As if the trade war and its seemingly constant escalation of misguided tariffs isn’t bad enough, the government has also seen fit to take the economic blunder one step further and pick economic winners and losers when it comes to tariff exemptions.
In March, Trump kicked things off with imposing a 10 percent tariff on aluminum and a 25 percent tariff on imported steel. To do this, he evoked an obscure law that allowed the president to impose tariffs on national security grounds.
Really though, Trump’s goal seems to have been less about doing what would be good for Americans or the U.S. economy but what would be good for what he considers a key part of his base: American steel manufacturing. In short, his tariffs were meant to help save U.S. metal producing jobs, of which there are about 415,000. For Trump, this seems to have worked well. He shows up, gives a speech, and talks about saving jobs.
[Also read: Trump’s tariffs will cut off some China trade, but businesses don’t know how much]
Of course, that’s not the whole story. As he tries to save what little of American manufacturing remains, those same tariffs are hurting the 4.6 million manufacturing jobs that depend on a steady supply of competitively priced metals.
That means that for a few factory feel-good moments trying to save an outdated and out-competed domestic industry, the president is hurting the jobs held by millions and, in the process, costing everyone more money on consumer goods.
That would be bad enough on its own, but serious questions have since been raised about the process for deciding what is subject to the tariffs. For example, Chinese-made iPhones and Apple Watches were left off the most recent list, as was the painkiller ibuprofen and certain children’s products. Many of these products found their way off the list through successful lobbying efforts.
But winners and losers are picked in other ways too.
Once tariffs are implemented, companies can apply for exemptions or to block others’ exemptions. The arbitrators of all of this wrangling over who should pay tariffs and who should get a pass largely comes down to the Department of Commerce.
To get an exemption, companies can petition the government for an exemption to tariffs on the grounds that they can’t purchase the product they need from a U.S. supplier or that there are national security concerns involved. At the same time, other companies can file an objection to any petition for exemption.
Even worse than just creating chaos by implementing tariffs and feeding this growing legal fight is that the whole process seems to be controlled by big steel companies. Every objection filed by one of three largest domestic steel producers to a petition for exemptions from tariffs was successful, according to recent research by the Cause for Action Institute, which recently filed Freedom of Information Act Requests to better understand how this process plays out. It will be very interesting to see the results.
Even if there are reasonable justifications for some tariffs, the manipulation of exemptions to benefit a single industry would be completely unacceptable. Unfortunately, the two are linked and as long as tariffs and exemptions are in place, they can and will always be applied unevenly and at the discretion of a government that has priorities other than fairness and economic growth.
The government should not be in the business of picking winners — and especially not at the expense of other Americans. It distorts the markets, likely hurts job numbers in the long run, hurts competition, and ultimately costs consumers more.
