Everything You Wanted to Know About Trump’s Tariffs But Were Afraid to Ask

U.S. President-elect Donald Trump, the self-proclaimed “tariff man,” campaigned on the promise of ratcheting import duties as high as 60 percent against all goods from China, and perhaps 20 percent on everything from everywhere else. And he might be able to do it—including by drawing on little-remembered authorities from the 1930 Smoot-Hawley Tariff Act, the previous nadir of U.S. trade policy.

Trump’s tariff plans are cheered by most of his economic advisers, who see them as a useful tool to rebalance an import-dependent U.S. economy. Most economists fear the inflationary impacts of sharply higher taxes on U.S. consumers and businesses, as well as the deliberate drag on economic growth that comes from making everything more expensive. Other countries are mostly confused, uncertain whether Trump’s tariff talk is just bluster to secure favorable trade deals for the United States, or if they’ll be more narrowly targeted or smaller than promised. Big economies, such as China and the European Union, are preparing their reprisals, just in case.

What makes it hard for economists to model and other countries to understand is that nobody, even in Trump world, seems to know exactly why tariffs are on the table. Trump himself has suggested using tariffs as a replacement for the entirety of U.S. federal income tax revenue; at the very least, Trump and his braintrust are relying on enhanced tariff revenue to offset the falling revenues that will come from a renewal of his 2017 tax cuts, which are set to expire next year and are an early priority for the incoming administration. Congress could include its own tariffs as part of the tax bill, or it could defer to Trump and his own authority to raise tariffs.

Either way, they appear to be coming.

It’s such an early priority, and tariffs are such a clear way to help pay for those tax cuts, that Trump’s former national security advisor, John Bolton, puts an early tariff-induced trade war at the top of his list of immediate concerns. “The first thing that worries me are the tariffs. We could have an economic crisis in the first six months of the administration,” he said.

But tariffs are also touted by Trump’s trade sherpas, such as former U.S. Trade Representative Robert Lighthizer, as a way to force manufacturing back to the United States by discouraging pricier imports. The more that plan works—and tariffs are a notoriously slow and inefficient way to juice domestic manufacturing—the less tariff revenue there will be.

And yet, tariffs are also described by those around Trump, and often seen as such abroad, as little more than a negotiating ploy to get better deals for U.S. exports. That was how they worked in a few instances in Trump’s first term, such as with Japan, and how they were meant to work but did not, such as with China. If tariffs are just a threatened big stick to get better trade terms for U.S. goods, then there won’t be tariff revenue to offset tax cuts, nor the spur to domestic manufacturing.

“What’s at war in all of this is that the president wants to pursue U.S. trading rights, and do his deals, and he wants the revenue from tariffs,” said Alan Wolff, a fellow at the Peterson Institute for International Economics. “How all that sorts out is anybody’s guess.”

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The other natural question about a fresh round of record-high tariffs is the how. Since Congress, according to the Constitution, has authority over foreign commerce such as trade and tariffs, could Trump slap duties on goods from around the world by himself? The short answer is yes—but maybe not quite to the extent that he has promised.

For nearly a century, Congress has delegated expansive trade authority to the executive branch, and the courts are already examining some alleged overreach; a bigger batch of tariffs would almost certainly invite fresh legal challenges.

But Trump would have four powerful tools at his disposal to levy tariffs, two of which he has used before. These once-obscure provisions of decades-old trade legislation will likely be where the rubber meets the road in terms of Trump’s frontal challenge to the global trading order.

The easiest one is the one he turned to in order to put tariffs on imports from China in his first term. The so-called Section 301 provisions of the 1974 Trade Act (there are actually several sections under 301) allow the president to put tariffs on countries that engage in unfair or discriminatory practices. China fit the bill in Trump’s first term, for its state subsidies, currency manipulation, theft of intellectual property, and more. The Biden administration has also used Section 301 to add further tariffs on China, including the last round of duties on electric vehicle imports, solar panels, and the like.

Trump could simply raise the tariff level under that existing authority if he wants to target all Chinese exports to the United States.

