In an opening salvo to his next trade war, President-elect Donald Trump announced that one of his first actions as president would be to levy 25 percent tariffs on Canada and Mexico and 10 percent tariffs on China. In this instance, Trump is trying to use tariffs as leverage to get Canada and Mexico to act on border issues, but he seems to have infinite reasons for proposing tariffs.
Whether any of his tariff announcements on social media actually happen is hard to predict, but they are a reminder that much of the damage that could result from raising tariffs can be avoided if Congress takes action to rein in presidential abuse of trade authority before inauguration day.
In targeting our top three trading partners, Trump is signaling that he’s willing to go to extreme lengths to disrupt trade flows and upend U.S. trade commitments (some of which he negotiated). Data collected by the Census Bureau shows that so far this year, the U.S. has imported $632.3 billion in goods from Mexico and $572.9 billion in goods from Canada, which accounts for more than one-third of all U.S. imports.
Now imagine adding a 25 percent tax on all those imports, because that’s exactly what Trump said he would do. This would not only raise prices on basic goods such as gasoline and agricultural products but also weaken U.S. manufacturing, which remains competitive thanks to integration in North American supply chains.
Take automobiles, a highly integrated supply chain. North America ranks as the third largest automotive manufacturer in the world, and where manufacturing jobs span several states and provinces in all three countries. To make those vehicles, however, parts can cross the border seven or eight times before final assembly. Imposing a tariff on these products means charging a tax every single time a part crosses the border. That would quickly add up.
What should be equally concerning is the fact that in calling for new tariffs on Canada and Mexico, Trump is undermining the rules he negotiated in the U.S.-Mexico-Canada Agreement — a deal he claimed “is the largest, most significant, modern, and balanced trade agreement in history. All of our countries will benefit greatly.”
He is either now claiming that he negotiated a bad deal, or that our trading partners cannot be assured of the commitments the U.S. makes in international agreements. All this raises the question of why any trading partner would ever bother to negotiate a trade accord with the U.S. ever again.
The uncertainty Trump has already injected into the trading system, even before taking office, should raise a red flag in Congress. The Constitution grants Congress the authority to regulate trade with foreign nations, but over many decades, Congress has delegated some of that authority away to the president.
When Trump says he will release an executive order on day one of his second term, he is referring specifically to those delegated authorities. Congress still has time to take those authorities back and avoid a potential trade war.
Last week, Reps. Suzan DelBene (D-Wash.) and Don Beyer (D-Va.) introduced the Prevent Tariff Abuse Act, which would curtail the president’s ability to use a law called the International Emergency Economic Powers Act to enact tariffs and quotas on other countries.
That is a good start, but there’s still more that Congress can do. Trade analysts have laid out a much broader list of tariff authorities that could be abused by Trump and Congress should act quickly to repeal or reform them.
If broad-based tariffs are enacted, as Trump has promised to do, the effects will be most strongly felt by working Americans, many of whom are still struggling to make ends meet as inflation cools.
Voters will not respond well to rising prices, something that Congress should keep in mind for the midterms. Worse still, if Congress fails to act, it will abdicate its constitutional authority on tariffs and be complicit in the breakdown of U.S. trade policy.
Inu Manak is a fellow for trade policy at the Council on Foreign Relations.
