Where Did the Republican Free-Traders Go?
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President Trump's trade war intensifies as he raises duties again on China, with retaliation coming back from Beijing as well as possibly America's friends in Europe. Meantime, the shock to the U.S. economy raises pressure on Republicans in the House and Senate to get moving on that one big beautiful bill to cut taxes elsewhere. So what's the holdup? Welcome, I'm Kyle Peterson with The Wall Street Journal. We

We are joined today by my colleagues on the editorial page, Barton Swain and Kate Batchelder-Odell. Trump's reciprocal tariffs on close to 100 countries have now taken effect as of Wednesday morning.

With rates ranging up to 104% on China, that includes an extra 50% Trump added at the last minute as retaliation after Beijing retaliated against the original reciprocal tariffs. And more retaliation might soon be on the way, China now saying it will put 84% levies on U.S. exports.

The European Union is moving ahead with its own response. The Journal reports this morning it is going to target roughly $23 billion of U.S. exports, including chewing gum, motorcycles, and peanut butter. Yet surveying the prospect of real economic damage, the pushback

from other Republicans still remains pretty mild. Nebraska Congressman Don Bacon has a bill to pare back presidential unilateral tariff authority. He has two other Republican co-sponsors, and then he told this to Axios, quote, I have 10 others who want to do it, but they want to talk to the trade representative first.

unquote. Barton, your op-ed in today's Wall Street Journal paper is on this mild pushback under the headline, the Republicans who forgot their economics. What is the argument that you're making? Last weekend, I spent a few hours, the thought occurred to me, let's look up what Republicans in the Senate have said in the past about trade and tariffs.

You know, I mentioned John Barrasso, Wyoming and the Peace, and that's not because I wanted to pick on John Barrasso. It's because he was alphabetically the first one I came to. And what I discovered was that virtually every senator, maybe everyone who has been in the Senate, Republican senator who's been in the body in years before Trump was president, was a big free trader back in the day.

And the tone began to change when Trump became the nominee in 2016. I mean, that's not surprising. And I don't mean to sort of pick on Republicans for having switched their principles, because what are you going to do? The leader of the party is a big fan of tariffs. However, I did think that they needed reminding of the fact that their convictions are firmly in the free trade camp, no matter what they might be saying publicly.

publicly, you know, just spent some time quoting a few of them and also some of the newer ones like Rick Scott and Tim Scott. I just wanted to remind them that they are on record as being dead set against the kind of global tariff regime that Donald Trump is proposing. Let's listen to a piece of what Wyoming Senator John Barrasso is saying now. This is him on Fox News this week. Congress has given the president more and more authority on tariffs.

Specifically, national security for unfair trade practices. President Trump is fully within his authority. And I appreciate what the president is doing on tariffs, specifically in our home state of Wyoming. In terms of beef, the cattle producers, they're saying it is about time.

Another senator that Barton mentions here is Oklahoma's James Lankford. And back in about 2011, when Congress was passing free trade deals with Colombia, Panama, South Korea, he said he, quote, supports free trade as a no-cost economic solution that creates jobs right here in America without requiring further government spending or adding to the deficit.

unquote. And here is Senator James Lankford more recently on Meet the Press. Reshifting the economy back to getting more manufacturing back to the United States, that's good for us long term. There's no question short term tariffs do cause an increase in price. As Secretary Besant just said, it's a one time increase that happens. I want to get that down. When we see some of the rates in some of the other countries that are very, very high, we've got to be able to work those down because our economy is very intertwined globally on this and want to make sure it's all fair and it works.

Barton, a couple of thoughts I would add here. One is that in some degree, the political context has changed, not only because the Republican Party now has a leader that is a pro-tariff president, but also because I think between 2011 and now, it has become much more apparent, particularly that China is going to be and continue to be a bad actor on the world stage, not only in regard to trade practices, but its menacing of Taiwan, its behavior in

during the COVID-19 pandemic. So there are, I think, some real substantive reasons to take a different approach, particularly with regard to China, than maybe Republican senators and congressmen thought

was the case in 2011. On the other hand, if you took a secret ballot poll or could give many of these Republicans on Capitol Hill truth serum and ask them about the blunderbuss approach of the Trump administration here, it's not a targeted approach toward China. It's

tariffs on everybody all the time, as high as we want, and you better not retaliate. I have a hard time thinking there are many, if any, that would think that that's a good idea on the substance, on the economics. And by the way, John Barrasso and James Lankford, I think are pretty serious-minded people. These are not some of the legislators who consider themselves Capitol Hill entertainers. Yeah, I completely agree with that, which is why I think the pro-tariff

sort of intelligentsia on the populist right is happy to talk all day long about China. And there's some agreement that, you know, China presents not just trade issues, but national security issues.

