The U.S. Senate Is Producing Terrific Tariff Bills; Will Leadership Notice?

The 118th Congress (2023-2024) is easily the best Congress we’ve had in the 21st century when it comes to tariff policy. U.S. Senators in particular are introducing new tariff bills for different products and industries. And the cadence is picking up. But so far, Congressional leadership appears to be looking the other way, stuck in reverse.

Background - Tariff Policy Used To Be Exclusively For Congress

The 118th Congress may well be the most responsive on tariffs since some time prior to the 73rd (1933-1935).

That’s because 90 years ago, in 1934, Congress mostly handed over its constitutional authority on tariffs to the Executive branch. Since then, the legislature has let its tariff function atrophy.

Before 1934, though, Congressional bills to legislate tariffs were the norm. Tariffs were legislated for revenue raising purposes, or for protective purposes (i.e., promoting domestic production), or for a mix of both! The very first Tariff Act, passed on July 4, 1789, laid it out in its first sentence:

The Tariff Act of 1789 was a ‘comprehensive’ tariff, setting tariff rates for literally any tangible good (agricultural, mineral, or manufactured) that might show up at a port.

These lists of tariffs are called “tariff schedules”.

Not every Congress would pass a ‘comprehensive’ tariff; that would happen maybe twice or once per decade, when there was support for a holistic reassessment of rates.

But tariff schedules were still tweaked by Congress even in sessions where there was no comprehensive revision.

For example, the tariff schedule was modified in 1797 to collect an additional 10% on articles imported by foreign ships. In 1804, an additional 2.5% across the board tariff was assessed to fund President Jefferson’s “Mediterranean Fund” for a naval buildout.

As tariffs were the main revenue source for the Federal government, they were adjusted almost every Congressional session in America’s first hundred years.

Daniel Peart, in his book Lobbyists and the Making of US Tariff Policy, 1816−1861, argues that that “tariff legislation, so important to so many Americans, was only the final outcome of a largely unseen and frequently convoluted process”. Historians profile high-minded clashes of ideas between political leaders at key moments in time. But while the 19th century was especially partisan, the voting records on tariff legislation, and the plethora of minor amendments on specific products or industries, suggests that negotiation and deal-making between regional and state Congressional delegations typically drove tariff setting, according to Peart.

The last comprehensive tariff legislation Congress passed was the Tariff Act of 1930, colloquially known as the ‘Smoot-Hawley’ Tariff Act after its legislative sponsors, U.S. Senator Reed Smoot (R-UT) and Rep. Willis C. Hawley (R-OR-01). The two were Chairs of the Finance and Ways & Means Committees respectively, the committees of jurisdiction for tariffs.

Legislators debated tariffs animal by animal, crop by crop, and product by product:

On March 28, 1930, the New York Times printed the entire tariff schedules of both the House and Senate bills for the 1930 Tariff, and comparison rates to the two prior comprehensive tariffs, those of 1913 and 1922.

Never since then has there been any comparable public debate over the tariff schedule.

As a result of being the last Congressional tariff schedule, the Tariff Act of 1930 remains codified at 19 U.S.C. Chapter 4, and is the foundation for much of our tariff and trade laws. That’s why you still hear about it in the news 94 years later. Until Congress passes a new Tariff Act, we’ll keep on hearing about 1930.

Post-1934, tariff schedules get sliced and diced in foreign capitals and behind closed doors.

In 1934, Congress delegated its constitutional authority on tariffs to the President through an amendment to the 1930 Tariff Act, titled “Promotion of Foreign Trade”. You can read more about this terrible period here.

With few exceptions, such as the Meat Import Quota Act of 1964, Congress has spent its time on trade policy since 1934 mostly writing letters to the Executive branch and rubber-stamping Presidents’ secret legislating via ‘trade agreements’.

