Giving tariff power to Congress is no panacea

That way lies protectionism, too

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Donald Trump’s “reciprocal” tariff have now taken effect, plus an additional levy on China which puts total tariffs against that nation at 104%. China has started allowing its currency to weaken and there are rumors swirling of a sell-off of U.S. bonds, which could spark a global financial panic.

Meanwhile, people seem to be holding out for one of two things to happen to save us. Firstly, there is hope that spiralling financial markets will persuade Trump to change his mind. Secondly, there is hope that Congress will step in and remove or limit Trump’s power to impose tariffs.

This latter move is technically possible. The constitution is extremely clear that it is Congress which has the power to impose tariffs, not the president. This was a very major issue at the Constitutional Convention in 1787, and the founders’ “intent” on it is about as clear as it is on anything.¹ The only reason Trump can impose tariffs at all is because Congress has delegated tariff-setting power to the president through various laws over the past 100 or so years.

Taking that tariff power back might then seem to be a simple solution to the present situation. Unfortunately, it’s not.

To understand why, you need to look at why Congress delegated authority over tariffs to the president in the first place. Prior to the years following the Smoot-Hawley tariff act of 1930 - which set tariff rates at their highest level in U.S. history until Trump beat the record today - Congress set tariff rates. Congressmen would get together and horse-trade with one another over which industries were going to get protection and which weren’t, deciding it all in the proverbial smoke-filled room rather than according to some national economic plan.

As might be expected, this led to a lot of protectionism. Each congressman had his own industries that he wanted to protect in order to help the voters back home and win re-election. Giving the local factory or farming community a concrete economic boost by excluding foreign competition was a great way to win votes.

Of course, congressmen needed to persuade a majority of their colleagues to agree to provide this protection. This gave rise to the practice of “log-rolling”, in which congressmen would swap tariff agreements. Congressmen from Maine might agree with congressmen from Ohio to support tariffs on fish and lumber respectively, then they’d all agree with Louisiana to add shrimp into the mix as well.

This dynamic created few incentives towards lowering tariffs because the beneficiaries of lower prices were consumers who were spread throughout all of the states rather than being organized into interest groups which could pressure Congress. There was always an association of Louisiana shrimpers who got together to bend the ear of their congressmen, but no national association of shrimp eaters with the same clout.

As a result, historians tend to regard the transfer of tariff power from Congress to the president from the 1930s onwards as a prerequisite of the era of open trade and globalization which followed. As a national political figure who benefits from overall national economic growth rather than helping the industries in one district, the president was well-placed to favor lowering barriers to trade.² He also didn’t need to reach agreement with 400 of his peers, all of whom had their own agenda.

Unlike Congress, presidents also have the ability to engage in negotiations with other nations, persuading them to lower their tariff barriers in exchange for the United States doing the same. This created the potential for reciprocal exchanges in which there could be an overall global lowering of tariffs, creating the era of free trade that we have lived in for decades.

On the other hand, transferring tariff authority back to Congress is likely to mean a baseline level of protectionism that is much higher than has existed for the last 80 years. And there are some other problems with it, too.