Who has the Authority to Impose Tariffs and how does this Affect International Trade?

[no_hypocrisy]

Background
While the U.S. Constitution grants to Congress the power to levy tariffs on goods, Congress has delegated some of that power to the Executive Branch over time. The U.S. Constitution states in Article I, Section 8 that “The Congress shall have the Power to lay and collect Taxes, Duties, Imposts and Excises.” Congress passed general tariff legislation until the early 1930s. However, in a move to grant more flexibility to the President to revitalize global trade in the midst of the Great Depression, Congress gave the Executive Branch the power to negotiate tariff reductions within levels pre-approved by Congress through the Reciprocal Trade Agreement Act of 1934. President Franklin D. Roosevelt became the first President to have the authority to levy tariffs and negotiate bilateral trade agreements without the approval of Congress.

The Executive Branch has continued to exercise a level of authority over tariffs over the past few decades. In 1962 President Kennedy signed into law the Trade Expansion Act, which allows the President to adjust tariffs based on threats to national security under section 232.3 This is the authority under which President Trump imposed tariffs on steel and aluminum, which have a vast impact on some of the United States’ biggest trading partners and many U.S. industries. Since the beginning of the year, there have been bipartisan efforts in Congress to try to regain some of the power that was delegated to the Executive branch to regulate trade.

-more-

https://yeutter-institute.unl.edu/who-has-authority-impose-tariffs-and-how-does-affect-international-trade

[soandso]

1. I don't know much of anything about this subject

other than the US has always used tariffs and other countries do, as well. In my uneducated opinion, I would think that tariffs are fine when you're protecting an industry that's vital to the country (be that in terms of making an important product or protecting jobs). Trump seems to be threatening them as leverage in trade and foreign policy (and probably the protection angle, too). One certainly wouldn't want to put tariffs on something you badly need/are dependent upon and don't make domestically.

[modrepub]

2. I'm Sure I'll Get Slammed Here

but "protecting" "important" industries can mean many things.

On "protection", that usually leads to inefficiencies in the market. This drives up costs because the industry making the product can't make it for less than some other competition (foreign or domestic). Here's a simple example, suppose there is a solar farm in MN and one in AZ and both have the same number of panels. Obviously, the one in AZ produces more electricity than the one in MN because its further south (more yearly sun) and is generally less cloudy. If you were to "protect" the MN solar farm you'd be promoting inefficiencies in the market by keeping a generally less productive producer on the market. Assuming the electricity is somehow going to the same consumers.

On "important", which ones are "important"? Is it some political pals biggest campaign contributor? Is it some billionaires pet project? You can get all kinds of shenanigans on this interpretation. But in the end its a political decision made by politicians and subject to cronyism and corruption.

Look, no one wants to loose their job. I get it. But if we truly believe in some form of Capitalism then layoffs, retooling and company demises are part of the normal flow of things. Economics, IMHO, is very similar to Biology's Theory of Evolution. Periodically there are shifts in the environment and the biota adjust or they perish. Not that we can't be compassionate about the situation, but we can't avoid that change is constant and we have to adjust. And I mean all of us, from the fry flipper at the fast food joint all the way up to the CEO and board members; they should all should be subjected to the consequences of bad financial decisions, which are sometimes out of their control.

[soandso]

4. Valid points

for which you definitely should not get slammed.

There's the libertarian view that markets should not be interfered with all and that they regulate themselves though supply and demand. They oppose anything like tariffs or barriers to international trade. They oppose nation states and borders, too, so their perspective (IMHO) is kind of Utopian and ignores reality. In a perfect world, their views might work but it's not a perfect world.

When I mentioned a protectionist policy with respect to tariffs, I mean between nations. Your example of a solar industry was between states and favoring one or the other is commonly referred to as picking winners and losers which I certainly oppose. However, when it comes to China replacing US industry and jobs, I would favor protecting US industry, business and jobs. I clearly remember when this globalization all began and president Clinton gave a speech about it saying something like, "American workers are going to have become competitive". That set off alarm bells for me because the implication was that the American worker was going to have to compete with the Chinese worker. Well, the rest is history and we just lost/gave away American industry, jobs and the self reliance that goes with that. Well, who does that benefit? Corporations. Yeah, the American public "benefited" by gaining access to cheap shit from China - often made by nearly slave labor - but AFAIC that's a loss, both morally and economically. It worked out well for Wally World and the Walton family.

Anyway and ultimately, and as I said, I don't know much about any of this tariff stuff, but my goal would be to re-build US manufacturing. If a product that is popular or needed isn't made here, then no tariff but get busy making it here, again. If it's something that the US provides for itself (is there anything left? - I don't know) then you don't wreck that industry and the jobs that go with it just to get it cheaper from overseas so you'd put a tariff on the import. It's not one answer and everything needs to be evaluated on a case by case basis.

I have a friend who has a landscaping business. He has a shed full of vintage lawn equipment and ALL of it was made in the USA (50's - 70s) . Why in the world if you can make rakes and hoes and lawnmowers in the US, providing decent jobs right here, would you not do that? What sense does it make to have sold those industries off to China? Now take an example like that for something vitally important like transformers or antibiotics. Being able to rely on yourself and be an exporter is far better than being dependent. Doesn't that seem like a no brainer? I don't think anyone needs to be a trade expert or economist to figure that out.

