Why Does Trump Have Such Free Rein On Trade?

The Constitution Says Congress Is In Charge Of Trade, Not The President, Yet Trump Seems To Be Running The Whole Show…

Here’s the exact language in the Constitution: “The Congress shall have Power….To regulate Commerce with foreign Nations”. For your reference, here’s a link to the U.S. Constitution: First Article, Section 8.

But of course, Congress makes the laws. As the country’s Chief Executive, it’s the President’s job to execute them. And over the years, Congress has expanded the President’s powers over trade. For instance, in 1962 the Trade Expansion Act established the Office of the U.S. Trade Representative inside the White House, giving the President his very own dedicated trade negotiator. (In Trump’s Administration, that’s the very able Robert Lighthizer).

Section 232 of that same Act (passed at the height of the Cold War), allows the Executive Branch broad powers to “determine the effects of imports of any article on the national security of the United States” (our emphasis). And it allows the President to “take action to ‘adjust the imports of an article and its derivatives.’”

That provision hadn’t been used at all in almost 20 years, and before that was almost exclusively employed to cut back on imports of crude oil. That’s all changed now.

And it’s why you keep hearing Trump (and his advisers) repeat those two words: “national security” when they talk about trade wars. Because those are the “magic words” Congress gave him to justify what he’s now doing.

Trump just invoked “national security” to slap huge tariffs on steel and aluminum imports from Canada, Mexico, and Europe. America’s closest economic, geographic, and political allies. They immediately announced they’d retaliate. Starting with things like Harley Davidsons from House Speaker Paul Ryan’s home state of Wisconsin and bourbon from Senate Majority Leader Mitch McConnell’s home state of Kentucky; a largely symbolic response so far. Kind of waiting to see where this is going.

A visibly flabbergasted Canadian Prime Minister Pierre Trudeau expressed hope that “common sense will prevail” (click on the photo to watch):

We’re not sure we’d be waiting around too long for that. Trump’s apparently itching to go after German car imports next.

So what’s the big deal? The President is Commander-in-Chief of the U.S. Armed Forces, why not have him lead the charge on global trade as well?

But is some steel from Canada really a threat to the national security of the U.S.? The U.S. now produces about 25% of its own steel. What level would not interfere with national security? 50%? 75%? 100%? That question isn’t being answered, because it doesn’t have to be. Because it’s merely the legal rationale for the President doing something unilaterally that would not likely gain favor with Congress.

Of course, regardless of the Administration’s justification, this only potentially works as a strategy if the U.S. can stomp around and say “we’re so big you have to do business with us”, which is still true in some industries and with some countries. (NAFTA is particularly tricky: that deal has become so much a part of almost everything the U.S., Canada, and Mexico buys or sells it’s incredibly difficult for any one of the three countries involved to extricate itself without dire consequences. Although the real NAFTA sticking point at this point seems to be Canada and Mexico’s insistence that any revised deal not continually be up for renegotiation, while the U.S. wants it to expire every 5 years).

In more far-flung places, due to the rapid globalization of industry that Trump wants to deny, the world is better positioned than ever to turn its back on the U.S. For instance, Europe’s Airbus is a completely legitimate alternative for commercial aircraft to America’s Boeing (which will already potentially be suffering from paying higher prices for steel and aluminum).

So Could Or Will Congress Try To Change This, Since Even Many Republicans Oppose These Burgeoning Trade Wars?

After all, it wasn’t always this way… Without giving too much of a history lesson: In the years following the Civil War, all the way up to the Great Depression, trade wars and tariffs were often one of the sources of greatest conflict between Congress and the President (and often determined who was nominated for President). That’s why tariffs you still hear about from those days were almost always named after Members of Congress, not Presidents. There was a robust give-and-take, and the issue was essentially co-managed, with various factions holding the upper hand at different times.

Nebraska Republican Senator Ben Sasse reacted to Trump’s move, telling the Washington Post:

“This is dumb. Europe, Canada and Mexico are not China, and you don’t treat allies the same way you treat opponents….We’ve been down this road before — blanket protectionism is a big part of why America had a Great Depression. ‘Make America Great Again’ shouldn’t mean ‘Make America 1929 Again.’”

But restricting the President would upend decades of both custom and law that’s actually expanded the President’s powers in this area. The Council on Foreign Relations has a great analysis, examining all aspects of this.

And actually, Congress has been moving even further to beef up the President’s trade powers in recent years, passing legislation that grants even more leeway on trade issues. In fact, one of the few “gifts” the Republican Congress gave President Obama was more power to fast-track trade deals. Global trade was one of the few things Republicans and Obama tended to see eye-to-eye on. Obama used that legislation to push through ratification of the Trans Pacific Partnership, with wide Republican support. Trump has since pulled the U.S. out of that trade deal.

OK, Then What About The Courts?

When Trump’s “travel bans” came down, opponents moved swiftly in federal court to try to block them, with some success. Those were also implemented under the banner of “national security”.

Trade is trickier. Partly because there’s already a mechanism in place for other countries to challenge unfair practices: the World Trade Organization. Which Trump reviles. Trading partners impacted by the U.S.’ latest moves are already filing appeals. Which in some ways is exactly what Trump wants: proof that the WTO is “unfair” to the U.S. Which will alienate the U.S. further. And according to the New York Law Journal, it could destroy the WTO, because that international organization’s rules also include a “security exception” that has never been invoked or ruled upon, and if it is, could instantly provide justification for all kinds of unfair trade practices by all kinds of countries, leaving the WTO essentially toothless. Despite the fact that some critics don’t think Trump ever looks more than one move ahead, we believe an attack on the WTO is very much part of the game plan here.

Back at home, the Supreme Court has played a role in both expanding and defining the President’s relationship to global trade, although based on our research (we’re not legal scholars or blessed with unlimited resources: so please correct us if we’re wrong and we’ll update), it hasn’t issued a major ruling in the area in decades.

In 1936 the Court ruled in favor of President Franklin D. Roosevelt. Justice George Sutherland wrote that the President is “the sole organ of the federal government in the field of international relations….He, not Congress, has the better opportunity of knowing conditions which prevail in foreign countries and especially is this true in time of war.” That would seem to support Trump’s recent moves.

In 1952 the court ruled against President Harry Truman, after he attempted to nationalize U.S. steel mills during the Korean War. As part of the ruling, Justice Robert Jackson described a three-tiered framework for evaluating presidential power, illustrated by this handy graphic from the Council of Foreign Relations:

Note the very bottom scenario and the words of Justice Jackson: “When the President takes measures incompatible with the expressed or implied will of Congress, his power is at its lowest ebb”.