Trump's Sudden Reversal on Tariffs Drives Messaging at Ways and Means Off Course

Rep. Mike Kelly, R-Pa., who owns a car dealership in Butler, Pennsylvania, that sells both domestic and foreign autos, said the president has the backbone to fulfill a pledge to protect manufacturing that many have made. "He stands up into a stiff wind, and says it's going to hurt for a while until we get back to where we need to be."

Rep. Jodey Arrington, R-Texas, said, "Thank God, that for such a time as this, he raised up a leader with the political courage to take on the political and corporate ... establishment that is going to do everything in its power to stop you and the president from hitting reset before it's too late."

He called himself "100% unwaveringly, unequivocally in favor of President Trump's reciprocal trade policy."

Chairman Smith opened the hearing April 9 with a list of five factories that closed in the last 20 years in his region, and the accompanying 2,445 job eliminations. "The Trump agenda prioritizes the long-term prosperity of working families and communities ahead of short-term stock market swings. The American people are counting on us to think beyond today’s headlines," he said.

When he asked U.S. Trade Representative Jamieson Greer questions, Smith said his mother lost her job in manufacturing, and said that the top 10% of Americans own 88% of stocks, and that people earning less than $42,000 generally don't own stocks, and "that's who President Trump is fighting for."

"It will be transformational. It may be bumpy for a while," he said. "But it's about time Main Street is represented rather than Wall Street."

Smith told Greer that zeroing out industrial tariffs with the EU is "not good enough. They have to address their non-tariff barriers to nonindustrial goods."

He noted that the 10 million people in Honduras buy more U.S. pork than the entire EU, with a population of 450 million, and that Angola, with a national income 1/200th the size of the EU, buys more U.S. chicken.

"That Missouri farmer has been screwed for such a long time by our friends," he said, and asked if Greer agreed the EU's ag rules are a serious trade problem.

Greer replied that "it's fundamentally unfair," and that in order for the EU to reach a deal to roll back the tariffs, "ag has to be covered."

Trump left 10% tariffs on nearly all trading partners when he backed away from 11% to 50% tariffs on trading partners, calculated based on trade deficits (see 2504090043).

Many Democrats on the committee questioned why tariffs would be set based on trade deficits, and some also questioned why, if trade deficits are the measure, were countries subject to 10% tariffs when they buy more U.S. goods than we import from them.

Rep. Don Beyer, D-Va., who was an auto dealership owner selling international cars until 2019, called the actions stupid. He said by Trump's logic, "any [trade] deficit is cheating. In fact, he called it rape." But, he noted, having a trade surplus didn't help Australia, Brazil or Singapore to avoid 10% tariffs. He asked rhetorically, "How does Australia negotiate an end to a trade deficit that doesn't exist?"

He said some of the large trade deficits, in places like Vietnam and Madagascar, are because "they're too poor to afford our exports."

Trade Subcommittee ranking member Rep. Linda Sanchez, D-Calif., said, "These tariffs are not reciprocal. Nor is it based on measuring foreign trade barriers." She said the effective tax rate on U.S. exports to Korea is less than 1%, but there's a 25% tax on their imports now.

"First he threatens a huge tariff," she said, to use as leverage, which she called extortion. "He declares anything they promise a huge victory even if it's an insubstantial deal, only to appease Trump and his cronies."

Many members, both Republican and Democrat, pressed Greer on how long it might take to reach deals, particularly with geopolitical allies like Canada, Taiwan and Israel. (Canada is not subject to the reciprocal tariffs, but is subject to 25% emergency tariffs justified over fentanyl smuggling and migration)

Greer told Rep. Brendan Boyle, D-Ill., that he couldn't predict, but said he hopes "we can move quickly."

Boyle asked what success would look like.

"The [trade] deficit has to go in the right direction. Manufacturing as a share of GDP has to go in the right direction. Non-tariff barriers have to go in the right direction."

He said the U.S. has the largest trade deficit of any country, and a $36 trillion federal debt. (Many economists say the two are linked, because American consumers have more to spend since they are not taxed enough to cover the cost of federal government operations.) "None of these numbers are sustainable. We have to deal with it now."