[modrepub]

6. How Do You Handle The Externalities?

I live in a NE Purple/Red state. Worker pay is generally high, environmental regs are supposed to be equal in all of the US (but I'd counter enforcement differentiation comes into play), state/local taxes are generally high and consider "right to work"/anti union sentiment is rampant in certain parts of the US. Most new US manufacturing is going to be in the South because of these factors. My point being, all of the things you bring up about foreign counties also applies to the US.

Some industry will reshore to the US, but it has to be cost effective. Making cheap trinkets for minimal profit is not something that should be happening in the US. Paying extra to have something built in the US just for the sake of it is wasteful (in resource allocation and increased prices to the consumer).

On thing we have not brought up is the rampant consumerism that in my opinion plagues human kind. We are swimming in stuff. Bouncing around in McMansions with most households having less than 4 people. Driving huge SUVs and/or supersized pickup trucks. Little or no savings for our golden years. And despite all of this stuff, we're a miserable lot. This, IMHO, is the real problem we as a species currently face.

[soandso]

7. We are one country

so there's not much that can be done when it comes to competition between states. That's a whole conversation because I'm from place that was the furniture capital of the world until it all moved to NC for cheaper labor. Now those companies have a lot of their stuff made in China.

When you say, " Paying extra to have something built in the US just for the sake of it is wasteful (in resource allocation and increased prices to the consumer)", the same argument can be used against unions and raising the minimum wage. That argument is for the cheapest consumer goods and services without thought for quality of life in the United States and what goes into that. It's the race to the bottom.

[modrepub]

10. So Undercutting is OK If Americans Are Doing It To Each Other?

Sorry, but I lived Billy Joel's Allentown (though I wasn't working at the time). The line "they threw and American flag in our face" is very poignant in my mind.

I'm almost old enough to remember 10k+ steel workers in the valley (and other places). Truth be told, automation probably eliminated more than half those types of jobs. Reshored manufacturing is only going to provide a small blip on the employment scale; they'll be less jobs (paying much lower wages because they're less skilled) than there were when they existed in the US decades ago.

[JustAnotherGen]

3. I'm thinking of starting

A blog to help people understand this - leveraging mini trainings and quick reference guide language I've used to train different functional groups in Manufacturing.

This is an excellent article - but it doesn't give impact statements.

That is what is missing in all of these discussions. Ex:

LL Bean Made In the USA boots. Why would the price increase? The metal brass for the eyelets.

Made in the USA boutique electronics?
US Baseboards average $15.
China Originally - in bulk $1.80. Still cheaper to import but kills the margins for boutique electronics manufacturers.

[soandso]

5. My answer on the eyelets

is don't put tariffs on what isn't made here. Funny you mention brass because there used to be a big brass manufacturer where I live. Of course, that's gone, now. Stupid.

Electronics? They can be made anywhere and that industry should be re-built in the US. Until it is, no tariffs.

This makes me think of Nike and when they moved their mfg abroad. It was a windfall for them because the labor was so cheap but they upped the price of their shoes. I'm sure the same is true with electronics.

BTW, I think when something is made that is superior, like German precision tools, there should be no tariffs. If the importing country ever gets to the point of being able to match that quality by manufacturing it at home, then reconsider.

If feel this way about all countries.

[JustAnotherGen]

8. I've been doing this a long time

One for the premiere designer and manufacturer of Cloud Computer and Memory Racks and Servers - right here in the USA. Exported globally.

Now for valves - Missiles, Commercial Plumbing, Rail, Boards for Electronics.

Years ago for Verizon Wireless.

The flip.is what happens when you export out to the hostile trade country. The only way around it was to build in a small Shenzhen factory, and one in NL, with sub builds in MX. That way you get around last place of transformation.

Electronics is burdened by the Conflict Mineral Res in Code Frank, extended producer responsibility in India, and on and on.

Establishing the sub factories in the USA and abroad could take 8-10 years. I won't be here then so it doesn't really matter to me.

I just don't see the next generation including Z's who will want to shower at the end of the day.

My husband is an immigrant blacksmith (think custom hand turned rails, restaurant fixtures) and has looked for 3 years for a paid apprentice. They don't want to get dirty.

[soandso]

9. All interesting

and addresses the the fact that tariffs and trade are not a simple subject with simple answers.

What you said about gen z is both dismal and true and I don't know where that is going to lead. No place good, that's for sure. I know someone with such a kid who has a degree in video production or something and he refuses to work doing anything that isn't that.

That's awesome that your husband is a tradesman! The loss of that in our society portends doom. I was recently looking at the restoration of Notre Dame cathedral and noted the fact that it takes very skilled, talented craftsman to even be able to do that work and I wondered how many are left or willing to apprentice.

[JustAnotherGen]

11. I'm very proud of him!

UNESCO Certified Metal restoration specialist.

He's hung from the ceilings of cathedrals, restored the Pantheon in the 90's, worked for the beautiful arts in Florence (restoration) when he had his art gallery there (juried sculptor) . . . in the US you can see his love at the Hamilton Grange in NYC, New Orleans, Boston, Cape May etc etc. - throughout restaurants in NYC, New Jersey . .. .he recently did work for a building owned by Alina Habba's father.

[soandso]

12. Very impressive

I have huge admiration for people with skills like that. They not only do things that people people need but they make the world a more beautiful place. It's also much more fulfilling work than jobs that don't require creativity.