WASHINGTON: Analysts predict that international trade will grow at 0.3 percent in 2019. A steep decline from the 3.3 percent recorded in 2018 and 4.8 percent in 2017. Those analysts site that much of that slowdown would stem from President Trump’s ongoing trade war with China.
Fortunately, a deal with Mexico has avoided the imposition of a tariff on Mexican products which would represent a tax increase on American consumers who would have paid it.
Mexican tariffs would erase more than $41 billion in gross domestic product for the U.S. along with $24.6 billion in income each year. (Ray Perryman, Board of Contributors: Trump tariff war with Mexico would have been costly for Texas )
Imposing tariffs on Mexico would also have done nothing to stop the flow of immigrants. At least not directly. However, the threat did bring President Adrés Manuel López Obrador to the table. And Mexico will be providing assistance to the US in order to stem the imposition of tariffs.
House leadership pushes the President to use the only tool he has – Tariffs
Former U.S.trade representative Carla Hills points out that,
“Without question, there has been a substantial uptick in migrants leaving Honduras, El Salvador, and Guatemala, traveling across Mexico in an effort to reach the United States. Poverty, corruption, and violence are the primary reasons they leave. Levying tariffs on Mexico would not deal with those issues. It would not encourage people from the Northern Triangle to stay home. Nor would tariffs that tax American companies and consumers help Mexico deal with the refugee problem. In fact, Tariffs would make matters much worse. Shrinking U.S. demand for Mexican products would not only diminish Mexico’s already stressed resources…but it would also weaken Mexico’s economy, causing that nation to lose jobs…ironically, these tariffs would more likely stimulate an even larger number of migrants seeking to cross our southern border…”
Some Republicans in the Senate, as well as some economists, warn that such a policy violates the philosophy of free enterprise and free markets.
Conservative economist Richard W. Rahn points out :
“For more than two centuries, economists and well-read people have understood that tariffs reduce the levels of competitiveness and prosperity. Adam Smith(1723-1790) explained how free trade (by increasing the extent of the market) enabled greater specialization and productivity, and David Ricardo (1772-1823) explained how free trade allowed for ‘comparative advantage’ to everyone’s benefit.”
In Rahn’s view,
“President Trump, despite claims that he is really a free trader, does not seem to fully appreciate the dangers of the tariff wars that he is undertaking. …Americans and Mexicans buy hundreds of billions of dollars of goods and services from each other each year. A tariff on Mexican goods will increase prices to American consumers. Mexico has a fragile economy and a new tariff on their goods means that many Mexican workers will lose their jobs —-and some number of these newly unemployed are likely to try to enter the United States to find work—-making the immigration problem worse.”
Placing aside the economic merits of raising tariffs and promoting trade wars, until recently, the President had no power or authority to impose tariffs unilaterally.
The responsibility to enforce tariffs belongs to Congress
Those who support the President’s power to impose tariffs argue that a 1977 law gives him the ability to do so. However, this interpretation of that law is questionable.
At that time, Congress passed the International Emergency Economic Powers Act (IEEPA). (What A President Can Do Under The International Emergency Economic Powers Act)
This law is not a tool of immigration policy or tariffs. The text of the law mentions neither. Instead, the aim is sanctioning foreign enemies. Tariffs successfully aid in fighting groups or countries hostile to the United States. Such as freezing the assets of Iran after the U.S, Embassy hostage crisis. Or to impose embargoes to punish foreign drug King-pins and cybercriminals.
Moreover, to restrict transactions concerning weapons of mass destruction.
“IEEPA was not designed for the imposition of tariffs,” says Jennifer Hillman, a Georgetown University law professor. “It was intended to give the president the power to impose economic sanctions when the president finds ‘an unusual and extraordinary threat’ to the national security, foreign policy or economy of the U.S, from foreign sources.”
Richard Alden, a senior fellow at the Council on Foreign Relations, says:
“There is no reference in the law to presidential authority to impose tariffs. It has been used for economic sanctions of various sorts against enemy countries, Iran, Iraq, Sudan, and Libya; it’s never been used against a close ally. This is a considerable step beyond anything the President has done before in terms of abusing the authority delegated to him by the Congress. I think that’s why you’re seeing a reasonably significant reaction on the Hill.”
Use of this law requires a declaration of an emergency. The controversy over the use of emergency powers, for wall-building and tariffs, underlies the confusion of Congressional willingness to delegate its powers.
The framers of the Constitution gave Congress a specific set of enumerated powers.
They empowered the legislative branch to “lay and collect” tariffs and duties, which means that the President, on his own, could not do this.
Over the years, Congress has ceded power to the President for his use in exceptional circumstances. There is no definition of “national emergency” in any of the laws requiring the President to declare one before taking action.
Several of these laws, including one used by the President to impose tariffs on steel and aluminum, do explicitly allow unilateral tariff imposition by the President without the involvement of Congress. However, those statutes are tools meant to respond to unfair trade practices and other perceived commercial threats.
The wording of IEEPA “though ambiguous, was not intended to develop immigration policy through tariffs,” said Raj Bahia, a University of Kansas School of Law trade expert. Many experts argue that we are experiencing the downside of past legislation delegating “emergency” international economic power to the executive branch. On a bipartisan basis, Congress should take this power back.
The Framers of the Constitution feared excessive executive power.
hey created a system of divided government and checks and balances. They gave Congress, for example, the power to declare war. Nonetheless, we have gone to war in Korea, Vietnam, Iraq, Afghanistan, and elsewhere without any congressional declaration of war. Congress, Republicans, and Democrats continue to abdicate its Constitutional role. The same is true with the 1977 law, which gives the executive ill-defined “Emergency Powers.”
Congress should revisit this legislation and remove any ambiguities about what it means. Otherwise, we will face future efforts by the executive to expand the power of the President. Thereby contravening the limits set by the Constitution.
Do we want a system in which one individual can impose tariffs and start trade wars? However, the threat of tariffs brought Mexico to the table to work with the President in a way that House leadership will not. That is the question before us.
Lead Image: President Donald J. Trump delivers remarks at the 75th Commemoration of D-Day Thursday, June 6, 2019 (Official White House Photo by Shealah Craighead)