There are also two perennial tariff-cutting programs which Congress has regularly reauthorized over the decades. One is the General System of Preferences (GSP), which cuts tariffs for ‘developing’ countries to promote off-shoring to them, and the other is the Miscellaneous Tariff Bill (MTB), which authorizes tariff cuts for items that importers claim is unavailable domestically.

In the 117th Congress (2021-2022), renewal of these programs, which had expired the previous year, failed. Normally these programs sailed out of Committee to the President’s desk with little controversy. Instead, the landmark trade legislation of the 117th Congress was the repeal of Russia and Belarus’ Most Favored Nation (MFN) status, which raised the average tariff rate on those countries from 3.4% to approximately 32%. The U.S. House also passed the Import Security and Fairness Act, which seeks to exclude Chinese shipments from the de minimis loophole. This healthier approach to trade in the 117th Congress perhaps portended the exciting developments in the 118th.

90 Years After the Executive Handoff, the U.S. Senate Leads In Reinvigorated Tariff Policy

All of the following tariff bills have their own wonderful origin stories and should immediately be enacted into law. They are presented below in the chronological order they were introduced in the U.S. Senate.

September 2023, in particular, was the month when a significant glass ceiling was shattered. That’s when U.S. Senators Bill Cassidy (R-LA) and Sherrod Brown (D-OH), who both sit on the Senate Finance Committee, introduced their own tariff bills to protect constituent industries and promote American production. The Senate Finance Committee is the committee of jurisdiction for tariffs.

Ferrosilicon Tariff

Senator Brown was joined by U.S. Senator Tommy Tuberville (R-AL) in sponsoring the Increasing American Ferrosilicon Production Act. The Senators are to be saluted for their unabashed embrace of protective tariffs with this bill. As the press release headlined, “Bill Would Increase Duties on Russian Ferrosilicon and Support Production and Jobs in Ohio and Alabama”.

Their ferrosilicon tariff bill raises the rate on Russian ferrosilicon from 11.5% to 35%. Other significant aspects:

It enjoyed support from two U.S. Ways & Means members, Rep. Carol Miller (R-WV) and Rep. Terri Sewell (D-AL), who introduced a House companion.
The bill was introduced after President Biden failed to increase the rate with the tariff adjusting proclamation authority he was given pursuant to the Russia MFN repeal bill. This is important, as the standard operating procedure since 1934 has been for legislators to accept defeat when Presidents have failed to protect a domestic industry.

Stylistically, one criticism can be made: the bill directs the President to ‘proclaim’ the 35% tariff. This is understandable given the context of President Biden’s failure to proclaim the tariff with his special, one-time Russia tariff proclamation authority. However this authority has since expired. Going forward, legislators should legislate tariffs, not direct the President to proclaim them.

Shrimp Tariff; With Garlic Too?

Senator Cassidy’s Indian Shrimp Tariff Act was another milestone moment. India enjoys a comprehensive protective tariff and the accompanying high economic growth, while also enjoying open access to the U.S. market. With this asymmetry, and lower Indian labor and environmental standards, their exports came to dominate the U.S. shrimp market. Traditional trade remedies, like anti-dumping and countervailing duties, proved to be of little utility, as is typically the case.

The U.S. shrimp industry now accounts for less than ten percent of Americans’ shrimp consumption. To stop the bleeding, Senator Cassidy’s India Shrimp Tariff Act levies a tariff of 10% for 2024, 20% for 2025, and from 2026 forward, 40% – which happens to be exactly India’s tariff rate.

One particularly exciting feature of the shrimp tariff: addressing the means of valuation. For ‘ad valorem’ tariffs (those expressed as a percentage), the percentage is applied to whatever the importer claims they paid overseas. Undervaluation is rampant, and our customs valuation rules encourage it. Senator Cassidy remedies all of that as follows: “shrimp imported into the United States from India shall be appraised, for purposes of that Act, as not less than the average of United States ex-vessel shrimp prices as of the date of exportation.”