Not all Republicans on the committee were full-throated supporters of Trump's tariff hikes, whether under the reciprocal push or the anticipated Section 232 tariffs on copper, pharmaceuticals, or existing 232 tariffs on steel and aluminum.

Rep. Nicole Malliotakis, R-N.Y., said, "I get concerned about trying to do too much at one time, biting off more than we can chew." She said she's hearing from manufacturers who say that higher tariffs on lumber, metals and other inputs make it harder to make their goods at competitive prices. She's hearing from importers who moved from China to Vietnam and Cambodia. "They made it very clear they can't wait 90 days for a deal to be made," she said. "They will literally close their business."

Greer said he thought it could take a few weeks or months to lower the 46% and 49% tariffs on those Asian countries, less than an hour before Trump lowered them to 10%.

Malliotakis said she hopes it's a few weeks.

She then said it takes seven years to open a pharmaceutical plant, and while she supports reshoring production -- including to Puerto Rico, which used to be a pharma powerhouse when tax rules favored production there -- she said she's wary of tariffs. "We can get there, but we need to make sure we don't hurt ourselves in the meantime," she said.

Rep. David Schweikert, R-Ariz., also said he was "concerned about the path" to increasing domestic drug manufacturing.

Rep. Blake Moore, R-Utah, appealed to Greer as a former Utah resident, and said last weekend, he visited the Sports Den, and the owner pointed to everything in the shop, which would be subject to far higher tariffs. Moore said the man, whose store has been open for decades, has never looked so anxious.

"What do I say to him?"

Greer said, "We have to have this reset," but told him to keep in touch, and that Greer will share the stories he hears of economic harm with the president.

"I don't see the strategy to get there," Blake said, referring to trade wins Trump had in his first term, "but I know that we can."

Several representatives, both Democrat and Republican, spoke to the lost exports the 25% tariffs on Canadian goods have caused -- California wine off the shelves, and tourists no longer coming to Finger Lakes wineries and Las Vegas.

Rep. Claudia Tenney, R-N.Y., said wineries in her district have had a 23% drop in visitors since February. She said she wants the northern border protected, "but also our trade we're used to."

She said aluminum and copper from Canada are needed by her manufacturers, too. She, and others, asked if Greer could offer businesses certainty about the USMCA exclusion continuing.

"That's the current status," he said. "I wouldn't want to get ahead of the president on that," he added, but said he expects it will continue. However, aluminum from Canada is subject to 25% tariffs, and Trump has said he intends to put a 25% tariff on imported copper, too.

Several members asked Greer if the administration would support trade preferences that allow poor countries to export apparel duty-free.

Rep. Greg Murphy, R-N.C., noted he goes on missions to Haiti, and asked Greer to support renewal of that country's HOPE/HELP bill, which expires at the end of September. "We really need to help these nations stabilize; it helps everybody," he said.

Rep. Gwen Moore, D-Wis., asked Greer if the administration still supports the African Growth and Opportunity Act. Some of the countries that have used AGOA to export apparel, like Lesotho, faced the highest tariffs under the formula.

Greer replied, "It's up to Congress."

Chairman Smith interjected after their exchange to say that he wanted to bring up "the significance that I believe AGOA has for this country from a security perspective." He said he hopes the administration will continue to recognize that value.

"I will certainly share your views with the president," Greer replied. "I would encourage the committee to look at ways to improve it."

Several Republicans from agriculture-heavy districts said they'd like to see barriers to crops come down, but were nervous about how long the high tariffs might last as negotiations are underway.

Rep. Randy Feenstra, R-Iowa, asked, "Do you have the staff and resources to man all these negotiations at this time?"

Greer said, "I could always use more staff," but praised the career staff. "These folks are truly the tip of the spear. They know their brief, they know what they're doing and when the countries come in ... they know exactly the barriers we're targeting."

Feenstra asked if he should tell his farmers that at the end of the process, there will be dramatically expanded markets.

"That's the expectation," Greer replied. "With some countries, it's easier, they have fewer barriers. With others, it's harder, it's going to take some time. And in the meantime, they'll have that tariff."