The Priorities of the New Congress

Claudia Schmucker © DGAP

U.S. President Donald Trump has adopted a clear stance on trade policy. For him, foreign trade is a zero-sum game. But while he has far-reaching powers in trade policy, he will have to rely on Congress in the long run. He can expect to come up against headwinds, including over import duties. This is emphasized by Claudia Schmucker (DGAP).

America First Trade Policy

"Make America Great Again!" – this is the goal of U.S. President Donald Trump. While many of his statements have remained vague, Trump has been clear on trade policy, announcing that punitive tariffs will be imposed on imports from China. He also called for NAFTA renegotiations. On his very first working day, he already implemented one of his campaign promises by withdrawing the United States from the TPP. Meanwhile, the future of the TTIP remains uncertain, and bilateral trade agreements are to be concluded – for example, with Great Britain. Trump seems to be a true mercantilist and views trade as a zero-sum game. For this reason, he also wants to reduce the trade balance deficit of the United States.  

Headwinds from Congress

According to the U.S. Constitution, Congress has the fundamental right to regulate trade with foreign nations. Over time, however, the President has been granted numerous powers: for example, he can impose unilateral import duties (Section 301 of the 1974 Trade Law) as well as renegotiate trade agreements or withdraw from such accords altogether, as has happened with the TPP. Thus, a President who wants to limit trade can do so without Congress by exercising his power to issue decrees.  

But while the President has significant room to manoeuvre, he will need the support of Congress in the long-run. Congress is likely to support the President in principle in his pursuit of "fair trade". However, he cannot automatically depend on the support of the Republicans. For example, Kevin Brady, who heads one of the House committees, has already spoken in favour of continuing TTIP; and the influential Chairman of the Senate Finance Committee, Orrin Hatch, has already declared that the United States should remain part of NAFTA and continue to abide by international agreements. At the same time, Trump might find some allies among the Democrats. For example, some high-ranking Democrats like Senator Bernie Sanders have stressed they can imagine working with Trump because they have long been critical of agreements such as TPP.  

It is likely that Congress would oppose the implementation of punitive tariffs as proposed by Trump. But Congress could do other things which would hurt trade. Paul Ryan, for example, is currently working on a border adjustment tax (BAT), which finds broad support among Republicans in the House of Representatives. It remains to be seen whether Trump could bring about a change in trade policy against opposition of Congress.  

Dr Claudia Schmucker is head of the Globalization and World Economy Programme of the German Council on Foreign Relations.