But in that clip that you played from John Barrasso, he mentioned Australia and Australia's tariffs on beef coming from specifically Wyoming. So there's some lack of ideological clarity here. As for the pushback in the Senate and the House, some bills floating around to try to claw back some of the trade authority or perhaps repeal some of the tariffs. Right now, I don't think that there's a massive effort here.

in the GOP, in Congress, to try to block Trump's trade authority, his ability to impose tariffs. But I think, just to give it a sort of crass political reading, I think some Republicans are laying some political groundwork so that when the

tariffs start to do real economic damage, they can say to voters, hey, we were never actually on board with this and we're trying to do something about it. Now, as the tariffs start to do damage, I think in the months ahead, I think you might see some Republicans take substantive steps and sign on to some of these efforts to try to take back the authority they've ceded to the executive branch over the last almost hundred years. Hang tight. We'll be right back in a moment.

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Welcome back. Let's take some letters from listeners who are puzzling along with us about what the Trump administration is up to here. On the point about China, Brian points to pushback in media about the Trump administration putting tariffs on islands occupied by penguins. But he points to Vietnam and he says that his read of the trade data is that it has become a pass-through country to get Chinese exports to the United States.

And so this is his theory for the global reach. He says, if we didn't place tariffs on Guatemala or some far flung islands, you can bet that within six months, those countries and territories would begin exporting billions of dollars worth of Chinese goods to the United States.

Kate, I wonder what you make of that. I mean, I do think that doing end runs around trade policies is something that is of concern to the Trump administration for sure and to other administrations before it. But part of the reason I don't quite buy this

as the explanation for what Trump is doing. On a podcast a few days ago, one of our colleagues mentioned Guatemala. The U.S. gets coffee and bananas and so forth from Guatemala. And if the concern is that Chinese steel and Chinese manufactured goods are going to be routed soon through Guatemala, it seems like it would be pretty easy for the Trump administration to leave the bananas and the coffee and the things that we cannot

grow very easily in the United States, leave those tariff-free and keep a lookout for some nascent Guatemalan steel and manufacturers industry that did not previously exist and was not sending stuff en masse to the United States. Well, right. I mean, I think the indiscriminate approach here belies any argument that this is narrowly tailored to get after some of China's trade abuses.

And also, I mean, think about how much work the United States has been doing to try to get more allies in Asia to help us check the growing military power of the Chinese Communist Party. This is directly at odds with that strategy to slap up a bunch of tariffs on Vietnam. Remember, after the COVID-19 pandemic, we wanted a lot of supply chain to move out of China and to move into other countries across the world that were more friendly to the United States.

But now apparently that's not our strategy anymore. And so I think that this is just incredibly self-defeating both economically as Barton has described, but also just geopolitically to slap a bunch of tariffs on people whose help we want. I mean, the Australian example also comes to mind. Keep in mind,

We are trying to sell nuclear powered submarines to the Australians, trying to work with them more closely. And now we are picking this enormous trade fight with them that's going to make that that much harder. So it's really schizophrenic to our larger thinking about the world. On the point about geopolitics, Kyle says one thing I didn't hear is how our partners and adversaries are going to fare on these tariffs.

He cites an offer that was made by Vietnam in response to Trump's tariffs to drop their own tariffs on U.S. goods to zero. And he suggests, he says, how are these other countries going to fare without the American economy? And Barton, picking up where Kate left off, my fear is that they're going to respond by trading more with one another. And if China starts buying more soybeans from Brazil instead of the United States,

and Brazil decides it's going to buy Airbus planes instead of Boeing planes from the United States. You can see a sort of a virtuous circle, not from the U.S. standpoint, but a virtuous circle of trade developing there. And by the way, that was what the U.S. was trying to do before Trump

with the Trans-Pacific Partnership trade deal was get a bunch of non-China countries together and say, we're going to trade more with each other and set the global rules in a way that is favorable to us, not to Beijing. And I fear now we are pushing those allies and partners toward China and doing the opposite. Right. And just to sort of restate what you and Kate, the point you're making is I

