The Supreme Court Clarified Tariff Authority, but Did Not Change Economic Reality
The Supreme Court Clarified Tariff Authority, but Did Not Change Economic Reality
The imperatives remain the same, even if the application of the tools must be adjusted.
I recently spoke to steelworkers and auto parts makers in Michigan. These are people who have spent their lives inside America’s industrial economy. Their concerns are not abstract. They want to know one thing: Does America still plan to make the things it needs to be a powerful country?
This is the question that trumps all others.
The Supreme Court’s recent ruling regarding the use of emergency powers to impose tariffs is significant, but only in the sense that it is now clearer how such a policy would be carried out. It does not, however, change the fundamental reality of the situation. Tariffs have long been one of the tools that America uses to build and maintain its industrial strength.
From the early days of the Republic until the start of the 20th century, tariffs were at the heart of America’s economic policy. America’s founders knew that political freedom cannot exist without economic freedom. A nation that is dependent upon foreign industry to produce the things that it needs is a nation that is in a state of permanent subservience.
This is precisely the point that Alexander Hamilton made in his “Report on Manufactures” in 1791. Hamilton knew that a nation that did not develop its own industry would forever be in a subservient position to the more advanced industrial nations of Europe. Domestic industry is not something that occurs naturally. It must be developed, and one of the ways in which that development was made possible was through the use of tariffs.
The results speak for themselves. In the 19th century, the United States had a set of tariffs that would be considered politically unrealistic in the modern age. Yet it was also a time in which the United States had the fastest industrial development in its entire history. American industry surpassed Great Britain’s and became the largest industrial base in the world in the early years of the 20th century.
This was not accomplished by accident. It was accomplished in a framework in which it was understood that the development of productive capacity was a necessary thing.
In recent decades, the role of tariffs has been viewed as a distortion in the economy. The conventional wisdom has been that the economy should be focused on efficiency and the lowest possible prices. This conventional wisdom ignores the reality in which industrial capacity is developed.
Industrial capacity is developed over time through experience and repetition. Each generation of industrial capacity makes the next generation stronger. The next generation of workers is trained by the first generation. The next generation of engineers makes the next generation of industry more efficient. This capacity is difficult to rebuild once it is destroyed.
In the United States, the role of tariffs was never to protect industry from competition. It was to protect industry so that it had the opportunity to exist in the first place.
This reality is more important now than it was in the past.
In recent decades, the United States has pursued a model in which globalization is the dominant economic reality. The conventional wisdom was that it did not really matter where anything was produced as long as it was produced efficiently. This conventional wisdom ignores the reality that production is a function of the people and the skills that are associated with it. Production is a function of the capacity and the ability that is associated with it. When production moves from the United States to another country, the capacity and the ability go with it.
The effects are evident in several sectors. Supply chains have become more tenuous. Some sectors have developed a high degree of dependence on foreign manufacturing. Some regions have struggled to replace what was lost in the past.
The Coalition for a Prosperous America and other such organizations have extensively documented these changes. Their work indicates a growing awareness of the fact that industrial capacity is not just an economic issue. It is also a matter of national resilience.
The Supreme Court’s decision does not remove tariffs. It clarifies the fact that tariffs must be enforced in accordance with established statutory procedures rather than emergency procedures. Congress’s constitutional powers are still intact. Existing legal procedures are still in place to deal with unfair trade practices.
While the procedures have changed, the economics have not. The question remains: Does America plan to continue using tariffs as part of its overall policy to preserve and build its industrial capacity?
The answer can be clearly found in history. Every nation that has developed into a significant industrial power has made efforts to protect its domestic industry at some point in its history. America did it. Other countries have done it too.
Industrial capacity does not develop on its own. Nor does it grow because of “free trade” or “free markets.” It develops because of choices made over time and a coherent, comprehensive policy that supports it.
Tariffs alone do not guarantee success, but, without tariffs, it becomes more difficult to preserve or build industrial capacity. While the Supreme Court’s decision has made the parameters clearer, it has not changed the economics.
Nations are strong when they have the capacity to produce what they need and weak when they lose it. This was true at the beginning of America’s industrial revolution. It remains true today.
The issue of tariffs is not just about protecting America’s manufacturing. It’s about preserving America’s capacity to be a nation.
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