Imports Ride to the White House’s Rescue, Again

Imports to the Rescue, Again

Shortly before Independence Day, President Donald Trump suspended US tariffs on fertilizer from Morocco after declaring that threats to domestic supplies of the product constituted a “national emergency.” As Bloomberg News reported at the time, the action was intended to help farmers and consumers worried about Iran-related price hikes. The Department of Agriculture estimates that lifting the duties will reduce phosphate fertilizer prices by 22%, saving farmers more than $1.8 billion this year – savings they’d presumably pass on to consumers.

In isolation, the tariff-happy Trump administration’s fertilizer decision is a comical footnote in a lamentable Iran war saga – a mundane, albeit legally dubious, government move to alleviate a sliver of the war’s inflationary effects and to placate an important political constituency before the Fall midterms.

Yet this is no one-off. Instead, it’s the latest in a long string of US trade actions that no one in an increasingly protectionist Washington is eager to acknowledge: Seemingly every time domestic supplies of essential goods – and politicians’ standing with voters – are at risk, the government lets imports ride to the rescue:

• When avian influenza crippled egg supplies in February, the Trump administration’s solution centered on importing 100 million eggs to stabilize the market and help temper prices.
• In November, Trump responded to palpable voter anxiety over grocery affordability by issuing multiple proclamations to lift “reciprocal tariffs” on a wide range of agricultural commodities. Early this year, he addressed beef shortages – caused by droughts and screwworm – by expanding quotas on Argentinian beef.
• After the Iran war started, the White House moved to stave off domestic energy shortages by issuing an unprecedented waiver of the protectionist Jones Act, which normally restricts domestic shipping to American-made ships.
• And broad tariff exemptions for imported hardware and related items are fueling the artificial intelligence buildout that powers the US economy and stock market.

Similar moves predate Trump’s second term. When problems at a Michigan infant formula factory caused the worst supply chain crisis of the pandemic era, Congress suspended formula tariffs, and the Biden administration waived regulatory barriers, launching “Operation Fly Formula” to pilot it in from Europe. Biden also invoked the same “emergency” authority Trump used for Moroccan fertilizer when he waived duties on imported solar panels to alleviate shortages that supposedly threatened energy security, the renewables buildout, and his signature legislative achievement — the Inflation Reduction Act. And between 2020 and 2022, the government modified the tariff schedule 10 times for pandemic-related reasons, with every change running in the direction of freer trade (mostly waiving or suspending duties on imported medical goods).

From these actions, spanning six years and three different presidential administrations, we can draw two important lessons.

The first is political. Protectionists in the government have routinely dismissed American business pleas for tariff relief in supposed service of loftier goals like national security and supply-chain resiliency. National objectives, so they say, must take precedence over the financial health of a few companies suffering from tariff-induced shortages and sky-high production costs. Yet when short supplies and high prices threaten these same officials’ political future, tariff relief arrives with remarkable speed, and bedrock nationalist principles melt away. This is a classic case of revealed preferences, and it’s hardly flattering.

The second lesson is larger and should reframe how Washington talks about “resiliency” today. The dominant story since 2020 is that the pandemic exposed the dangers of globalization: open trade and long, complex supply chains had left the United States “vulnerable” to economic shocks and intensely “dependent” on foreign suppliers. The typical fix was to reshore the domestic production of critical items via tariffs, subsidies and other localization policies. “Resiliency” had become synonymous with onshoring.

Yet time and time again, one of Washington’s most reliable responses to an actual shock – whether it originated in a foreign war, a domestic factory shutdown, or a global pandemic – has been the opposite of onshoring. It’s been import liberalization, not protectionism, and supply diversification, not autarky.

Rhetorical misdirection aside, the government’s real-world response is welcome – and consistent with economic research from the pandemic. Studies have found that, contra the conventional wisdom, goods dependent on international supply chains didn’t face greater disruptions than ones sourced domestically. If fact, global production units frequently proved more resilient than their nationalized counterparts, largely because the former had diversified sources and could more easily adjust. Even in sensitive sectors involving “non-friendly” nations, trade proved remarkably resilient – helping to alleviate critical bottlenecks rather than cause them. And the product that failed most spectacularly during the pandemic was the one the United States had already walled off from foreign competition: baby formula.

None of this means that economic openness should be the only policy governments adopt to prepare for or adjust to supply shocks, whether foreign or domestic. The global economy can raise genuine security concerns when, for example, adversaries have a stranglehold on critical goods with no adequate substitutes. And the global economy’s surprising resilience during the Iran war has shown how emergency government stockpiles can calm markets and fill temporary gaps in supply.

But the war, the pandemic, and other recent crises have also shown how freer trade and economic “interdependence” can cushion domestic shocks, speed adjustment, and help a stressed US economy keep chugging when local production falls short. They’ve shown that the easiest kind of “resiliency” policy is to just stop blocking the imported things that Americans need. And they’ve shown that even policymakers who demonize globalization understand its security benefits – if, at least, their own reelection’s at stake.