Trump silently modifies tariff policy, brushing aside the trade war hawks.
Tiptoe Through the Tariffs
The Wall Street Journal reports The U.S. Is Tiptoeing Away From Many of Trump’s Signature Tariffs
The Trump administration is quietly watering down some of the tariffs that underpin the president’s signature economic policy.
President Trump in recent weeks has exempted dozens of products from his so-called reciprocal tariffs and offered to carve out hundreds more goods from farm products to airplane parts when countries strike trade deals with the U.S.
The offer to exempt more products from tariffs reflects a growing sentiment among administration officials that the U.S. should lower levies on goods that it doesn’t domestically produce, say people familiar with administration planning. That notion “has been emerging over time” within the administration, said Everett Eissenstat, deputy director of the National Economic Council in Trump’s first term. “There is definitely that recognition.”
The move comes ahead of a Supreme Court hearing in early November on the reciprocal tariffs—a case that could force the administration to pay back many of the levies if it loses in court. The White House, Commerce Department and U.S. Trade Representative’s office didn’t respond to requests for comment.
The shift on the reciprocal tariffs reflects the Trump team’s desire to hedge its bets should the court strike down its broad levies, according to people familiar with the administration’s thinking. At the same time, Trump’s team is expanding its use of tariffs based on more established legal authority: Section 232 of the Trade Expansion Act of 1962. Trump has already deployed that law to underpin tariffs on metals and automobiles, and this month announced a new tranche of duties aimed at heavy trucks, pharmaceuticals and furniture.
On Friday, Trump unveiled his latest action under Section 232, imposing 25% tariffs on trucks and truck parts, as well as 10% tariffs on buses, effective Nov. 1. As part of that action, Trump also expanded a tariff relief program for automakers, allowing them to apply for credits to partially offset the cost of tariffs on car and truck parts until 2030, instead of 2027.
Last month, Trump issued new exemptions for products from gold to LED lights and certain minerals, chemicals and metal products via a list called “Annex II” that includes many products that are or will be covered by the Section 232 levies.
He also previewed hundreds of potential exemptions to come in the future: The order includes a list of products that could receive zero tariffs under trade agreements with foreign nations that are being negotiated by Trump’s team. That list, dubbed “Annex III,” is aimed at “products that cannot be grown, mined, or naturally produced in the United States,” the order states, such as “certain agricultural products; aircraft and aircraft parts; and non-patented articles for use in pharmaceutical applications.”
The September order also allows new authority to the Department of Commerce and the U.S. Trade Representative’s office to grant tariff exemptions themselves, without Trump himself issuing executive orders mandating the new carve-outs.
The move will help streamline tariff policy, a White House official said, so the administration doesn’t need to issue an executive order for every group of exemptions as it implements over a dozen trade deals Trump has announced, or arrives at new pacts.
For months, administration officials led by Commerce Secretary Howard Lutnick had insisted there would be “no exemptions, no exceptions” from Trump’s so-called reciprocal duties, originally announced in April. Lutnick has softened his stance publicly, saying in a late July television appearance that “if you grow something and we don’t grow it, that can come in for zero.”
Candy giant Hershey said in May that it was “engaging with the U.S. government” to seek an exemption for cocoa. Duties on the commodity have added to problems for the Pennsylvania chocolatier, which also has been grappling with high prices for its core ingredient, and the company said it was using every lever at its disposal to get cocoa tariffs changed.
Certain tuna products are among the goods now potentially eligible for tariff exemptions. Mecs said that exceptions for foods like tuna are particularly important as the Trump administration pushes its “Make America Healthy Again” agenda.
“There are a lot of healthy food products that are largely imported,” he said.
Synopsis
- President Trump is shifting his trade policy by exempting dozens of products from tariffs and offering more carve-outs for trade deals.
- The administration is expanding tariff use under Section 232 of the Trade Expansion Act of 1962, covering heavy trucks, pharmaceuticals, and furniture.
- New orders allow the Commerce Department and U.S. Trade Representative’s office to grant tariff exemptions, streamlining the process.
