Trump’s war on offshoring jobs easier said than done
n his high-profile battle against offshoring US jobs, President-elect Donald Trump has threatened Mexico, China and multinational corporations with punitive tariffs and retaliation.
But to make good on such threats, Trump will have a narrow set of legal tools at his disposal and risks exposing the United States to retaliation. Swept into the White House in part on a promise of bringing jobs back to the United States, the president-elect this week reiterated his vow to slap a “major border tax” on companies that use cheap Mexican labour to export to the US market. But can he really do this? The US Constitution gives Congress the authority to impose taxes and regulate foreign commerce but it grants the president the power to negotiate international trade pacts, which still are subject to approval by lawmakers.
Over the 20th century, however, Congress significantly extended the president’s authority in matters of trade.
Broad powers from Congress: “Current US laws give the president an enormous control over restricting trade,” said Gary Hufbauer, a former senior Treasury Department official in charge of trade policy who is now at the Peterson Institute in Washington.
Adopted in 1917, the Trading with the Enemy Act allows the president to suspend imports from countries during periods of conflict. President Franklin Roosevelt used the law in 1941 to freeze trade with Japan and some analysts say Trump could try to use it today, on the basis of continuing hostilities in Iraq and Afghanistan.
Other retaliatory measures could be on surer legal footing. The 1974 Trade Act allows the executive branch to impose duties on a country’s imports if its trade practices are “unreasonable,” or to suspend a treaty if it imposes an economic “burden” on the United States.
One of Trump’s favourite targets, the North American Free Trade Agreement, which links the United States with Canada and Mexico, could be an inviting target under the Trade Act.
The law also allows the administration to slap surcharges on imports for a maximum of 150 days to correct a “disequilibrium” in the US balance of payments. The United States habitually runs a massive deficit with China, for example.
Even if permissible under the law, such actions still could carry serious economic and political risks.