Pevita Pearce
By Alicia Diaz and Laura Curtis
Bloomberg News
(TNS)
Hakeem Jeffries, poised to lead House Democrats, has declared his intention to "stop the stupid Trump tariffs jacking up prices on Americans." Concurrently, Ron Wyden, the incoming chairman of the Senate Finance Committee, has signaled his commitment to reasserting congressional authority over trade policy. Even Senator Ted Cruz, a prominent Texas Republican, has voiced his dissatisfaction, lamenting that "tariffs have made everything too expensive." Despite these pronouncements from across the political spectrum, the path to curbing President Donald Trump’s expansive tariff powers is proving to be neither easy nor swift. The incoming Democratic-led Congress faces a significant hurdle, with the risk of internal party divisions and potential backlash from those who have benefited from the existing trade landscape.
The administration, even as President Trump tempered some of his trade policies in the lead-up to the recent elections, has several potential trade barriers in the pipeline. One notable possibility is the announcement of a new set of duties linked to what is described as excess industrial capacity. This initiative could target imports from over a dozen economies, potentially taking effect even before Democrats officially assume control of Congress in January. A statement released by the U.S. Trade Representative’s office on Thursday emphasized the administration’s ongoing commitment to addressing "long-standing trade imbalances that incentivize companies to invest and build in America and that protect American workers and their families." This stance suggests a continued focus on using trade policy as a tool for domestic economic growth and job protection.
The Steep Climb to Tariff Rollback
The task of reversing or reforming the current tariff regime is described by experts as "very difficult." Blake Harden, managing director at EY’s Washington Council practice, noted in an interview that "the new majority next year will want to focus on rolling back tariffs or passing some kind of tariff reform. And I think that is very difficult." He elaborated on the complexities, explaining that lawmakers within both parties are not in uniform agreement on which specific tariffs should be repealed or which presidential authorities should be curtailed. Furthermore, tariffs have increasingly evolved into a potent policy instrument that garners support from a significant portion of both the Republican and Democratic parties in Washington.
The historical precedent offers a nuanced perspective. The last time Democrats had a clear opportunity to reverse Trump’s tariffs, the subsequent Biden administration actually expanded them, primarily with the aim of targeting China’s trade practices. While there is a shared disapproval of the ongoing trade war with Canada among both Republicans and Democrats, there remains a strong bipartisan consensus for a more stringent approach toward China. This divergence in approach highlights the intricate geopolitical considerations that influence trade policy decisions.
The unity of the Democratic party on this issue is also not guaranteed. For instance, Senator Sherrod Brown of Ohio, who secured re-election, has a history of vocal criticism of free trade agreements. While he has expressed reservations about some of the White House’s tariff policies, the significant exodus of manufacturing jobs from his home state, attributed in part to global trade dynamics, complicates any decision to roll back existing duties. As Harden pointed out, "There’s always somebody, once the tariffs are imposed, who wants them to continue because they’re benefiting from them. So whoever is in power, it makes it really difficult potentially to unwind those." This suggests that vested interests, established by the imposition of tariffs, can create inertia that resists change, regardless of which party holds power.
Navigating Legislative Hurdles and Shifting Alliances
Beyond the internal party dynamics, significant legislative challenges stand in the way of tariff reform. To pass legislation that effectively reverses the White House’s trade policy, a supermajority would be required in both chambers of Congress to overcome a potential presidential veto. As of Thursday, a Bloomberg tally indicated that Democrats hold 54 seats in the Senate and 243 seats in the House. This means that even if every single Democrat voted in favor of a tariff rollback bill, they would still need the support of approximately 13 Republican senators and nearly 50 Republican House members to override a veto. This math underscores the substantial bipartisan cooperation required.
Senate Minority Leader Charles Schumer of New York, speaking to The New York Times, expressed his expectation of a smooth transition to majority leadership and reiterated that cutting tariffs would be a key priority for Democrats. When questioned about the possibility of legislation to dismantle Trump’s tariffs, Schumer acknowledged the president’s veto power but stated, "He can veto it, but yes, but I think we’ll get good Republican support for that." This optimism, however, is met with skepticism by some. While certain free-trade advocates within the GOP, such as activist Grover Norquist, believe their colleagues might vote to override a veto, others are less convinced, pointing to the fear of primary challenges as a deterrent for lawmakers who might otherwise wish to break with the party leader.
