I think my colleague Ed Kilgore is right to describe President Trump’s announcement about trade with China as more of a climbdown than a breakthrough. Trump had threatened to raise tariffs on Chinese imports if they didn’t make concessions before the end of the year; now, by setting a 90-day negotiating window, he’s delaying that threat to the end of February.
But Trump’s record of trade climbdowns has been uneven to date. In spring of 2018, he appeared to climb down from his threat to impose major steel and aluminum tariffs, by temporarily exempting so many U.S. trading partners as to render the tariffs unimportant. But this reprieve actually proved temporary, and now the metal tariffs are real, broad, and important. Other threatened measures, such as global tariffs on auto imports, have remained mere threats — so far.
All of which is to say, the trade war with China is delayed, but I would not assume it is canceled, especially since the agreement Trump announced on Twitter doesn’t appear to be much of an agreement, but rather some vague “commitments.” As White House National Economic Council head Larry Kudlow put it on Monday, “commitments are not necessarily a trade deal, but it’s stuff that they’re going to look at and presumably implement.”
“Presumably” you should not take this one to the bank.
Presidents who lose their legislative majorities tend to shift their attention to policy they can make through their own executive power. With no ability to pass additional tax cuts or seek the repeal of the Affordable Care Act, Trump is likely to be even more keen to pick trade fights over the next two years than he was before. This is a reason markets should temper their relief about the trade war delay.
But there is a key question: Will Congress give Trump as much leeway to set trade policy over the next two years as they did over the last two?
Broad, unilateral presidential authority over tariffs and trade does not come from the Constitution — Article I, Section 8 grants Congress the authority to set import duties. Over the decades, Congresses have passed laws that grant presidents a variety of authorities to impose tariffs on their own, and Congress can take those authorities back if they feel they are being abused.
The idea behind these laws was for presidents to respond nimbly to narrow trade disputes or address matters of national security, not to allow presidents to implement a broad policy of trade protection without consulting the legislature. Trump has particularly abused his authority to impose tariffs on grounds of “national security” even when his apparent policy purpose — sometimes disclosed in his own tweets — is unrelated to national security.
A new law could grant Congress the right to review and reject such national security tariff designations. This would interfere with Trump’s hopes to impose unilateral tariffs — and with his efforts to win concessions from other countries by threatening to do so. Over the last two years, several members of Congress on both sides of the aisle introduced bills to do this.
Of course, Congress didn’t pass any of those bills, because Republican leaders in Congress didn’t want to pick fights with the president. The loudest pro-trade Republican voices tend to be in the Senate, and Majority Leader Mitch McConnell refused to bring any of their bills on the topic to the floor.
But Iowa senator Chuck Grassley will be taking over as chairman of the powerful Senate Finance Committee, and he’s told Axios he’d look favorably at bills to reduce Trump’s trade powers. Grassley, like many of the most ardent Republican free traders, represents a farm state that’s especially hurt by China’s retaliatory tariffs on agricultural goods.
There may be two other key differences that motivate Senate Republicans on trade in 2019.
Trump’s future actions, including possible auto tariffs, could be more economically damaging and more upsetting to the Republican donor class than those he has taken so far, making action more urgent. And given last month’s election results, a Senate vote on trade could mean more than picking a symbolic fight with the president, because there will be a Democratic House that is likely to cooperate on any bill to restrict Trump’s powers.
House Democrats are divided on free trade, but a vote to supervise Trump’s trade actions can be easily framed as anti-Trump instead of anti-tariff. In the theoretical case where Trump proposes specific, sensible, and sound tariff actions, Congress can always vote to sustain them later. And with the Democratic coalition shifting away from Rust Belt cities and toward the coasts and major service-oriented metropolitan areas, there are fewer Democrats in Congress likely to be attached to Trump’s protectionism anyway.
There is another trade fight Trump may soon pick with Congress. Trump wants to secure approval of his lightly modified North American free trade agreement, and he’s said he intends to secure it by announcing U.S. withdrawal from the existing NAFTA agreement, leaving Congress a choice between his new deal and no deal at all.
Many Republicans in Congress don’t much like Trump’s proposed changes to NAFTA, since they weaken certain protections for American investors in Canada and Mexico and impose mildly tighter restrictions on free trade in autos. They won’t be eager to vote for the new agreement.
Trump probably does have the legal authority withdraw unilaterally from NAFTA. But without Congress’s agreement, he could not force the repeal of “implementing legislation” related to NAFTA, which means many of its rules would remain law in the U.S. even after Trump took us out of the agreement itself.
A partially dead NAFTA would be enough of a mess, and the deviations from NAFTA in his new “USMCA” are minor enough, that I would bet on Trump successfully forcing congressional hands to approve the new deal.
In a way, Trump’s move to scrap NAFTA in favor of an agreement very similar to NAFTA is a victory for free-trading forces, since it puts America’s leading protectionist’s seal of approval on America’s most important free trade agreement. So congressional free traders ought to be able to get themselves to think of this deal as a political win for the cause of free trade even if they don’t like its rules of origin for auto parts.
But if Trump takes big actions to undermine the global trading system instead of sustaining it — for example, if he imposes global auto tariffs or greatly steps up the China trade war — that is when I would watch for Congress to step in and reduce his trade powers.