A GOP Tariff Working Group and Post-Trump U.S. Trade Politics

The Hill reported last week that a handful of pro-trade Republicans in Congress used some leverage during a vote about voting on tariffs – it's complicated, check out the details at the link for more! – to get a Republican working group on tariffs established:

And [Tom] McClintock [R-CA] said [Speaker Mike] Johnson agreed to form an informal House GOP working group on tariff policy, including possible measures to modify existing policy and clarify Congress’s role in setting it. 

“Tariffs are bad public policy and are self-sabotaging at least part of the recovery that we’ve set in motion,” McClintock said, adding that, constitutionally, tariff authority should rest in Congress. 

[Don] Bacon [R-NE] told The Hill that Rep. Adrian Smith (R-NE), who was part of the negotiation on the House floor, will lead that effort. Smith is the chair of the House Ways and Means Committee’s Trade Subcommittee.

“We want the house to build tariff policy, and not give our authorities to the president,” Bacon told The Hill.

“I’m looking forward to the chance to elevate the conversation with colleagues about the importance of trade policy to hardworking Americans,” Smith said in a statement. “After years of inaction, a lot of progress has been made under the Trump administration, but we have more work to do.”

There is plenty of evidence already regarding the impact of tariffs on the economy, but nevertheless there are now a bunch of new U.S. tariffs in place, and this seems like a good time to do some additional study of the issue. I don't know exactly what the Republicans who pushed for this have in mind, but if I were them, here are some things I would look at in evaluating the recent tariffs.

First, on the import side, what impact are Trump's tariffs having on domestic prices? And what impact are they having on domestic industries?

For domestic prices, this issue often gets caught up in broader discussions of inflation, but I think these are separate points, and here the focus should be on the prices of a range of specific products that have been subject to tariffs. Every product market is a little bit different, so it would be helpful to pick out a varied group of products (maybe 20 or 30?) that have been subject to new tariffs and look at what has happened with prices. In this context, it's also worth looking at the profits of retailers, who will sometimes decide not to pass through all of the costs of the tariffs and take a hit to their profits instead.

For the impact on affected industries, the idea behind tariffs is to promote domestic production in certain protected industries, but it's important here to also look at how other industries have been affected, for example when inputs they depend on become subject to higher tariffs.

Second, on the export side, one of the arguments for the IEEPA tariffs has been that they can be used as leverage to open up foreign markets and increase U.S. exports. Farm state Republicans in particular seem to be on board with the Trump administration's trade policy in the hopes that their constituents will benefit from this. These Republicans were annoyed with the Biden administration's limited efforts at increasing exports, and have been somewhat supportive of the Trump administration's more assertive approach on trade.

Are the IEEPA tariffs having success in increasing exports? To answer this question, I would look at how exports are doing overall, and then also specifically at the sectors targeted for opening. Some people might want to focus only on the latter, but I think you need to take into account the broader impact of U.S. trade policy on export sales of U.S. goods and services. My guess is that the record will be mixed, and both sides will be able to pick out products that make their point, so I think it's important here to look at as many goods and services as possible to get a full picture of U.S. export performance.

When evaluating the economic impact of tariffs, you have to weigh and balance all of these things. Based on past experience, and studies of that experience, I think we all have a good idea of what this evaluation is going to tell us, but here's a chance to do the analysis again.

An additional factor to throw in here is the geopolitical impact of these tariffs. How have other countries reacted and how do they see their relationship with the U.S. at the moment? That is likely to be somewhat of a qualitative assessment, although there are quantitative aspects as well.

Finally, another issue that would be valuable for the working group to look at, as suggested by some of the quotes in The Hill piece, is the role of Congress on tariff and trade policy. Congress has delegated a lot of power in this area to the president over the years. This may be a good time to consider taking some of it back.

One example of this would be to require Congressional approval in order for certain tariffs imposed by the president to take effect, or to let them expire within a certain period if not approved by Congress. Another would be to insist on a stronger Congressional role in trade negotiations, with more direct participation.

And then thinking more broadly, it could be helpful to develop Congressional institutions that help Congress play a more substantive role in tariff and trade policy. There have been proposals in the past for a Congressional Trade Office, and that idea may be worth exploring again. (It's worth noting that Congress has traditionally been more protectionist than the executive branch, and with plenty of members of Congress acting on behalf of import-competing interests, I'm not sure we can be confident of the direction a greater role for Congress on trade policy would ultimately take us.)

Could this tariff working group initiative have an impact on Trump's trade policies? That seems unlikely, but I do wonder it it could help lay the foundation for a future Republican trade policy that is more market-oriented. Trump's obsession with tariffs is pretty unique. Many people have views on tariffs, but the emphasis he puts on them is off the charts. This may be a minority opinion at the moment, but I think a post-Trump U.S. trade policy could revert – not necessarily right away, but at some point – to something close to the previous norm, which was moderate protectionism, with Democratic politicians slightly more protectionist than Republicans. Post-Trump politics will likely involve less overall interest in tariffs, with the traditional battle between export-oriented industries and import-competing industries driving trade policy once again, bringing us back to the usual mix of trade liberalization and protectionism in U.S. trade policy (although how the new tariff revenues factor in to the mix is a little unclear to me). This might not fit neatly into some of the narratives floating around out there, but it may just be the boring – to many, but not me! – truth of trade policy.