Truly, a marvelous feature! No more undervaluation problems. All Gulf Coast and Southeast legislators should be rushing to join this legislation.

Speaking of Gulf Coast legislators, U.S. Senator Rick Scott (R-FL) has announced his own SEWAGE GARLIC Imports Tariff Act targeting China, although as of the date of publication, the text has not been released. In the 1990s and early 2000s, imports of Chinese garlic effortlessly circumvented AD/CVDs that California garlic growers had obtained to stop the flood.

For commodities, circumventing country-specific tariffs is typically far easier than with manufactured goods. For agricultural items especially, what is ultimately needed is global protection first and foremost, with imports tightly controlled from a limited number of trusted origin sources. Price stability is paramount for producers. This tariff policy is already in the U.S. tariff schedule for peanuts, sugar, and other agricultural items, and is the norm in much of the world.

Senator Cassidy’s recently introduced Americas Act takes a critical first step to that outcome, by instructing USTR to raise our global MFN bound tariff rate average from its current lowly 3.4% – the lowest of any WTO member – to 40%. See an article based on an earlier discussion draft here to learn more. Note that India’s WTO bound tariff average is over 50%, and a quarter of their tariff lines are ‘unbound’, meaning they retain sovereignty to charge whatever they want.

Ending our 3.4% global MFN open tariff eradication is fundamentally necessary to advance near-shoring and Western Hemisphere development, but also for countless desired U.S. policy priorities, in farming & manufacturing, and from antitrust to the environment and more.

Senator Hawley Protecting U.S. Taxpayer Spending With Tariffs

When the Inflation Reduction Act became law in August 2022, it was estimated to cost roughly $403 billion in tax credits for energy and climate-related spending. Much to the dismay of U.S. Senator Joe Manchin (D-WV), the U.S. Treasury’s implementation of those tax credits has both ballooned that estimated expenditure to $659 billion while also driving the spending away from America-made products towards imports from China.

In addition to the U.S. Treasury’s malfeasance, the Biden Administration nullified AD/CVD orders applying tariffs to Chinese solar panel imports from for southeast Asian countries. Put plainly by Michael Stumo, CEO of CPA, at the time “the Biden administration is picking China’s government-subsidized solar manufacturers that use forced labor and coal-fired power plants over U.S. solar manufacturers and American workers”.

We’ve seen this story before, when Congress and the President provided $900 million in government-backed loans to solar panel maker Solyndra, only to stand by and watch the investment get crushed by cheap Chinese solar panel imports. (Here again, AD/CVDs failed). President Trump helped right spark a rebirth with his global Section 201 solar tariff, but here too it was heavily neutered by litigation from the import lobby. President Biden ultimately killed off the global Section 201 solar tariff by greatly expanding the quota limits to make them meaningless.

With the Biden Administration’s hostility to solar tariffs in particular, and apparent ambivalence to keeping IRA spending from seeping overseas, Senator Hawley’s two tariff bills are urgently needed relief.

First, Senator Hawley introduced his Protecting American Autoworkers from China Act, which raises the tariff by 100% on all vehicles imported from China, and also on vehicles assembled in other countries by firms controlled in China. In 2018, President Trump increased the tariff on car imports from China from 2.5% to 27.5%. As CPA documented, this led to positive revenue and protection effects, with Volvo production leaving China, Ford canceling offshoring plans, and General Motors opting to absorb the tariff without passing along any costs.

Nonetheless, the U.S. Treasury’s decision to give $7,500 to dealers of Chinese EVs for every consumer lease neutered the protective effect of that 27.5%, and thus China’s Polestar has continued to ramp up imports. Hawley’s 100% should help restore the protective effect.

And perhaps most significantly for this bill, it changes the rule of origin for automobiles globally, specifying that vehicles assembled in other countries by firms controlled in China will be treated as though they originated from China. This is true tariff innovation! It tariff enjoys the support of the Teamsters Union as well.

