Can Donald Trump pass taxes without Congress? And can anyone stop him? | Trade War News

US president-elect Donald Trump – who called tariffs “the best word in the American dictionary” – wasted little time after his election victory before proposing tougher tariffs on trading partners.

Trump’s campaign promises include adding a 10 to 20 percent tariff on all non-domestic goods sold in the United States, a 60 percent tariff on goods from China and similar tariffs on countries that tax the US. Then on November 25, Trump promised new tariffs of 25% on goods from Mexico and Canada and an additional 10% tariff on China.

Economists say that Trump following through on these promises could revive inflation, which is a key issue for Trump to win the 2024 election.

Our research review of real-world tax studies concluded that consumers ultimately bear most of the burden of higher commodity prices, and the burden outweighs the economic benefits of the tax. There is consensus among economists on this question, research shows.

Independent groups have estimated that Trump’s proposed tariffs could cost the average family $2,000 to $4,000 a year, estimates that were calculated before the latest tax proposals.

If fully implemented, the new North American tariffs could increase grocery prices, given that Mexico accounted for 69 percent of US vegetable imports and 51 percent of fresh fruit imports by 2022. , which relies on Canadian crude oil exports. Construction prices can rise, too; one-fourth of the lumber used in the US comes from Canada, and Canada and Mexico supply cement, metals, machinery and other building materials.

Supply chains for these and other goods could not quickly switch to domestic sources, which could force consumers to pay more or skip buying what they don’t need altogether.

If Trump wants to go after taxes, there may be no way to stop him. Experts say he can act independently, without the support of Congress, which is likely to be more anti-tariff than he is. Agricultural states, which hold a large majority in the Senate, are concerned about retaliatory tariffs by US trading partners that could blow up export markets in the long run.

“There appear to be few practical or legal obstacles to Trump making good on his campaign promise,” concluded trade experts Warren Maruyama, Lyric Galvin and William A Reinsch with the Center for Strategic and International Studies, a national security think tank.

Trump’s record on tariffs

A tariff is, in essence, a tax on imported goods. More than a century ago, tax rates were a large part of the federal government’s revenue, but in recent decades, local taxes have become the primary source of federal revenue. After 70 years of international negotiations to promote free trade, tariffs have recently risen to about 2 percent of total federal revenue, according to the Congressional Research Service.

After Trump was elected in 2016, he independently ordered an increase in tariffs, estimated at $80bn, on items such as steel, aluminium, washing machines, solar panels and a range of goods from China. As a result, foreign tax revenues collected by the federal government doubled between 2015 and 2020, to $74bn. When Joe Biden defeated Trump in the 2020 presidential election, Biden retained many of Trump’s values.

It remains to be seen whether Trump intends to follow through or raise tariffs as a ploy to gain approval from those countries.

What power would enable Trump to impose taxes without Congress?

According to Article 1, Section 8 of the Constitution, Congress has the power to impose taxes, not the president.

However, over the years, Congress has passed many laws that give some of those powers to the president.

“Legally, there is no difference between Congress setting tariffs and the president setting tariffs that work within the law,” said Ross E Burkhart, a Boise State University political scientist who specializes in trade.

Powers available to Trump include:

Section 232 of the Trade Expansion Act of 1962which allows the president to impose sanctions if national security is threatened. Trump has already used this authority on his steel and aluminum products, some of which Biden has retained.

“While some say it would be a stretch for Trump to claim that all imports are a threat to US national security under Section 232, courts have been handing presidents foreign affairs and trade policy, and legal challenges to the provisions of Section 232. They have gone nowhere,” Maruyama, Galvin and Reinsch wrote for the Center. for Strategic and International Studies.

Section 301 of the Trade Act of 1974which authorizes tariffs when the president determines that a foreign country “unreasonably burdens or restricts the commerce of the United States” in violation of trade agreements. Trump used this authority for some of his first tariffs on China and on civil aviation from the European Union; Biden has used it for tariffs on Chinese electric cars and other technology products.

Section 301 requires a decision by the Office of the US Trade Representative; Section 232 requires an investigation by the Department of Commerce. But “these procedural niceties can be done on a moment’s notice by cabinet officials,” Maruyama, Galvin and Reinsch write.

Tariffs in China will be “very easy to implement” using the Section 301 authority, said Douglas Irwin, an economist at Dartmouth College.

Burkhart said: “Congress is unlikely to express strong opposition to tariffs on China. The public tends to view China’s and US trade policies as unfair, making this easier to implement.”

Section 338 of the Tax Act of 1930, which has not been used for decades but would allow the president to impose tariffs of up to 50 percent on foreign goods if the US International Trade Commission finds that a foreign country has used unfair trade practices against the US.

Section 122 of the Trade Act 1974, which allows the president to add a 15 percent tariff on imports for 150 days given a “large and serious” deficit in the US balance of payments with other nations or to prevent “imminent and significant depreciation of the dollar” in foreign exchange markets.

Section 203 of the Emergency Economic Powers Act, which allows a tax on all imports during times of war or emergency. Declaring such an emergency would require an executive order from Trump. Trump threatened to use this authority in 2019 against Mexico, citing illegal immigration to the US, but later that year, the two countries reached an agreement on immigration policy that ended its use.

Alan Wm Wolff, a senior researcher at the Peterson Institute for International Economics, wrote that the extremely broad use of Section 203 – “for brothers and friends in Europe and Asia, in the Americas – would be “a power grab too big to be in. that is what Congress intended in this act.”

But Maruyama, Galvin and Reinsch argue that the law’s language is broad enough to fit Trump’s needs. “It’s not a stretch” to imagine Trump extending the law to deal with the US’s massive trade deficit, they wrote.

What power do the opponents of the tariff have to fight them?

The five provisions allow Trump great freedom over trade policy — and there’s no sure way to stop him, experts say.

Opponents of the tax may sue, but legal challenges will face an “uphill battle,” Maruyama, Galvin and Reinsch write. “Courts, including the Supreme Court, have been reluctant to interfere with the president’s use of foreign affairs and tax powers.”

The U.S. Court of International Trade rejected some of Trump’s proposals for foreign tariffs during his first term in office, but it’s unclear how that court will rule on the new proposals, said Kent Jones, an economics professor at Babson College.

America’s trade partners may challenge Trump’s policies at the World Trade Organization, the international trade arbiter, but this did not stop him. “President Trump has often said that he does not view WTO rules or any other trade agreements as binding on the US, and this consideration will not prevent his decision to impose tariffs,” Jones said.

Congress could pass legislation to limit Trump’s tariffs or use the threat to do so as leverage. If the tariffs are as broad and deep as Trump has recommended, deep-pocketed businesses may pressure lawmakers to oppose them.

“The size of the global tax will cause businesses to shrink,” Burkhart said. “These are the biggest lobbying districts on Capitol Hill, and they will make a big noise when President Trump announces a global tax, even if the legal conditions are appropriate under them.”

However, the Senate and House have a majority of Republicans. And Trump can strategically free certain companies to isolate and weaken his opposition.

“By playing favorites in tax exemptions, the government can distribute rewards to friendly or compliant companies,” Jones said.

A more likely, and potentially more effective, response would be for foreign countries to raise prices on US goods, ending the economic pain in the US.

Widespread economic damage, especially from rising prices, could lead to a reversal of Trump’s election fortunes and could be the only factor that works in the end, experts say.

“The biggest pushback against collective, universal tariffs is likely to come from American consumers and US retailers and distributors who buy goods from other countries, as their prices may drop significantly, almost to the point of full tariffs,” Jones said.