Part 2: Industrial Policy Making
Republicans during the Obama presidency made great hay, and rightly so, over the $11.3 billion the federal government lost in its post–financial crisis takeover and restructuring of General Motors. Trump's trade wars have topped that number three years running on agriculture bailouts alone—$12 billion to compensate for the retaliatory clampdowns on export-market access in 2018, $16 billion in 2019, and $19 billion in 2020 pre-COVID.
"We now have a huge $20 billion-plus farm subsidy program that most experts are worried is never going to disappear," says trade lawyer and Cato Institute analyst Scott Lincicome. "There's nothing so permanent as a temporary government program. That old Milton Friedman line is certainly true in the case of farm subsidies."
The president has expanded the latitude for his successors and America's trade partners alike to use bogus justifications for erecting tariffs. In March 2018, Trump exercised the little-used Section 232 national security exemption to the 1962 Trade Expansion Act in order to enact a 25 percent tariff on imported steel and a 10 percent tariff on aluminum. This despite the fact that his own military rejected the security argument, that six of the top 10 foreign suppliers of steel are NATO allies, and that two months later the president himself tweeted that the tariffs were in response to a Canadian tariff on dairy products.
"For decades, presidents, and governments in general around the world, were extremely hesitant to invoke national security in order to achieve economic protectionism for really not national-security-related grounds," Lincicome says. "The Trump administration has really opened Pandora's Box with respect to Section 232."
The move "has provided future administrations a really easy way to unilaterally implement certain policies," Lincicome continues. "So, for example, you could quite easily see a Biden administration determining that climate change is a national security threat and thus imposing national security tariffs on imports from countries that don't sign under the Paris agreement." With courts generally deferential to the executive branch's national security claims (and with Congress dispositionally unwilling to take on the president), future trade wars now have a template.
As predicted by the vast majority of trade economists, Trump's tariffs have failed in their stated intent to prop up domestic producers and jobs, triggered reciprocal actions that have punished American exporters, and created a cottage industry of lobbying in Washington for exemptions.
Trump campaigned against the seven-decade Washington-led international system of mutual tariff reduction without ever having a coherent plan to replace it. His promised bilateral trade deals have mostly failed to materialize; other countries and blocs are now signing pacts that freeze out American producers; and the dispute-resolution body at the World Trade Organization (WTO), which has historically proven favorable to U.S. claims, has ground to a halt because of Trump's unwillingness to appoint representatives.
Sen. Josh Hawley (R–Mo.) and his allies like to say "we should get out of the WTO" and "replace it with something that doesn't kowtow to China," Lincicome says. "The problem is, [Trump has] done none of that. Instead, it's all just might-makes-right unilateralism."
tl:dr version: Trump's trade wars have absolutely not accomplished their stated intention of bringing back industrial jobs. Instead, they have have triggered reciprocal trade wars. $20 billion annually is spent bailing out farmers harmed by Chinese reciprocal actions, a program that is alleged to be temporary but realists expect to be more-or-less permanent. His misuse of Section 232 tariffs against traditionally loyal American allies has not only fractured long-standing relationships, but has opened a door to further arbitrary uses of the section in the future.
