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The Time for Tariff Reform Is Now
February 14, 2020

The Time for Tariff Reform Is Now

Now that USMCA approval is in the rear-view mirror, it is time for Congress to take on the difficult question of finding an appropriate balance in tariff authority between the Congress and the executive branch.

During the past two years we have seen a vivid display of Congress abdicating too much power to the executive branch in setting tariff policy. Although Article I of the U.S. Constitution gives clear authority to Congress over tariff levels, some of this authority has been delegated to the President throughout the years, especially in relation to national emergencies, national security threats and combating unfair trade.

However, the President has misused this delegation of authority to increase tariffs on almost 20% of all imports. Many of these tariff increases were as much as 10 fold the level of the tariffs that had existed on those items previously. Collections have increased dramatically, so much so that in its latest Travel and Trade Report, CBP reported that tariffs collected last year were 70% higher than the prior year. Almost all of that is a result of tariff actions taken by the Administration under the authority granted in Sections 201, 301 and 232.

It is important to remember that tariffs are taxes -- on consumers, on manufacturers that use imported inputs and on the American economy as a whole. While they may be appropriate policy tools in some circumstances, their overuse has the same impact as higher income taxes or sales taxes. It is not surprising, therefore, that these tariffs, and the retaliatory measures other countries have taken as a result, have been enormously consequential to companies around the country. What is most remarkable about these tariffs is that they have been implemented with little assessment by the Administration, Congress or any independent bodies on the broader effects they would have on our businesses, consumers, or our overall capabilities to compete in the world economy.

Admittedly, Congress isn't really the appropriate institution to deal with every single situation where you might have the need for temporary or conditional use of the tariff authority. That is why historically Congress has delegated considerable authority to liberalize trade and to address unfair trade practices to the executive branch (TPA, countervailing and anti-dumping laws, IEEPA, etc). But to remove the constitutionally-recognized body for setting tariff levels completely from the equation is a major mistake. We believe that in delegating such authority, members of Congress are still entitled, both by statute and by the history of congressional-executive relations, to expect that meaningful consultations between the two branches will occur prior to raising tariffs.

Given the emergence of tariffs as the single most significant mechanism for restructuring U.S. trade relations and impacting domestic production, we strongly advocate for a robust congressional review of this policy to clarify the circumstances in which executive action is justified under these statutes and to introduce appropriate congressional review prior to implementation.

To this end, the NFTC leads a coalition of industry associations calling for effective tariff reform legislation that we believe must include the following key elements:

First - a tariff reform bill should be broad in scope rather than achieving only piecemeal reform and should cover all statutes granting Presidents tariff authority that don't already have adequate definitions and limits.

Second - there needs to be a statutory requirement for congressional review and approval that includes an assessment of the economic effects of the action.

Third - tariffs must sunset over time, ensuring that these authorities do not become an excuse for permanent protection.

Fourth - the national security authority needs to be revised using a proper definition of national security that prevents the statute from being used to protect U.S. industry for economic rather than security reasons. Section 201 of the Trade Act sets forth an elaborate procedure for giving industries temporary relief when they suffer serious injury from increased import competition. It's limited in time and it requires a determination of injury by an independent body.

And finally, Congress should make procedural changes to the 232 statute to ensure that, when deemed necessary, these extraordinary tariff measures are fairer, more transparent, and that they have meaningful, predictable and affordable exclusion procedures for products that consuming industries cannot source domestically.

The tariffs imposed under the Presidentís tariff authority over the past two years have disproportionately affected small and medium-sized companies and created unprecedented levels of uncertainty for U.S. businesses who depend on international supply chains to remain competitive. The measures proposed above would make it easier for U.S. businesses of all sizes to participate in the process and to prepare for the consequences of tariff actions.

Our country relies on a delicate balance between the branches. When it comes to trade policy, that balance seems to be broken. The time for Congress to reassert its power is now. Our companies depend on it.

-- Rufus Yerxa, President, NFTC.

This piece was adapted from remarks delivered at Representative Stephanie Murphy's Congressional Trade Series: The Role of Congress in Trade and Tariff Policy