There have been some rumblings and grumbling about whether President Trump has the power to be imposing tariffs. After all, the Constitution gave Congress the power to “lay and collect Taxes, Duties, Imposts and Excises” and “to regulate Commerce with foreign Nations.” The language is clear.
And yet, Trump has been able to move unilaterally because Congress gave this power away to the executive branch in 1934.
Before the 1930s, Republican congresses jealously guarded their tariff-making authority, which they used to protect the U.S. market for American manufacturers and workers. Democrats — both southern cotton growers and later liberal internationalists — were free-traders, who constantly sought to reduce the tariff to encourage exports, expand foreign trade and create international cooperation. Trade was the issue that polarized U.S. politics and tore families apart.
And then, in the wake of the Great Depression, the Democrats rode into office, became the dominant party and, as in so many other areas, passed laws assigning far greater power to the executive. This created a system that boosted free trade for decades but unwittingly forged the legal framework that now allows Trump to destroy their policy vision.
Franklin D. Roosevelt’s early New Deal programs took power from Congress and placed it in the executive branch. The argument was that Congress represented local parochial interests and could not adapt to the increasingly interdependent economic world created by industrial capitalism. The federal government and professional civil servants were better equipped to deal with the macro-economy, which they did through programs like the National Recovery Administration and Agricultural Adjustment Administration that limited economic production raise prices.
The Supreme Court eventually declared both programs unconstitutional. But the court was silent about the Democrats transferring the power to set tariffs and regulate trade from Congress to the executive branch, which was done through the Reciprocal Trade Agreement Act (RTAA) in 1934. Democrats again argued that the president, advised by professional civil servants, was better equipped than Congress to act in the national interest. They reasoned that if there was one area marked by parochial jealousies, it was in protected industries, such as wool, chemicals, textiles and shoes, seeking ever higher tariffs in the face of the Depression — precisely what economists said was the absolute worst thing for world economic recovery.
The RTAA initially included all kinds of safeguards so that Congress could intervene if it was having an adverse effect on some constituency. It would have to be renewed every three years. It limited the total reductions the president could make in tariffs. And it limited the president to forging bilateral agreements — so multilateral deals like, say, the TransPacific Partnership, were off-limits.
The RTAA was popular with a growing number of manufacturers who were hoping to exploit foreign markets and needed to make sure that the people in those foreign markets had the dollars to buy, for example, John Deere tractors and Coca-Cola. The most powerful business lobbies supported the RTAA, and the Republicans eventually fell in line.
Between 1934 and 1945, the Roosevelt administration forged 29 agreements thanks to the powers included in the RTAA, reducing the U.S. tariff by nearly three-quarters. By 1939, American exports rose by more than $1 billion dollars.
At first, the RTAA’s safeguards also worked well. Democrats worked within the law’s limits and were forced to reargue its merits every three years.
But the economic devastation in Europe after World War II prompted Americans to rethink trade and the tariff. Democrats argued that economic nationalism had caused the Great Depression, which battered countries around the world and led to the rise of fascism in Germany, Italy and Japan. To these postwar Democrats, the way to avoid future wars was to tie the world together with trade and prevent the rise of economic and imperial rivalries that fueled armed conflict.
In 1945, the State Department made the case that more liberal trade policies held the key to peace and sought permission from Congress to reduce tariffs, already significantly reduced since 1934, by 50 percent. Republicans balked, but once again, the Democrats’ usual enemies — business lobbies such as the U.S. Chamber of Commerce and, more quietly, the National Association of Manufacturers — supported the Truman administration’s foreign policy of international economic integration.
The Cold War — with its imperative to make global capitalism work to avert the communist alternative — sealed the deal. Protectionists lost their congressional allies thanks to the fight against international communism. Plus, the economy was booming, while erstwhile U.S. competitors were still rebuilding (with the help of U.S. foreign aid).
Per the RTAA, the executive branch was responsible for negotiating U.S. trade policies, which it did in a series of negotiations known as the General Agreement on Tariffs and Trade (GATT), beginning in 1947. The RTAA still came up for renewal, but because tariff-setting was now focused on GATT concerns, internationalists were all but assured a victory.
In 1962, another liberal Democrat — President John F. Kennedy — liberalized trade further with the Trade Expansion Act of 1962, which superseded the RTAA and negated its safeguards, giving the president power to negotiate multilateral trade deals for the first time. It also put in place new safeguards, including worker retraining programs and the national security exception that Trump is using to justify his aluminum and steel tariffs.
In the years since, there has been remarkable bipartisan agreement on the economic merit of globalization, despite periodic spasms of protectionism from both the left and the right. Returning trade policy to Congress became increasingly less possible. Congress represents local and regional interests against other local and regional interests within the United States; it is ill-equipped to come up with a national trade policy that allows the U.S. to participate in and compete as a single entity in the context of worldwide trade discussions as formulated by GATT and now the World Trade Organization. That was part of internationalists’ argument back in 1934, and it is truer today than ever.
But the Trump administration has used the mechanisms that made the U.S. commitment to globalization possible, legal and constitutional to dismantle that very vision. The liberal internationalists who put these changes in place failed to anticipate a president unable to appreciate the value of international economic cooperation, and how vulnerable the structure they had created was to such a figure. Today, we are learning how fragile the free-trade regime actually is — and the dangers of reliance on the executive to set policy.