Donald Trump’s Tariff Feedback Loop

General Motors’ announcement Monday that it would close five plants in the U.S. and Canada and lay off 14,000 workers provoked a storm of outrage from President Donald Trump in which he threatened to cut the company’s subsidies. (Spoiler alert: He can’t.) Didn’t these ungrateful brigands know how good he’s been to them, cutting their corporate taxes and gutting the onerous environmental regulations Barack Obama put in place? Perhaps the time had come for a new course—in the form of new protectionist carve-outs sweet enough to seduce GM into staying put.

Trump’s suggestion that he may implement a new industry-wide tariff on auto imports isn’t new: it’s something he’s been threatening for months. The Commerce Department in May began an investigation into whether imports on cars and auto parts could constitute a national security issue—the kind of issue that would allow Trump, under the Trade Expansion Act of 1982, to impose such tariffs unilaterally, without consultation with our trading partners. The White House has already invoked this power derived from Section 232 to implement far-reaching tariffs on foreign steel and aluminum.

If Trump tries to move forward with auto tariffs over the warnings of his advisers, however, he may face an out-and-out revolt from congressional Republicans, some of whom have gone along with his trade wars so far only with much grumbling. Some Senate Republicans who have begrudgingly let Trump’s steel and aluminum tariffs of 25 percent and 10 percent remain in place are publicly skeptical that the administration could make the same argument that automobile imports actually represent a threat to national security.

“There’s no rational person that could think that we have a national security issue with auto manufacturing,” Tennessee Republican Bob Corker told reporters earlier this year. “It’s an abuse of that authority. It’s very blatant. … It feels like everything’s becoming transactional.”

And Ohio Democrat Sherrod Brown, who supports many of Trump’s trade policies and has blocked Corker’s efforts to impose congressional oversight of the tariffs, has said it would be “hard to argue that auto production is a national security issue.”

Even Republican leadership in the Senate has signaled they would move to curtail Trump’s tariff powers if he continues to scale up his protectionism—a rare objection from a group that has mostly reconciled itself to the president’s policy aims. “If the administration continues forward with its misguided and reckless reliance on tariffs, I will work to advance trade legislation to curtail presidential trade authority,” Senator Orrin Hatch told reporters this summer. In fact, two such bills have already been introduced in the Senate: one by Corker that would require the White House to secure congressional approval before implementing Section 232 tariffs, and a more moderate measure by Ohio Republican Rob Portman that would establish additional congressional and administrative checks on the president’s ability to declare imports a security threat.

It’s not hard to see why many in Congress regard auto tariffs as a bridge too far. It’s not just the damage economists expect such a move would wreak on the economy—although that damage would likely be substantial. “The potential consequences of tariffs on automobiles and parts could be even more damaging than the steel and aluminum tariffs because the market is so much larger,” Tori Whiting, trade economist for the Heritage Foundation, told THE WEEKLY STANDARD. “A recent study by Trade Partnership estimated that roughly 150,000 net jobs would be lost in the U.S. if these tariffs are imposed. The move is also expected to increase the price of both imported cars and domestically produced cars, as we have seen with steel prices in 2018.”

Still more disconcerting, however, is the way in which his rhetoric about auto tariffs reveals a sort of economic feedback loop in the president’s mind. To him, his steel and aluminum tariffs have already proved their free-trade skeptics wrong: they have succeeded in propping up the domestic metal manufacturers they were intended to help.

Meanwhile, the president has simply ignored the Cassandras who have warned all along that those tariffs would rattle those industries which manufacture products out of steel and aluminum—domestic auto manufacturing being one of the biggest. If he slaps a new tariff on autos to compensate for the tariff on metals, what will he do when the damage from that tariff manifests itself elsewhere in the economy? Where does it stop?

Haley Byrd contributed to this report.