The Year of Protectionism? Trump Alone Will Decide
Posted January 3, 2018 8:40 p.m. EST
WASHINGTON — The Trump administration will soon face several major trade decisions that will determine whether the White House adopts the type of protectionist barriers that President Donald Trump campaigned on but that were largely absent during his first year in office.
So far, the president’s actions on trade have been more moderate than his campaign speeches suggested. Trump withdrew the United States from a Pacific Rim trade pact and opened other, existing trade deals to renegotiations. But he has yet to impose any of the broad tariffs that he has argued are necessary to give U.S. companies a fair shot in a global economy.
In 2018, Trump will have several opportunities to punish foreign rivals as the final decider in a series of unusual trade cases that were initiated last year. These cases, which were brought under little-used provisions of trade laws, give the president broad authority to impose sweeping tariffs or quotas on foreign products.
The United States has numerous other routine trade cases in the works — like Boeing’s fight with the Canadian plane maker Bombardier. But the ones heading to Trump’s desk are unique because they fall to the president alone, rather than career bureaucrats, to decide.
“We’re approaching a moment of truth where decisions have to be made to impose tariffs or not,” said Wendy Cutler, vice president of the Asia Society Policy Institute and a former trade negotiator. “The days of saying we’re going to have a study on this or carry out an investigation into that are over.”
Many U.S. companies, particularly manufacturers, are cheering on the administration. They argue that they need the government’s assistance to stop foreign companies from flooding the market with cheap products.
But others, including consumers and companies that buy steel, aluminum, solar modules and other products, complain that tariffs would make these items more expensive, put U.S. companies out of business and kill more jobs than they create. And some of the measures the Trump administration is considering might violate commitments that the United States has made under existing trade pacts, risking retaliation from other countries.
Chinese Imports and Investment
The president has long hammered China for taking advantage of the United States on trade, and threatened to impose penalties as a result. Now, with a special investigation on China drawing to a close, he appears to have his chance.
In August, the administration opened an investigation into whether China’s actions on intellectual property were harming the United States. The investigation has focused on technology transfer, in which China forces or coerces companies to share intellectual property as a condition of doing business there. It’s a practice that could help Chinese producers gain an advantage over U.S. competitors in years to come.
The results of the investigation aren’t due until August, but trade analysts say they could arrive within weeks. They suggest that the administration might consider restrictions on Chinese investment in the United States, as well as tariffs on Chinese products.
In an interview with The New York Times on Dec. 28, the president said that he had been “soft on China” to gain the country’s help on North Korea, but that he was now intent on cracking down.
“China on trade has ripped off this country more than any other element of the world in history has ripped off anything,” he said. “If they don’t help us with North Korea, then I do what I’ve always said I want to do.”
The United States typically takes cases against foreign competitors after investigations like these to the World Trade Organization. But the Trump administration has suggested that it may not want to wait for the WTO. If the United States acts alone, it may violate the organization’s rules. In that case, China could gain the support of other WTO members and retaliate against the United States with its own trade restrictions, potentially triggering a trade war between the world’s two largest economies.
The president must decide by Jan. 26 whether to impose tariffs or quotas on imports of solar cells and modules. Imposing restrictions could make solar products more expensive, slowing the adoption of solar power. But the domestic manufacturers argue that without protection from cheap Chinese products, U.S. solar manufacturing will disappear.
Two companies, Suniva and SolarWorld, have asked for broader protections by bringing a so-called “safeguard case” — a rarely used measure that gives the president broad power to help a struggling industry. This type of power has not been used to levy tariffs since 2002, when President George W. Bush restricted imports of steel.
On Oct. 31, a panel of trade officials who had studied the case recommended that the president impose restrictions, with some arguing for tariffs of up to 35 percent on some products. The final decision rests with the president. Washing Machines
A similar safeguard case, related to imported washing machines, is now headed to Trump for a final decision.
Whirlpool has petitioned the government to restrict low-cost imports, which it says have flooded the market and hurt American manufacturers. It claims that South Korean rivals Samsung and LG have moved their production around the globe to evade U.S. tariffs that were levied on specific countries. As a result, it has asked for broader protections that a safeguard case can bring.
Trade officials reviewing the case recommended that the United States impose some restrictions on imports, by taxing them after a certain number of washers enter the American market each year.
But Whirlpool and its supporters — including Ohio’s senators, Rob Portman, a Republican, and Sherrod Brown, a Democrat — have urged the president to adopt even tougher restrictions to preserve U.S. manufacturing. Trump must make the final decision by Feb. 2.
Steel and Aluminum
The most contentious trade cases the president will have to weigh in on are twin investigations regarding imports of steel and aluminum.
The Trump administration opened an investigation on April 19 into how much steel the United States needs to protect its national security, and whether current capacity meets that level. Carried out under Section 232 of the 1962 Trade Expansion Act, the case would allow the president to impose sweeping barriers on steel imports.
The plan garnered swift support from steelworkers, steel companies and Rust Belt legislators. They say the industry is struggling to remain in the United States, putting the ability to manufacture weapons, tanks and critical infrastructure in jeopardy. Users of steel, including carmakers, food companies and the military, have expressed concern about the potential for higher costs.
Some U.S. allies, like Germany, South Korea, Canada and Japan, have also protested, saying the burden of tariffs could fall heavily on their companies. Steel-makers mostly point to a flood of cheap Chinese steel, but the United States already heavily restricts imports from China. Supporters of tariffs say Chinese steel is flooding into the United States through other countries, and the United States would look to impose a broad solution to cut off the foreign flow of Chinese steel.
The Commerce Department must submit its report on the investigation by Jan. 15 to the president, who will have 90 days to determine an action.
A similar investigation into aluminum imports was started on April 26, and the Commerce Department must submit its findings to the president by Jan. 21. Trump will then have 90 days to make a decision.
If the United States does restrict steel and aluminum imports, other countries might go after the United States at the World Trade Organization. The question then would be whether the Trump administration would choose to heed the WTO’s directives or ignore them, potentially undermining the global group.