“Using 301 would be easy to do. Trump could wake up and not like breakfast, and put 60 percent tariffs on China. It’s instant and easy,” said Wolff, previously the deputy director-general of the World Trade Organization (WTO) and a U.S. trade official before that.

The other tool Trump turned to before might not be so useful this time. Section 232 of the 1962 Trade Expansion Act gives the president the authority to use tariffs to protect national security; that was how Trump raised tariffs on steel and aluminum imports in his first term, even from close allies.

The problem with using (and abusing) Section 232 is that the administration has to at least make the case that the protected products are crucial to national security, through a determination from the Commerce and Defense departments. That was just doable with steel, but more specious when it came to protecting beer cans, construction rebar, and Pennsylvania votes.

Using the national security exception also rankles the WTO—not that the United States, under any administration, has ever cared. But other countries did file complaints against abuses of that national-security exception, which may very well have gone somewhere if successive U.S. administrations had not defanged the WTO’s ability to hear and adjudicate trade disputes.

What’s either encouraging or alarming is that Trump has two additional authorities to impose tariffs that he has not tapped yet.

The first superpower comes from the 1977 International Emergency Economic Powers Act (IEEPA), which gives the president sweeping and nearly unchecked powers to impose sanctions, fight cyber crime, punish foreign election interference—and, potentially—levy tariffs. (It hasn’t ever been used that way, though former U.S. President Richard Nixon, in so many ways Trump’s trailblazer, used precursor legislation for his 1971 shock tariffs.)

All it requires is a presidential determination that there is a national economic emergency—there were nearly a dozen such in Trump’s first term—for the White House to be able to impose tariffs as a remedy.

IEEPA could be an option “if he wants to move earlier,” Wolff said. “None of the other delegated authorities ever contemplated an entire tariff schedule set by the president, but if there is a ‘national emergency,’ and he puts a tariff on everything, would the Supreme Court find that credible? It’s possible.”

But the real break-the-glass moment for Trump’s tariff plans would hearken back to the last big (and cautionary) foray by Congress into throttling trade as a way to pacify restless voters, the infamous 1930 Smoot-Hawley Tariff Act, whose most frightening provisions remain on the books.

Section 338 of the 1930 law would allow the president, with only a cursory determination and with unilateral authority, to slap tariffs of up to 50 percent on goods from any country that treat the United States unfairly or restrict U.S. goods in any way. If the harms continue, Section 338 allows the president to prohibit the import of those goods altogether.

Most economists agree that Smoot-Hawley’s steep tariff increases at the start of an economic downturn—tariffs that were quickly matched by trading partners—made the Great Depression worse; global trade cratered by the mid-1930s. The bill that made a depression great could help Trump make his recession even greater.

This brings Congress back into play. The election of Sen. John Thune as Senate majority leader has raised some hopes that a vestigial free-trade wing of the Republican Party remains alive and could act as a check on Trump’s ability to reach for tariffs. Thune has warned that tariffs will lead to inflation and prefers free trade that could find more, not fewer, outlets for farm goods like those from his home state of South Dakota. A desire to avoid the kind of punishment China doled out to U.S. agricultural exports in Trump’s first term might encourage some GOP senators to reclaim some trade authority (though Trump used tariff revenues to mollify battered farmers and ranchers).

Congress has lately taken some steps to reassert its authority over trade matters, in both chambers, though more to restrict trade than to free it. Sen. Tom Cotton and Rep. John Moolenaar have proposed legislation in their respective chambers that would strip China of its normal trading relations with the United States and legislate stiffer tariffs on goods from China, though leaving future tariff adjustments up to the president.

If Congress wanted to constrain Trump, it could limit the size and scope of his existing tariff authorities, though that would require buy-in from the more protectionist House of Representatives and a fight with a newly-elected president. It could also pass legislation to put certain limits on other authorities, such as IEEPA, in order to curtail executive powers.

But with renewed tax cuts—and the tariffs to pay for them—an early priority, time is of the essence. If Congress aims to reassert its trade authority, it better do so soon.