USTR Defends Tariffs Pegged to Trade Deficits as Senators Question How Long They'll Stay

Sen. James Lankford, R-Okla., while not directly opposing the actions, did question the logic of fixating on bilateral trade deficits with developing countries.

In asking U.S. Trade Representative Jamieson Greer at a committee hearing April 8 how long it might take to reach deals with trading partners, and, presumably, roll back tariffs, he told him about an Oklahoma company that spent millions to move production from China to Vietnam.

He noted that because tariffs are so heavy on Vietnamese imports, that company is going to have to renegotiate prices with every retailer that stocks their goods -- Walmart, Target, Costco. He said the company said if the reciprocal tariffs are "going to get resolved soon, they'll hold off on making those calls."

Greer replied, "Vietnam is, frankly, one of the major targets of this action. Their trade surplus is so lopsided."

In written testimony that he skipped over in his opening statement, Greer pointed to Vietnam's poverty as an unfair trade practice. "Depressed wages and poor labor conditions in other countries also lead to huge imbalances. The average monthly salary in Vietnam is about $340, while the average in the United States is $5,000," he wrote. "This pulls our factories to Vietnam, which sells us $15 of goods for every $1 we send them."

Lankford said mildly, "I don’t anticipate we will ever have equal trade with Vietnam, we're a much larger economy than they are," then added that bringing down Vietnam's trade barriers to U.S. agriculture is positive.

He added, "Most countries in the world are never going to buy as much as we're purchasing."

Sen. Michael Bennet, D-Colo., also pointed to the burden of a constituent company, Osprey Packs, that relies heavily on Vietnam.

Greer said the fact that most countries in the Western Hemisphere only face a 10% additional tariff should be a cue to companies to move production from Asia to the Western Hemisphere. There will be no exclusions for products that are not produced here at scale, like apparel. "I’ve heard from textile manufacturers for many years that they’d love to have the Western Hemisphere more competitive," Greer said.

Sen. Tina Smith, D-Minn., questioned the logic of that advice, given that the reciprocal tariff rates are based on trade deficits. If bilateral trade deficits change in a year, will the tariffs, too?

Greer didn't directly answer her question, but defended the formula as a "good approximation" of unfair trade practices.

In his opening statement, he said, "Our large and persistent trade deficit has been over 30 years in the making, and it will not be resolved overnight, but all of this is in the right direction. We must move away from an economy based solely on the financial sector and government spending, and we must become an economy based on producing real goods and services. This adjustment may be challenging at times. It is a moment of drastic, overdue change, but I am confident the American people will rise to the occasion as they have done before."

Sen. Ron Johnson, R-Wis., has softened his criticism of executive tariff actions since 2018 (see 1805240002) and 2019 (see 1902060042), and is no longer arguing that importing cars from Canada is not a national security issue.

But Johnson, who ran a plastics fabricator for decades before becoming a politician, said he doesn't believe that goods that require a lot of labor to make should come back to the U.S. He did say he thinks the U.S. has lost some important manufacturing capacity, and importers shouldn't be overly reliant on China.

"I think trade is a win-win situation," he told Greer. He asked the administration to focus on strategic products, and cautioned that firms could go bankrupt as a result of the higher costs for imports. "There's going to be a lot of collateral damage," he warned.

Sen. Thom Tillis, R-N.C., noted that a million people in America will turn 65 this year, as he will, and that those aged from 60 to 65 are looking at their dropping 401(k) balances. He suggested that the administration has bitten off more than it can chew by hitting every country in the world with higher tariffs rather than starting with one region, or some products.

Trump urged his supporters to have patience in a social media post on April 7, which Tillis referred to obliquely.

"Every time we talk about people having patience, we need to understand the Founding Fathers made sure the patience was never more than 14 months," he said.

He said for those near retirement age, who voted for him and for Trump, "I’m just trying to figure out if they’re going to feel good about this" in February. "I wish you well, but I am skeptical."

Several Democrats questioned the capacity to bring home all these deals set in motion by the tariffs. Sen. Catherine Cortez-Masto, D-Nev., asked Greer how long it took to renegotiate NAFTA. He said proudly that it was done at "breakneck speed" and it took two years.

The top Democrat on the committee, Sen. Ron Wyden, D-Ore., asked: "How can you negotiate with scores of countries before Americans see their 401(k)s go up in smoke?"

Greer replied, "The country decisively voted for the president. He knows how to use tariffs appropriately to drive investment and manufacturing back to the U.S."

Later that day, Trump himself acknowledged there's a capacity issue with so many countries clamoring to negotiate trade deals to lower tariffs he imposed on them. He told reporters at the White House: "We need a lot of talent. We have a lot of countries coming in. They want to make deals." He said the administration is going to have to call on law firms that pledged pro bono services.

Sen. Mark Warner, D-Va., a usually soft-spoken moderate, said he's baffled by the tariff roll-out. He said the carve-out for semiconductors didn't exempt GPUs or lithography equipment.

He said this is the worst economic policy he's ever seen, and that Trump cannot just will the world's trading system to change to suit his desires. "I loved your fancy Greek formula" for deciding tariff rates, he said sarcastically, "which was basically bad math on steroids."

He raised his voice as he demanded that Greer defend imposing a 10% tariff on Australia, one of the few industrial countries that the U.S. has a trade surplus with, and which has promised to spend billions on U.S.-built submarines.

Even if the president rolls back the tariffs on allies, Warner argued, "Our trust relationship has been ruined."

Greer said that Australia has the lowest tariff of any country under the regime, and that the surplus should be much higher, and it would be if Australia ended its "fake science" bans on U.S. beef and pork.

"You are a much smarter person than that answer," Warner replied.