I would say economic relationships lend themselves to diplomatic relationships. The more we trade with a country, the closer we are on a range of security and defense issues. So our economic ties, let's say with Taiwan or Cambodia, strengthen our ability to persuade these countries to take stances towards U.S. enemies like China.

or Russia, that we would prefer them to take. I'm afraid that these global tariffs are

are giving an opportunity, as you point out, to Russia and China to turn to some of these smaller and weaker victims of U.S. tariffs, if I could put it that way, and say to these countries, in effect, we'll open our markets for you, unlike the U.S., so let's establish closer economic and security ties. Linda says she was wondering why we didn't mention or discuss increased investment in the U.S.,

by companies as recently announced by President Trump. And there have been some, the Trump administration is touting claims that Apple is going to invest billions of dollars in the United States, TSMC, the Taiwanese chip manufacturer. I guess my issue there, Kate, is that talk is cheap. And

Two things. One is that it can be hard to tell what of this is actually new investment that was prompted by these tariffs and would not have happened otherwise. And one of it is stuff that these companies were going to do anyway or was on the margins. And now they're putting out a really fancy press release and they're inviting the President of the United States to come to the ribbon cutting because they know who is in power, who's in the Oval Office.

And two, often these kinds of press releases are talking about long-term investments. And right now we're in a situation where it's not clear how long the tariffs are going to last, whether the Trump administration is going to enter negotiations with some of these countries to get the tariffs down again. And we've seen that kind of thing play out in the past. In Trump's first administration, just to pick one, there was a company called Foxconn making electronics.

said it was going to invest $10 billion and create 13,000 jobs in Wisconsin. That has been subsequently scaled back. I think the latest figures are a billion dollars, 1,500 manufacturing jobs. So these kinds of plans by companies are always shifting. And so I think

When President Trump comes out and says, look, here, I've got the CEO next to me, and he's going to do all of these great things between now and 2028, you have to take those promises with a big grain of salt. Well, right. And if you think about the overall strategy to impose these tariffs, I mean, take the car market, for instance, where components of cars sometimes cross the border a couple times before the car is finished.

And now the Trump administration is going to completely disrupt that process and make it far more expensive and less competitive. So I guess the point I'm getting at here is that no one really doubts that the government can pick winners and losers, but that's what they're doing. And it's not going to make Americans wealthier. It's going to make things more expensive. So we want, obviously, we want more capital investment in the country, but we're doing so defensively.

in this way where the government is sort of dictating and trying to decide how exactly it works and not by what's going to serve consumers. And I think that is ultimately a mistake. Could I just mention briefly, I think there's a nostalgic strain in some of the pro-tariff thinking on the right.

that looks back to the early and mid-20th century and sees a time when entire stable communities were built around manufacturing plants and so on. But that is not going to be duplicated by this or any other effort to bring companies here. The manufacturing plants already on U.S. soil are constantly moving around as states incentivize them to move or they have reasons to move because of favorable taxes.

and regulatory environments elsewhere in the country. So this idea that we're going to go back to the 50s

when generation after generation worked at the mill and we had stable communities, allegedly. Number one, I'm not sure that those are the kinds of jobs that most Americans want for their kids. I mean, it's debatable. And number two, it's just not possible in an age when companies can move around with relative ease in order to seek out favorable environments. Hang tight. We'll be right back in a moment.

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Welcome back. Let's take one more letter. Peter says the Department of Defense already requires contractors to source their materials like steel, aluminum, and other metals from U.S. manufacturers. It's a

So why would tariffs even be needed for national security purposes? Adding a tariff seems to bluntly increase the cost of steel used in all civilian commercial endeavors unnecessarily. What am I missing? And Barton, I don't think he is missing much. And part of the difficulty here in discussing these tariffs has been the shifting rationalizations that you hear, the explanations coming out of the White House and the Trump administration. Is it