Market Reactions and Evolving Trade Landscape
The prospect of a divided government and a potential shift towards a less confrontational trade policy was met with positive reactions from investors. Major international automakers like Japan’s Toyota Motor Corp. and South Korea’s Hyundai Motor Co. saw their stock prices rise following the election results, partly driven by speculation that Democrats would indeed pursue tariff reductions. Companies that have been significantly impacted by Trump’s solar and polysilicon tariffs, including U.S.-based First Solar Inc. and South Korea’s Hanwha Solutions Corp., also experienced an uptick in their share values. This market sentiment reflects an anticipation of a more predictable and less volatile trade environment.
Looking ahead, the incoming Congress is expected to increase scrutiny on the administration’s enforcement of existing laws, such as the Uyghur Forced Labor Prevention Act. Kit Conklin, chief strategy and global affairs officer at supply chain AI company Exiger and a former senior adviser to the U.S. House Select Committee on China, commented, "There will be Congressional oversight on tariffs, but there is a surprising amount of bipartisan support for trade restrictions that target core structural challenges with China." Conklin further elaborated, "Chinese industrial capacity and illegal transshipment threaten jobs in both red and blue states," suggesting that while the broad dismantling of tariffs might be challenging, targeted actions against specific practices could find bipartisan consensus.
Geopolitical Ripples and the China Factor
The global economic landscape has been significantly reshaped by Trump’s trade policies. Several nations have responded by forming new trade alliances or adopting their own protectionist measures. The European Union, for instance, is actively developing strategies to better safeguard its single market from what it perceives as a flood of Chinese imports that pose a threat to its key industries. This indicates a broader international recalibration in response to the shifts in U.S. trade policy.
President Trump’s approach to China has been a central theme of his trade agenda. He has sought to address trade imbalances and intellectual property concerns, which led to significant retaliatory measures from Beijing, including the weaponization of its rare earths dominance. The upcoming meeting between President Trump and Chinese leader Xi Jinping, scheduled for a few weeks from now, holds particular significance as it precedes the expiration of a U.S.-China trade truce. This meeting could offer insights into the future trajectory of the world’s two largest economies.
Chris Kennedy of Bloomberg Economics anticipates that while President Trump may adopt a less direct approach with China going forward, the administration is unlikely to significantly pull back on its overall trade agenda. He predicts, "Look for continued expansion of a web of sectoral tariffs, country-specific actions, content rules and negotiated exceptions. That means headline volatility should remain lower than early in Trump’s second term, and U.S.- China trade may prove more stable than America’s relationships with some other partners." This suggests a continued focus on intricate, targeted trade management rather than broad policy shifts.
This complex trade environment is also impacting ongoing negotiations, such as the review of the U.S.-Canada-Mexico Agreement (USMCA). U.S. Trade Ambassador Jamieson Greer and other officials are reportedly seeking a more comprehensive approach to addressing the presence of Chinese content in imports, highlighting the interconnectedness of global supply chains and trade policies.
The Long Road Ahead for Tariff Policy
While the possibility of bipartisan trade legislation exists, its swift enactment is considered unlikely. The negotiation of the USMCA during Trump’s first term was a protracted and intensive process, requiring significant collaboration between the administration and lawmakers. The White House has not demonstrated a strong inclination for such extensive cross-aisle negotiations during the current term.
Ultimately, the consensus among trade policy experts is that significant changes to the existing tariff levels are not imminent. As EY’s Harden concluded, "We’re a long way from knowing what the long-term tariff policy will be. But they are likely here to stay and I don’t believe a flip in Congress is going to have a significant impact on the tariff levels." This outlook suggests that while political rhetoric may shift, the underlying economic and strategic considerations that led to the imposition of tariffs will likely ensure their continued presence in U.S. trade policy for the foreseeable future.
With assistance from Abhishek Vishnoi and Erik Wasson.
Photo credit: Jackson Lanier/Wikimedia Commons
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