Trump's steel tariffs are riddled with exemptions. Why?
What is the Commerce Department up to?
President Trump's tariffs on steel and aluminum aren't a shining success. Since the White House slapped duties on those imports coming into the U.S. last year, domestic workers in those industries are seeing meager benefits, and trade deficits have actually risen.
There are many reasons why this is the case, but one in particular may be absurdly simple: Trump's Commerce Department is riddling his tariffs with loopholes.
The tariffs were originally imposed in March 2018 — a 25-percent rate on all steel imports and a 10-percent rate on all aluminum imports. Certain allies were granted a temporary stay of execution, but in June the tariffs hit them as well. This all did not go over well with the American business community, and Commerce Secretary Wilbur Ross began allowing individual companies to request waivers from the tariffs if they met certain qualifications.
Ostensibly, exemptions are granted if the steel product being imported isn't readily available from American producers. The whole point of tariffs is to give domestic producers a competitive advantage. But reviews of the Commerce Department's waivers suggest it's granting an enormous number of exemptions, and granting them in a bizarre or haphazard manner.
For instance, a recent study by Christine McDaniel and Danielle Parks at the libertarian Mercatus Center found that waiver grants are all over the place: Requests for waivers for Canadian steel exports were approved 27 percent of the time, Spanish requests were approved 6 percent, and British requests were approved 30 percent. Meanwhile, requests for Chinese exports were approved 39 percent of the time — despite China playing a central role in President Trump's anti-trade rhetoric, and in the actual creation of the global steel glut.
"In the six months from March to August [of 2018], the amount of steel imports approved from China is equivalent to 40 percent of what came in during the previous year," McDaniel and Parks wrote. "In contrast, the volume of steel in the approved requests with Canada as exporter sums to 107 million kilograms, which is less than 2 percent of U.S. imports of subject steel from Canada."
The situation is equally bizarre when it comes to the aluminum tariffs: Eighty-six percent of Chinese exports into the U.S. have an exemption, while only 2 percent of Canadian exports do.
It should be noted that Mercatus is pretty ideologically hostile to Trump's protectionism. But their findings also stack up with concerns from across the political spectrum.
In August 2018, Sen. Elizabeth Warren (D-Mass.) sent a letter to the Commerce Department's inspector general, noting that the waiver application process seemed off and asking for an investigation. In particular, she pointed to an occasion where a waiver was granted to an exporter involved with Russian President Vladimir Putin. The waiver was later revoked, with Commerce citing a "clerical error." Warren also noted that Office of Management and Budget director Mick Mulvaney was lobbying for waivers for importers who had donated to his earlier congressional campaign.
Then in November, three more senators — two Democrats and one Republican — penned a letter to the Government Accountability Office (GAO), asking it to look into the matter. The agency agreed, though its report probably won’t be out for a few more months.
Now, it's certainly possible that whatever's going on with commerce's waiver process has more to do with incompetence than corruption.
Ross originally said he expected around 4,500 waiver requests to come in. Instead, his department got swamped with more than 10 times that many. They also badly underestimated how much processing time any individual request would need.
More evaluators have been hired since, but the backlog remains enormous: About 60 percent of the requests were still pending as of December, while another 30 percent had been approved, and 10 percent denied. Mercatus and others argue that the Commerce Department's system for organizing the requests is opaque and confusing. According to Reuters, staff can't afford to spend more than a few minutes reviewing the merits of any particular waiver request.
Sources told The New York Times, CNN, and Reuters that the Commerce Department often deals with this problem by simply rubber-stamping any waiver requests that no one objects to. If a request does receive an objection, they tend to take it at face value, without really looking into it.
In September, the White House altered the review process, to give rivals more time to object to waiver requests, and for rebuttals to the objections.
There's an interesting comparison to be made to Trump's tariffs on China, where 1,300 waiver requests have been denied as of November, and none approved. Those are run through the U.S. Trade Representative office, which is overseen by Robert Lighthizer. Whatever you think of his policy beliefs, Lighthizer does seem to be a conscientious public servant. Ross over at Commerce, by contrast, is a prime example of the White House's habit of hiring flippant, favor-dealing billionaires.
If you view public office as a payday rather than a responsibility, incompetence and corruption tend to be the result.