The Trump administration was able to reshape America’s trade policy in large part because it simply decided to ignore anything that punctured its manufactured reality about how tariffs work.
Economic data show that American businesses and consumers—not China—are overwhelmingly paying the cost of the tariffs? Send Peter Navarro out to do some television hits where he baselessly claims otherwise.
Thousands of American companies are lining up at hearings to explain why the tariffs would hurt their bottom line? Give Wilbur Ross a can of tomato soup and let him explain that those added costs are actually no big deal.
Farmers are getting gutted by the trade war? Send them fat checks, deny that your policies were to blame, and inadvertently create a new, expensive aid program that will be politically difficult to unwind.
Those clowns are no longer running the show, but the Biden administration seems determined to keep the circus going a while longer. Take, for example, Commerce Secretary Gina Raimondo doing her best Navarro impression during an interview earlier this month with MSNBC. Asked about whether the Biden administration would roll back the Trump tariffs on steel, aluminum, and other goods from China, Raimondo argued that “the data shows that those tariffs have been effective.”
Have they? Raimondo was careful to avoid saying exactly what the tariffs have been “effective” at accomplishing, but the actual data would suggest the answer is not much—except, of course, raising prices for American businesses and consumers.
On that front, the tariffs are quite effective. According to the American Action Forum, a free market think tank, Trump’s tariffs (and retaliatory tariffs imposed by other countries) have increased annual American consumer costs by about $57 billion. The Tax Foundation estimates that Trump’s tariffs amount to an $80 billion tax increase on U.S. businesses. And researchers from Columbia University, Princeton University, and the Federal Reserve Bank of New York concluded that the tariff costs “have been passed on entirely to U.S. importers and consumers.” More than three years after Trump launched his trade war, these facts are no longer in doubt.
The fundamental problem is the same one that Trump, Navarro, Ross, and others spent the past few years trying to hand-wave away: Tariffs simply create more losers than winners. The U.S. steel industry, for example, employs about 141,000 workers. But there are more than 6 million workers in manufacturing businesses that consume steel. The tariffs are meant to protect the former group by imposing higher costs on the latter, much larger group.
“The tariffs have shifted injury from one industry to a much broader segment of the economy,” the Coalition of American Metal Manufacturers and Users, a trade group that represents 30,000 companies with over 1 million workers, wrote to the White House in a letter responding to Raimondo’s comments about the tariffs’ effectiveness. “If these tariffs are not terminated,” the group warned, “the result will be lost business for U.S. manufacturers and lost U.S. jobs.”
Unfortunately, Raimondo’s comment doesn’t appear to have been a mistake or an unscripted, inarticulate moment. Through its first 50 days in office, the Biden administration has given no indication that it is interested in providing relief to American businesses beset by Trump’s tariffs. If anything, Democrats in the White House and Congress appear to be entrenching those policies.
During her confirmation hearing last month, U.S. Trade Representative Katherine Tai said she views tariffs as “a legitimate tool” to wield against China. While acknowledging that Trump’s trade policies caused “a lot of disruption and consternation,” Tai said she hoped to “accomplish similar goals in a more effective process.”
In practice, that likely means giving labor unions—which are typically not huge fans of free trade—greater control over U.S. trade policy. Tai previously worked as the congressional Democrats’ top negotiator on the United States–Mexico–Canada Agreement (USMCA) and helped shepherd some major union priorities into the deal. The AFL-CIO, which almost never endorses trade agreements, came out for the USMCA after some last-minute changes to artificially hike wages in Mexican automating plants and more strictly enforce labor standards in Mexico.
But it also likely means maintaining this charade about the effectiveness of tariffs, despite all evidence to the contrary. Because Biden’s top trade advisers are more polished than Trump’s, they’ll likely avoid making outlandish and easily disprovable claims like Navarro’s ridiculous “China is bearing the entire burden of the tariffs” promise. Instead, Raimondo and Tai are using vague talk about “effective” policy and “legitimate tools.” But don’t let the softer language fool you: They are just as wrong.
Perhaps the best illustration of how Democrats are seeking to entrench Trump’s tariffs as mainstream U.S. trade policy is a proposal drafted by U.S. Sen. Bob Casey (D–Pa.), a longtime family friend and close ally of Biden’s.
During a Senate Finance Committee hearing on Wednesday, Casey said he hopes to create a new grant program to steer tariff revenue to communities where manufacturing jobs are disappearing. His proposal, Casey explained, “would direct the revenue derived from anti-dumping and countervailing duties back to communities impacted by trade.”
In other words, use the tariff revenue to offset the cost of the tariffs. It’s basically the Trump administration’s farmer bailout all over again, except with a different set of beneficiaries.
Rather than recycling tariff revenue through Washington, D.C., and then pretending it is helping the very businesses and communities being harmed by the tariffs themselves, the Biden administration should take the shortcut and simply abolish the tariffs. That would provide an immediate economic boost to the manufacturing sector and would prevent politicians from finding new ways to entrench Trump’s tariffs in federal policy.
Of course, that would require understanding the difference between policies that are “effective” for the economy and those that are effective for political reasons. So far, the Biden administration seems to be doing no better than the Trump administration at that calculus.