Lawmakers Skeptical of “National Security” Tariffs as China Trade Spat Escalates

In the past week, the Trump administration’s trade crisis with China has deepened significantly. Senators, however, are still busy processing the fallout from the White House’s earlier tariffs.

Commerce Secretary Wilbur Ross in Beijing for trade talks on June 3
AP Photo/Andy Wong, Pool
June 20, 2018, 8 p.m.

The escalating tit-for-tat between the U.S. and China on tariffs has senators on both sides concerned, but so far the moves haven’t fired up the same opposition as President Trump’s earlier action on steel and aluminum imports.

The Trump administration’s trade battle with China boiled over Friday, when the president said he would impose a 25 percent tariff on $50 billion in Chinese goods in what the White House calls a response to intellectual-property theft and unfair trade practices. In a matter of hours, China accused the U.S. of provoking a trade war and outlined its own $50 billion set of tariffs targeting agricultural products, cars, and seafood.

Monday saw another escalation with Trump firing back, saying the U.S would impose 10 percent tariffs on another $200 billion in goods if China followed through on its threat.

The escalating conflict has spooked both markets and Capitol Hill, and it feeds into broader criticism from both the Right and Left on the administration’s aggressive trade policy. But so far, lawmakers are more concerned with Trump’s earlier round of tariffs—25 percent on steel and 10 percent on aluminum—particularly the fact that they target the European Union, Canada, and Mexico.

In a Senate Finance Committee hearing Wednesday, lawmakers grilled Commerce Secretary Wilbur Ross about the justification of these tariffs under Section 232 of the Trade Expansion Act of 1962, which allows tariffs for protecting domestic industries important to national security. Lawmakers on both sides of the aisle are skeptical that the tariffs are a legitimate use of the national security provision.

“The lessons of the steel and aluminum tariffs are clear: These tariffs do not support U.S. national security,” Finance Chairman Orrin Hatch said at the hearing.

Sen. Rob Portman, a former U.S. trade representative in the Bush administration, said he supported “cracking down on China” but was concerned about the use of the national security exemption in Trump’s earlier tariffs.

“My concern is 232,” Portman said. “It’s a very extraordinary remedy that ought to be used very carefully and very selectively, and it ought to be used for national security reasons. That’s why it was drafted. Frankly, my concern is the way we are using it now is both misusing it and having negative economic impacts in certain sectors, but also I think it risks us not having this tool in the future.”

Some analysts have said that using the national security exemption for arguably non-national security trade disputes could undercut the provision in bodies like the World Trade Organization. The Commerce Department is also considering similar 232 tariffs on foreign-made automobiles.

Senate Foreign Relations Committee Chairman Bob Corker led a failed bid last week to insert language into a defense-spending bill that would place restrictions on the administration invoking the national security exception without congressional approval. Republican Sen. Pat Toomey, a cosponsor to the effort and a member of the Finance Committee, told reporters Wednesday that he and Corker are looking for a legislative vehicle to reintroduce the language. They will likely need a measure with a tax title.

The conservative-leaning Tax Foundation found that the steel and aluminum tariffs, as well as the original $50 billion in tariffs on Chinese goods, would result in U.S. GDP and wages falling by .06 percent and cost the equivalent of more than 45,000 full-time jobs.

Both inside the hearing and elsewhere on Capitol Hill, lawmakers have expressed concern about the logjam in the Commerce Department to approve exclusions to the steel and aluminum tariffs for businesses that can’t get a specialty material from domestic manufacturers.

“Out of more than 20,000 applications, as of today a little more than 40 have been granted,” House Ways and Means Chairman Kevin Brady said. “Because that process isn’t working, it is creating pain and economic damage on American companies and workers whose products are fairly traded.”

Ross told lawmakers Wednesday that the department was making “good progress” on the applications and would be accelerating the process, though he cautioned that most applications are likely to be rejected.

So far, lawmakers haven’t levied as much criticism on Trump’s China-targeted tariffs as on the 232 steel and aluminum tariffs. They have been more apt to go after China on trade issues than, for example, allies like the EU and Canada. Last week, the Senate passed its defense-spending bill with a provision that would nix the president’s deal to lift penalties on Chinese telecom giant ZTE after the phone-maker was caught violating sanctions on North Korea and Iran. Lawmakers must still reconcile that provision with the House defense-spending bill.

The China-specific tariffs proposed Friday and then upped Monday don’t rely on the 232 national security provision. Instead, the administration cites Section 301 of the Trade Act of 1974. The “301” tariffs allow a president to take action to compel a country to reverse policies that violate international trade agreements.

Republican Sen. John Thune said his South Dakota constituents, farmers specifically, were willing to give the Trump administration time to sort out the trade conflict with China, a sentiment many farm-state lawmakers don’t echo when it comes to the steel and aluminum tariffs.

“Right now, most of our farmers and ranchers are willing, as I’ve said before, to cut the administration some slack to try and get the best deal possible,” Thune said Tuesday. “They, like everybody else, are upset with the cheating that China does and the stealing of intellectual property.”

Still, Thune said he was concerned about the retaliatory tariffs and how they may affect an already struggling farm economy.

Senate Finance ranking member Ron Wyden, meanwhile, linked the issues surrounding the steel and aluminum tariffs with the administration’s current back-and-forth with China and other trade challenges, including the North American Free Trade Agreement.

“That a longer debate,” Wyden said of the 301 tariffs. “But one of the key aspects of today is that I think the arbitrariness and the chaos and the bedlam that the administration is causing is going to make it harder for us to get bipartisan support in areas like dealing with China ripping off our technology or updating NAFTA.”

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