Donald Trump's Tariffs Proposal Faces Pushback From Republicans

Dec 05, 2016

In a major early hurdle to Donald Trump's trade agenda, Republicans indicated on Monday they are not ready to support his proposed tariff on U.S. companies that leave the country, reopening old rifts between the President-elect and his own party.

Trump repeated on Sunday morning a campaign promise to set a 35% tax on businesses that leave the country—leaving many Republicans on Capitol Hill to respond the next day with guffaws, grimaces and nervous hedging.

“I do not want a trade war. I do not believe in a trade war. I do not think trade wars are healthy. I think history has shown that trade wars are not healthy,” said House Majority Leader Kevin McCarthy.

“We know the size of America with the population around the world that we need to trade around the world,” he added.

“Some of these things do have to face a harsh reality but you have to be very careful if you’re going to add costly tariffs,” said Republican Sen. Orrin Hatch of Utah, who endorsed Trump in May. “We’re all going back to the ‘30s when they started playing around with this and that and caused a lot of trouble."

Republican Sen. John McCain, when asked whether he would support a 35% tariff, scoffed and and answered emphatically. “No!” he said.

On an array of policy issues, Trump is at odds with Republican orthodoxy. But on few issues is he as far removed from the rest of his party as on trade.

Republicans have long been the standard-bearers for free trade, opposing impediments to the exchange of goods, while traditionally, it has been Democrats who have supported taxing goods that are imported in the United States and called for similar trade protections.

During the election, Trump flipped the script, promising to punish trade infractions and countries. Though his screeds against companies that planned to leave the country—Nabisco, Carrier and others—attracted workers in the so-called Rust Belt states, they came with few specifics on policy.

Now, with Trump's inauguration just seven weeks away, a central message of his campaign seems unlikely to garner much support from his Republican colleagues, who have long held that extreme restrictions would have a devastating effect on American companies and the economy.

"The U.S. is going to substantialy [sic] reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. without retribution or consequence, is WRONG!" Trump tweeted shortly before 7 a.m.

"There will be a tax on our soon to be strong border of 35% for these companies wanting to sell their product, cars, A.C. units etc., back across the border," he said.

The disagreement between Trump and his fellow Republicans show once again the disagreements between the party's traditional views and their now-leader's long-held beliefs. Trump has been calling for more protectionist trade policies since Ronald Reagan's presidency; ideological leaders in the Republican Party such as House Speaker Paul Ryan have insisted on the party's traditional small-government, limited regulation agenda.

One point of agreement between the President-elect and Republicans may be on tax reform. Republicans on Monday emphasized a compromise instead of tariffs that would include a lower corporate tax and a streamlined tax code. Some leading Democrats and Republicans, including incoming Democratic Minority Leader Chuck Schumer and Republican Sen. Rob Portman, favor a one-time tax on companies that have kept their profits overseas.

“We can get at what he’s talking about through smart tax reform. What his concern is, is legitimate—American companies are moving overseas, are shifting headquarters and factories overseas,” Speaker Ryan said in an interview with the Milwaukee Journal-Sentinel on Monday, the paper reported.

Republican Sen. Lindsey Graham, an outspoken critic of Trump during his campaign, said he supported tax reform, not tariffs.

“I think tax reform to entice people to stay is the right approach,” said Graham. “Tax penalties to keep them from leaving really gets into the boardrooms of every business in the United States.”

The U.S. government already imposes duties on companies that sell goods into the country below market value, a practice called dumping. Much of Trump's support during the election came from working-class voters, many of them who feel that trade deals have caused them to lose their jobs.

Despite their differences with the President-elect, some Republicans are still loath to speak out against the issues that excited Trump's base of voters and brought him a surprise victory last month.

"If you think of all the things that have been proposed, obviously there were many of them and an agenda’s got to be narrowed down," said Republican Sen. Bob Corker. “I’m not much of a tariff-oriented individual, but I look forward to seeing what he does.”

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