Do we need Canada to crack down on fentanyl trafficking or are we going to raise a ton of money and lower other income taxes? Or is the point here to bring back manufacturing? Sometimes it seems like it depends on which advisor is on TV in any given moment and what the context is. All right. I think the only thing I would add is

is that these sort of provisions to require the use of U.S.-made steel or U.S.-made that is to allow politicians during campaigns, several of which I covered in the last cycle, to cut ads that say, so-and-so passed a bill requiring U.S.-made goods and so on, and show clips of, you know, guys wearing hard hats and stuff inside factories. Again, another crass

political reading on my part, but I think that's at least a big part of it. Kate, turning to Capitol Hill, how much do you think the economic turmoil from these tariffs has added to the pressure and the sense in the Republican conferences, in the House and the Senate, that we need to get this big, beautiful tax bill as Trump calls it through, and we need to start on it soon? I think that the tariff rates are

that Trump put on with these reciprocal tariffs were higher than a lot of people expected. And if the US, the government is going to take billions of dollars out of the economy at the border like that, then is the answer to give some kind of tax cuts elsewhere, especially if President Trump is trying to avoid a recession. Right. So I would say that Republicans in Congress, for the most part, are starting to focus on that reality. One argument the White House made was, oh, well, you know, tariffs are a small part of the

portfolio and we really are going to do deregulation and tax reform. But now it's been pretty slow getting that tax bill across the finish line. Even getting the budget for it is what Congress is trying to do that lets them start to debate the parameters of the bill. I

I do think that the tariffs and the danger, the political danger and the economic danger are scrambling the politics on the tax bill a little bit in ways that might allow for more pro-growth tax reform. When I say pro-growth, Trump talks about putting a new deduction for cars, car loans. That's not pro-growth. That does nothing to change the incentives to work or invest.

So I'm talking about ideas like maybe lowering the corporate rate a little bit further from 21%. There's also been a discussion on Capitol Hill about the top marginal tax rate for individuals, currently 37%. That rate is really salient for the incentive to work and invest. Some of the more populist Republicans have been floating, maybe taking it back up to 39% so that they can pay for some of these other giveaways like no taxes on tips.

That would be the exact wrong direction to go to after this tariff onslaught. And so I'm hopeful that those who want more growth in this tax bill that will raise Americans' incomes and be politically popular the way the 2017 bill was with that significant corporate rate cut,

I'm hopeful that this is an argument working in favor of a more pro-growth tax bill, because if Republicans don't get this done, they're in political trouble. Because Trump really did win on the economy more than I think people appreciate on rising prices. And the tariff so far, not going in the right direction on that front. And so they need to retreat to the tax bill to get some of that growth and to improve the economy the way voters want.

There'll be much more to say as Republicans actually start to get in the nuts and bolts of writing these bills. But Kate, what is the state of play as we tape this right now on Wednesday afternoon? Over the weekend, the Senate passed a budget outline and the House is now taking that up, though not clear whether Speaker Johnson, last I heard, was going to have the votes to get that over the line. What are the holdouts saying and what do you think the path forward in the House is for this budget outline?

So as of this afternoon, the House was charging ahead in trying to pass the budget outline that the Senate passed over the weekend. And there have been some holdouts that President Trump has been trying to persuade. Last night, the president's line was, close your eyes and get there to Republican holdouts. And it might be an effective one, honestly. The holdouts, their core argument is that the Senate bill doesn't do enough to cut spending and that we need to do more to restrain government spending and that the Senate bill won't do it. I think that's

That's a very silly argument for this reason. What we are currently passing this week and what the Senate passed is a shell, an outline, a budget outline that kicks off the process that allows a bill to pass with 51 votes in the Senate. So that's crucial because if you need 60 votes, you need a bunch of Democrats and they're going to charge a huge price. So Republicans want to pass this bill through the Senate's reconciliation procedure. So they first pass a budget and then they come up with the details of the bill later.

So there is this really arcane dispute over how the Senate wrote what are called reconciliation instructions. I don't want to get too far into the weeds of that for our listeners, but the point is that these basically are floors of spending cuts and that the eventual details of the bill are still to be written. So what these House holdouts are saying are, I don't want to start negotiating because I don't think I'm going to get enough spending restraint. And I think that's just a really not credible argument because...

What happens if they fail? If they fail to pass this bill, they're going to get no spending restraint and they are going to get a $4.5 trillion tax increase when most of Trump's 2017 tax cuts expire at the end of the year. So the obvious solution here is you pass this budget outline and you start making your case. You start saying we need to get serious about fiscal discipline. We're going to have to work on making Medicaid a better program for the vulnerable who need it and start making

working on how it covers working age men, for instance, you start making a case for those cuts. But this line that I don't want to negotiate, I don't want to open the discussion process, I just think it does show that there is a constituency that wants the issue of spending restraint more than they actually want to accomplish anything on it. Thank you, Kate and Barton. Thank you all for listening. You can email us your own tariff questions to pwpodcasts at wsj.com.

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