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Is the China trade war legal?

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Thanks to the federal separation of powers, even the president cannot always get what he wants. This is especially true in an area like trade because the Constitution assigns principal responsibility to Congress. In fact, the Trump administration may not have legal authority to implement a policy at the heart of its trade agenda, which is a tariff on every single thing imported from China, as recently threatened by the president.

As it stands in the trade war between the United States and China, President Trump and Trade Representative Robert Lighthizer are relying on the Trade Act of 1974 for authority to impose tariffs on imports from China. This authority is commonly referred to as Section 301, which instructs the trade representative to determine whether any policy or practice of a foreign country is unjustifiable and burdens or restricts American commerce. Given the heavy hand that Beijing uses in the Chinese economy, it was not hard for Lighthizer to find such practices.

Beijing imposes a variety of investment restrictions, discriminatory licensing procedures, technology transfer rules, and cyber intrusions, all with an aim to acquire the intellectual property of American businesses. According to the Trump administration team, these practices cost the American economy $50 billion each year. Section 301 empowers the president and trade representative to impose restrictions on China, with a preference for tariffs. Consequently, the Trump administration last week imposed 10 percent tariffs on $200 billion worth of Chinese imports, which are set to rise to 25 percent by next year, and that is a problem.

{mosads}The president has already imposed a 25 percent tariff on $50 billion in Chinese goods. With the new round of tariffs that have just gone into effect, he has essentially imposed a $60 billion fine for a $50 billion crime. Section 301 is very specific in that any action undertaken by the trade representative, in this case the tariffs, should be “equivalent in value to the burden or restriction being imposed” by China. The Trump administration appears headed to exceed the limits by billions of dollars.

This is one of the dangers of a “tit for tat” trade war. This all began when the trade representative found that unfair Chinese practices have cost the American economy $50 billion. In response, the president and trade representative slapped a 25 percent tariff on $50 billion worth of Chinese imports, essentially raising $12.5 billion in new taxes. Given the challenge of matching the costs to both countries, there is an argument to be made that the trade representative targeting of $50 billion Chinese imports was indeed more than satisfactory to meet the original equivalence in value.

Unfortunately, things did not stop there between the two sides of this trade war. Beijing responded by placing a 25 percent tariff on $50 billion worth of American imports. Washington responded with a 10 percent tariff on $200 billion worth of Chinese goods, which effectively imposes a new $20 billion tax scheduled to increase to a $50 billion tax by next year.

As matters now stand, tariffs have been placed on at least $250 billion worth of Chinese imports, or roughly half of all things that Americans buy from China. If President Trump follows through with his threat and slaps a 25 percent tariff on every single thing that Americans buy from China, it would be a $130 billion dollar tax. That would far exceed the damages of any practices China has imposed on the United States, even if one will calculate the damage done by the trade retaliation of Beijing to date.

At this point, either the White House has violated the vague limits set by Section 301 or Congress overstepped its authority in giving the executive branch authority that is too broad. The Constitution is clear that Congress regulates commerce. If the White House has no limit to how many tariffs or restrictions it can impose on China, then this is an unconstitutional delegation of legislative trade power. There has been much discussion over whether China should be punished with tariffs and whether the trade war is actually good. This latest round of tariffs may in fact spark a legal battle between American businesses, the White House, and Congress.

Riley Walters is a policy analyst who specializes in Asian economic and security issues in the Asian Studies Center at the Heritage Foundation.

Tags Business China Congress Donald Trump Finance Robert Lighthizer Trade

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