Trump Trashes the House GOP’s Tariff-Free Approach to Trade Populism

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Photo-Illustration: Daily Intelligencer. Photos: Drew Angerer; Mark Wilson/Getty Images

Donald Trump wants to lower the trade deficit and boost American manufacturing. To accomplish this, he would like to slap a 35 percent tariff on the goods of any company that relocates outside the United States — and on all cars made in Germany — while also hitting Chinese imports with a 45 percent tariff, and making America’s respect for the (decades-old) One China Policy conditional on Beijing’s cutting the U.S. a better “deal” on trade.

Which is to say: The president-elect would like to put “America first” by radically increasing the cost of consumer goods in the U.S., starting trade wars with several countries, and, quite possibly, an actual war with China.

House Republicans don’t want to do any of that. But they would like for Trump to be able to tell his Rust Belt faithful he did something to bring their jobs back. And so, Paul Ryan has responded to the president-elect’s wild proposals by saying, in so many words, “Yes, Trump’s right — we should stop taxing U.S. exporters on their overseas sales.”

The technical name for that proposal is a “border adjustment tax” (or “BAT”), and it would effectively increase business taxes on importers while giving U.S. exporters a significant tax break. The BAT is the cornerstone of the House GOP’s corporate tax reform. Over the next ten years, it’s expected to generate roughly $1 trillion in new revenue — funds Ryan needs to (partially) offset a massive cut in the overall corporate rate.

And, it was supposed to simultaneously satisfy Trump’s appetite for protectionism. In mid-November, the president-elect’s economic adviser Stephen Moore warned the House GOP leadership that they no longer belonged to a conservative party, but to a “working-class, populist” one.

One week later, Moore held up the BAT as evidence that the House had heeded his counsel.

“If we have a border-adjustable tax system, that can solve a lot of these trade issues that Trump is talking about,” Moore told Reuters. “You’re going to tax what’s imported and not going to tax what’s exported. So we’re going to reduce the trade deficit and we’re going to have more companies come in here.”

But in an interview with The Wall Street Journal last Friday, Trump rejected this sunny assessment of the BAT. “Anytime I hear border adjustment, I don’t love it,” Trump said. “Because usually it means we’re going to get adjusted into a bad deal. That’s what happens.”

The president-elect also decried the measure as “too complicated” — according to Politico, the Trump team’s specific concern is that the measure is too complicated “to sell to voters.”

And the president-elect’s preference for putting public opinion above Paul Ryan’s agenda extends beyond issues of trade. Over the weekend, Trump promised that his party’s Obamacare replacement would provide “insurance for everybody.”

“There was a philosophy in some circles that if you can’t pay for it, you don’t get it,” Trump told the Washington Post. “That’s not going to happen with us.”

Of course, the “philosophy” Trump cites here is conservatism, and the “circles” are those that the House GOP swims in. The Republican Party has no desire to guarantee universal health-insurance coverage. They merely want to guarantee “universal access” to such coverage. Which is a bit like saying your public-transportation plan is to provide “universal access” to Lamborghinis — anyone who can afford one will have the freedom to access it!

The president-elect also told the Post that he intends to follow through on his campaign promise to pressure pharmaceutical companies into cutting the prices of their drugs, an initiative that the House GOP has zero interest in, but which the public overwhelmingly supports.

Whether Trump is any more sincere about these positions than he is about forcing Mexico to finance our border wall remains to be seen. On Tuesday, the president-elect appeared to take several steps in Paul Ryan’s direction, telling the news site Axios that border adjustment was “still on the plate,” and that Medicaid block grants could be one way to ensure that “people with no money” are “taken care of.”

Still, at the very least, Trump is complicating the House GOP’s messaging — and likely inspiring a few Republicans to think of how much easier life would be with President Pence in the Oval Office.

Trump Trashes the House GOP’s Compromise on Trade Policy