Musical Tribute
Wait a Second
Hold on! What happened to the grand plans?
Please recall Lutnick Says Tariffs Can Eliminate the IRS and Balance the Budget
Lutnick: “We’re going to make the External Revenue Service replace the Internal Revenue Service.”
To balance the budget and eliminate personal income taxes, Trump would need to collect $7 trillion in tariffs on a net trade deficit of $918 billion.
I would love to hear a detailed explanation of exactly how that works.
Trumps Claims
- Tariffs will increase revenue enough to balance the budget
- Tariffs will bring manufacturing back to the US
- Tariffs will reduce inflation
- Tariffs will increase exports
The explanation never came as to how those conflicting goals work. Since then, we have since had two new claims.
Two New Claims
- Tariffs will be rebated to consumers.
- Tariffs will pay for farmer bailouts.
I am no longer convinced Trump will lose in court. Too much time has passed.
Curiously, Trump actions are such that it won’t matter much either way. I have discussed ways that Trump can use Section 232 levies instead.
Also, as noted above, Trump is backing down in many ways on his own accord.
Finally, as stupid as aluminum and steel tariffs are, the Supreme Court may not want to buck Trump on fake national security issues.
Full Appeals Court Rules 7-4 Against Trump’s Reciprocal Tariffs
On August 29, I commented Full Appeals Court Rules 7-4 Against Trump’s Reciprocal Tariffs
In a very much expected (by me) ruling, the appeals court rejects Trump’s global tariffs.
Surprise Not
Please consider what I wrote on June 10 in Justice Department Asks Appeals Court to Let Trump Tariffs Remain for Longer
The word tariff is not even in the act. Nor are synonyms like duties.
Second, there is no emergency. An emergency is a sudden unexpected crisis. Trade deficits have existed for decades.
Third, there is no unusual or extraordinary threat. Trump has even imposed tariffs on nations with which we have no trade deficit including islands inhabited only by penguins.
Fourth, there is lack of a clear authorization by Congress to grant Trump such authority. The applicable principle involved is called “major question”.
The Tax foundation estimates the cost of Trump’s tariffs to be over $2 trillion. If that’s not a “major question” then what is?
This is a similar to the setup in which Biden attempted to suspend student loans that would also have an impact of $400 billion.
Trump seeks a bigger than any previous Supreme Court “major question” ruling including student loans.
Finally, we get to the issue of delegation. The Supreme Court has ruled that Congress has no authority to simply giving away its constitutional rights.
Unfortunately, that does not stop other foolish actions.
Trump Needs an Activist Court to Win
I discussed this on August 27, in Can Trump’s Tariff Revenues Help Pay for the Federal Budget Deficit?
It would be amazing if the appeals court ruled for Trump. But the key question is how the Supreme Court will rule.
Recall that the Court ruled against Biden on student loans largely on the basis of the “major question”. There are even more reasons to strike the idea here.
However, although it’s constitutionally clear, a ruling against Trump is by no means certain.
Ironies Abound
The Appeals court even cited the case I mentioned of Biden’s student loans. If the court allowed this, then it should have allowed student loans. And who knows what Democrats will do if the President is always right.
The decision, even if upheld by the Supreme Court, won’t cancel all of Trump’s second-term tariffs. Alongside the so-called reciprocal tariffs, Trump has also imposed a number of levies on industries including automobiles, steel, aluminum and copper under a separate national security authority.
The first irony is Trump moans about an activist court. But it will take an activist Supreme Court to allow Trump’s reciprocal tariffs.
The second irony is that even if Trump wins in court, not much will have changed. Trump is backing down in many ways, but also triggering Section 232 actions that are definitely more valid (albeit still economically foolish).
The third irony is Republicans may not like the results down the road if Trump scores a complete win. Who knows what tariffs the next Democrat may undertake on grounds of fake climate emergencies?
I wonder if there is some sort of compromise ruling by the Supreme Court allowing everyone to declare victory (or moan).
Here’s the key point: If Trump can declare fake emergencies, why can’t the next Democrat president?
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