Broad Tariffs Panned by Export Witnesses at Trade Hearing

Senate Finance Committee Chairman Mike Crapo, R-Idaho, whose May 14 hearing was on trade in critical supply chains, told the witnesses at the end of the hearing that there's "not a lot of disagreement [on the committee] that we need to get a targeted tariff regime, and we need to get rid of non-tariff barriers."

Crapo said the reciprocal tariffs' objective is to eliminate non-tariff barriers, and he said many countries discriminate against U.S. exports.

"There’s some pain in getting there," he said. "We hope we get there."

He told the witnesses that he thinks there's bipartisan support for the solutions they suggested, but didn't describe which ones he'd like to pursue.

Gracelin Baskaran, director of the Center for Strategic and International Studies Critical Minerals Security Program, told the senators that the African Growth and Opportunity Act, which expires at the end of September, is a linchpin of the economic relationship with Africa.

"Not renewing it would be a very negative signal," she said, but given that tariffs on minerals (up to this point) have generally been under 3%, just AGOA is not enough to develop a mineral supply chain directly from Africa without Chinese processing. However, adding an investment incentive to AGOA could be helpful, she said.

She warned that a Section 232 tariff action meant to shore up either critical minerals or copper would make the U.S.'s economic security worse if it targets ores.

"Ninety percent of the value in copper is when I take it out of the ground," she said, and putting a 25% tariff on ore would make it economically unviable to smelt imported copper ore in the U.S. She said if tariff policy is punitive to countries that have the deposits we need, that also will make things worse.

Sen. Maggie Hassan, D-N.H., asked Baskaran if we need to trade with Canada to reduce reliance on China in minerals, and she said it should be one of our strongest allies. She gave the example of zinc, mined in the U.S., refined in Canada, and then returned, along with germanium, a byproduct of that processing.

AdvaMed CEO Scott Whitaker told the committee that tariffs on inputs like plastics and rubber are the biggest obstacle the industry has faced in many years. Broad tariffs are not constructive, he said.

In his submitted testimony, he explained that a U.S.-manufactured scanner and a U.S.-manufactured infusion pump contain several hundred parts sourced from more than 20 countries. Because of the tariff changes, surgical kits, diagnostic components and imaging device production is being slowed.

"We ask this Committee and the Administration to treat medical products with a reciprocal 'zero for zero' model in these country-to-country negotiations," he said.

Crapo, in his opening statement, noted that trade-enabled efficiency helps American producers focus their resources on the high-value aspects of the process, and that the majority of imports are for production.

But he also said that "a number of trading partners use price controls, technology theft, weak intellectual property protections or unreasonable government procurement policies" to keep U.S. medical devices out of their markets.

American Soybean Association President Caleb Ragland, who farms in Kentucky, was the most negative witness about the trade wars. He said his sector has never recovered from the trade war with China that started in 2018; back then, a third of soybeans were exported to China, and in the years since, the strongest market showing was when 25% of the crop was sent to China.

Sen. Chuck Grassley, R-Iowa, asked Ragland if he wants to see the same purchase agreements from China on soybeans that were promised in 2019.

"We would like to see a minimum of those volumes," he said. The lost volume in Chinese sales "has been devastating. Our prices were similar to what they were in 2018, but our costs of production are so much higher. Trade drives demand," he said.

Several senators asked Ragland if diversifying markets would help. He said while soybean exporters do want to expand sales in other Asian countries, "there’s more pigs in China than the rest of the world combined. We can’t just replace them with other customers."

In his opening statement, he said China accounts for 60% of global soybean imports. He said the association's top asks for the committee are to suspend all tariffs on Canada and Mexico, to quickly reach a China phase two agreement with ag purchase commitments, and to resolve the reciprocal tariffs quickly.

"The longer these tariffs remain in place, even at lower rates than originally announced, the higher the likelihood our trading partners will take steps to move on from the U.S. as a supplier," he wrote.

But the Republicans on the committee gave little sign they would confront Trump's tariffs.

Sen. Thom Tillis, R-N.C., told Ragland that he had 40 farmers in his office just before he came to the hearing. He said farmers in North Carolina told him they're supportive of what the president is doing on trade, but also said they can't afford for the uncertainty to last even one year.

"The trade uncertainty is just going to have to work itself out," Tillis said. "Outside of trade, what should we really be focusing on?"

David Isaacs, vice president of government affairs for the Semiconductor Industry Association, like Baskaran, is waiting for the conclusions of a Section 232 investigation on whether tariffs or quotas are needed on imported semiconductors.

He told the committee tariffs should be delayed several years, or structured as a TRQ that would not reduce until new U.S. capacity launches.

Whatever restrictions come, duty drawback should be allowed, because it allows manufacturers who pay duties on imported components and materials to recover that revenue, which it uses to fund research and development and more manufacturing capacity.

He said the industry needs clear implementation guidance from customs, and time to gather information needed on content from various countries in the supply chain.

"These compliance challenges should be mitigated to the maximum extent possible, as they could cause an increase in operational costs and delays, further reducing business competitiveness," he wrote.