What’s Next For Tariffs? Here’s What the Trade Representative’s Confirmation Hearing Revealed

Jamieson Greer, President Donald Trump’s nominee for trade representative, defended the president’s aggressive use of tariffs to a panel of senators.

Speaking before the Senate Finance Committee Thursday, Greer—who, if confirmed, will play a role in shaping the nation’s trade policy—shed some light on how the administration might use tariffs, which were a key part of Trump’s economic policy platform. Senators have not yet voted to confirm Greer and will likely discuss his nomination in the coming days.

Trump already roiled markets in the first month of his presidency when he threatened 25% tariffs against Canada and Mexico and imposed a 10% tariff on China. The tariffs against Mexico and Canada were delayed after the two countries said they would tighten border security against drug smuggling and illegal immigration.

“I am convinced that we have a relatively short window of time to restructure the international trading system to better serve U.S. interests,” Greer said.

What Are Tariffs For? Just About Everything

Greer said one of the main uses of tariffs would be to ensure “reciprocity” from other countries—that is, to get them to lower their own tariffs and open their markets to U.S. companies.

“For many decades, we have had a trading system where the United States opens its market over and over again, and others do not,” Greer said.

Greer also said tariffs could be used to raise money to fund the government, to encourage companies to manufacture products in the U.S. rather than abroad and to achieve other policy objectives that have little to do with trade. For example, he cited Trump’s use of tariff threats to get Canada and Mexico to crack down on fentanyl smuggling.

Several Democratic senators criticized Trump’s use of tariffs, citing the possibility that if imposed, they could raise prices for consumers and damage relations with allied nations.

The Trump Administration Has Nostalgia For the 90s (The 1890s)

Like Trump himself often has, Greer dusted off history books when Oregon senator Ron Wyden, a Democrat, asked for an example of tariffs having a positive effect on the U.S. economy.

Greer noted that before the income tax was created in 1913, the federal government was funded almost entirely by tariff revenue and cited protective tariffs as contributing to the rapid industrial expansion of the U.S. in the late 19th century.

Greer acknowledged that things are different now. For example, the government is much larger now relative to the country’s economy than it was back then. (For example, the entire U.S. Army in the 1890s would comfortably fit into the stadium where the Army football team plays today, with 4,000 seats left over.)

“I don’t think we’re in a position to, tomorrow, fund the entire government using tariff revenue,” he said. “But I think that historically, we have had tariff revenues as an important part of funding the government prior to the income tax.”

Many economists say broad-based tariffs that would be needed to support a significant amount of the government’s funding are economically destructive and can raise consumer prices. Although overall inflation was low during Trump’s first term in office, tariffs he imposed on certain products, including washing machines, raised consumer prices.

The Administration Views Trade Deficits As A Problem To Be Solved

Greer said a top priority of the administration would be reducing U.S. trade deficits with other countries.

The U.S. often buys much more from other countries than we sell. That trade deficit hit a record high in December, partly the result of companies bracing for Trump’s tariffs by loading up on foreign products.

“To me, this is a huge problem,” Greer said. “It’s a problem for our workers. It’s a problem for exporters. …I think in short order, we will be approaching these countries to assess their unfair trade practices and why they’re able to have and maintain these huge trade imbalances.”

Whether a trade imbalance is inherently bad is a matter of debate among economists.