade Agreement with overall negative net impacts, thanks to an anti-growth minimum wage and increased domestic content requirements. And he moved to extend high tariffs on Korean trucks as part of the one-sided reform of the George W. Bush-era U.S.-Korea Free Trade Agreement, to the detriment of U.S. consumers.
Finally, the president inflicted serious damage to the World Trade Organization—the great arbitrator of all international trade disputes—on the specious claim that the organization wasn’t sufficiently deferential to the United States. Here’s how Lincicome sums it up: The administration chose “to shut down the organization’s appellate body (basically the supreme court of trade dispute settlement) instead of negotiating new and necessary reforms in good faith (e.g., by teaming up with like-minded countries while offering actual concessions on longtime irritants like U.S. agricultural subsidies and ‘trade remedy’ rules).””
Optimistic View: What Trump will do. Lone Candle. 11 11 2016. https://www.youtube.com/watch?v=ttw8tSXNesk&feature=youtu.be The biggest problem with Donald Trump as president Lone Candle. 7 22 2016. https://www.youtube.com/watch?v=PexQGJj3C8w&feature=youtu.be More pain than gain: How the US-China trade war hurt America Ryan Hass and Abraham Denmark.
“the U.S. trade gap is on track to exceed $600 billion this year. That would be the highest since 2008, just before the global financial crisis.
The monthly deficit in U.S. goods trade with all other countries set a record high in August at more than $83 billion.
Trump has blamed the trade deficit on bad trade deals negotiated by his predecessors and unfair trade practices by other countries, but most economists disagree with that explanation.”
“A variety of factors contributed to Trump’s failure to eliminate the trade gap, which White House trade adviser Peter Navarro predicted in 2016 could be erased in one or two years.
Overall trade remains depressed compared to year-ago levels because of the coronavirus pandemic.
But the massive U.S. government stimulus payments to businesses and consumers have helped U.S. imports recover faster than U.S. exports. That explains why the monthly goods deficit has increased from the average level of $73.3 billion in 2019.
However, even without the pandemic, Trump’s practice of piling tariffs on China and selected other products like steel and aluminum was never going to turn around the deficit, most economists agree.”
” The large U.S. trade deficit is fundamentally driven by larger economic factors — like the fact Americans spend more than they save and have to borrow from abroad to finance the difference”
“Trump’s $1.5 trillion tax cut in 2017 contributed to that problem by running up the U.S. budget deficit.”
“Looking at trade in 2019, the last full year of data, the overall U.S. trade deficit fell by less than 1 percent from the previous year to $577 billion. However, the bilateral trade deficit with China fell by a much more impressive 17 percent to $345 billion as importers turned to other countries such as Mexico, Vietnam, Taiwan, South Korea, Japan and members of the EU.”
““We would say one of the big failures of the Trump administration with respect to trade policy is the failure to address currency misalignment in any kind of meaningful way,” said Thea Lee, president of the Economic Policy Institute, a left-leaning think tank aligned with union groups. “Putting a couple of sentences into the deal, but without a clear road map as to how it’s going to be instrumentalized, doesn’t really do very much.””
“Trump’s revised NAFTA agreement with Mexico and Canada does include strong protections for workers rights, which helped the pact win overwhelming approval in the Democratic-controlled House. But the fact that labor concerns were not addressed in the China agreement “just shows that the Trump administration is not driven by any principles in this area, but simply by political expediency,” Lee said.
The administration hails China’s agreement as part of the phase one trade deal to purchase $200 billion more of U.S. goods and services in 2020 and 2021, compared with the record it set in 2017.
But the data released on Tuesday shows that China is well behind on that goal. During the first eight months of this year, it had imported just $69.5 billion worth of U.S. farm and manufactured goods, compared to $80.2 billion in the same period in 2017.
U.S. farmers were hit so hard by Trump’s tariff war with China that his administration doled out more than $20 billion in emergency aid payments to help cushion the blow.
U.S. farm exports to China had reached as high as $25 billion annually a few years before Trump was elected. But they plummeted to $6.8 billion in fiscal 2019 after Beijing retaliated against Trump’s tariffs by raising its own duties on U.S. farm exports.”
“With the presidential election now just over two weeks away, President Donald Trump has mounted a frantic effort to ensure America’s farmers, a key Trump voting bloc, will support his flagging re-election campaign. In short, he’s shoving piles of cash their way.
The New York Times details the “gush of funds” Trump has promised U.S. farmers—with more on the way. Some say total farm subsidies could top $40 billion this year. The Times says the figure may be as high as $46 billion. Either figure would be a record.”
“Non-partisan observers have also labeled them political handouts. “The Government Accountability Office found last month that $14.5 billion of farm aid in 2019 had been handed out with politics in mind,” The Week reports. The Times, citing the same GAO report, also highlighted by some Democrats, shows farm subsidies last year appeared to be directed to “big farms in the Midwest and southern states,” mirroring at least some segments of Trump’s farm base.
That same base has been hit hard by tariffs championed by Trump. In 2018, I predicted (as did many others) that Trump’s international trade tariffs would spur retaliatory tariffs and harm U.S. farmers and consumers in the process. They did just that.
But because Trump’s tariffs hurt U.S. farmers, and because he wants them to vote for him again, he’s sending them cash. That cash even has a name. Last year, one farmer NPR food-policy writer Dan Charles spoke with says he and his fellow farmers have taken to referring to the tariff-induced subsidies as “Trump money.””