Secondly, Senator Hawley introduced the Declaring Our Energy Independence From China Act, which imposes an additional 25% tariff on battery cells and modules, solar cells and modules, and wind turbines, not only from China, but also from other countries if produced by Chinese firms, similar to his Autoworker bill. This means the new tariffs would apply to green energy goods made by Chinese companies in Vietnam or Malaysia.

Hawley’s energy tariff bill has one more exciting feature: it brings back “United States Value” as the basis for customs valuation for Chinese green energy imports. United States Value was first legislated in 1897 as a customs valuation formula, and it ties the value to the price at which merchandise “similar to the imported merchandise is freely sold or offered for sale in the usual wholesale quantities in the principal U.S. market”. In 1980, Congress repealed United States Value, following a coup by multinational enterprise in the GATT Tokyo Round.

Finally, while not a product-specific tariff bill, Senator Hawley deserves praise for introducing his Raising Tariffs on Imports from China Act MFN repeal bill last year. Especially encouraging was the Senator’s underscoring of the revenue aspect, and linking his introduction to debt ceiling talks. It should be at the forefront of any trade package. See CPA’s guide to repealing China MFN for more.

Senator Rubio: making ‘specific’ tariffs cool again

Just a few days after Senator Hawley introduced his auto tariff bill, Senator Rubio introduced three of his own:

Closing Auto Tariffs Loopholes Act. Similar to Hawley’s bill, this legislation updates the automotive rule of origin globally to treat motor vehicles produced by a foreign adversary and its controlled entities as if they originated in the territory of the foreign adversary.
Strengthening Tariffs on Chinese Autos Act. While Hawley’s tariff is pegged at 100%, Senator Rubio chose what is known in tariff terminology as a ‘specific’ tariff. Specific tariffs are a flat dollar value per unit, rather than a percentage. Senator Rubio’s bill puts the tariff at $20,000 per vehicle. This is fabulous. Choosing a specific tariff does away with all the weaknesses in our customs valuation regulations, and is easier to administer than any ad valorem tariff, even one backed by a robust valuation mechanism like United States Value. Specific tariffs are tremendous, and used to make up the majority of rates in the U.S. tariff schedule in the 1920s. Senator Rubio also deserves praise for drawing attention to the “assists” loophole in customs valuation in his press release, which currently allows multinationals to subtract the cost of many foreign inputs from the value of the finished item they are importing.
American Subsidies for American Autos Act. Not only does this bill fix Treasury’s malfeasance with the IRA, but it goes even further in ensuring IRA money doesn’t flow to China by requiring electric vehicles to meet the more stringent USMCA automotive rule of origin before becoming eligible for tax credits. It more than offsets Treasury’s malfeasance.

American automotive CEOs including Ford’s Jim Farley and Tesla’s Elon Musk, along with the United Auto Workers, have warned that China’s automotive industry is an existential threat and that absent tariffs, will displace the rest of the industry. Senators Hawley and Rubio have put forward a solution.

Will Congressional Leadership Notice?

All of the above tariff bills are common sense and urgently needed. Leadership at the Ways & Means and Senate Finance trade subcommittees are currently working on the contours of a trade package. They should forget about GSP and the MTB, which prioritize tax breaks for importers, and instead focus on legislation like the bills above, which will result in protection for American jobs with some revenue for the Treasury as a bonus.

With the narrowly divided Congress, we may not see any trade package this year, but given the wild popularity of tariffs with U.S. voters, and the increasing cadence of tariff legislation, expectations continue to grow for the 119th Congress starting next year.

Who knows? Maybe we’ll see a sweeping Tariff Act of 2025 with a healthy mix of revenue and protection? Sooner or later, it will happen.

The U.S. Senate Is Producing Terrific Tariff Bills; Will Leadership Notice?

Background - Tariff Policy Used To Be Exclusively For Congress

Post-1934, tariff schedules get sliced and diced in foreign capitals and behind closed doors.