Tariff the Chinese Cargo Ship, Not the American Consignment Shop

Affordability is top of mind for millions of Americans today, so it’s good to see the Trump administration adapting its tariff strategy to minimize the impact on household budgets. This refinement is crucial to protecting families’ finances while better utilizing tariffs as tools to punish bad actors like China that engage in all sorts of unfair trade practices.

Recently, the administration imposed a 25 percent tariff on many Brazilian imports via Section 301 of the Trade Act of 1974, a provision granting the U.S. Trade Representative (USTR) authority to investigate and retaliate against discriminatory trade practices. If Brazil wants these tariffs removed, all they have to do is drop their own trade barriers.

But it’s worth noting what was wisely omitted by USTR from these Brazilian tariffs — like coffee.

Americans have no alternative to buying their coffee from abroad because it can’t be grown here except at fantastic expense. As such, tariffs on things like coffee would just get passed on to the consumer in the form of higher prices, making their exemption a prudent economic decision.

Then there’s the secondhand goods market, which allows American families and small businesses to import tens of billions of dollars in products annually. The Brazilian tariffs and other recently imposed import duties exempted antiques, collectibles, art, and other used products.

Tariffs generally, and Section 301 tariffs specifically, aren’t even designed for secondhand products. Instead, these trade penalties are meant to target practices like Chinese subsidization of industry.

A tariff on a new Chinese washing machine, for example, combined with tax and regulatory reform here in the US, may encourage domestic production. Conversely, a tariff on an imported antique watch cannot cause anyone to manufacture that watch in Ohio. It’s truly an apples-to-oranges comparison.

Secondhand goods are often unique inventory and frequently don’t fit into precise categories when it comes to customs duties. There can be single-unit items with no original packaging, no documents or markings indicating origin, and quite frequently no manufacturer left to ask.

Import rules built for bulk container shipments of new, uniform products are ill-suited for a vintage bomber jacket. A secondhand German-origin collectible or piece of specialty manufacturing tooling shipped from Brazil shouldn’t be treated as a Brazilian-made product.

And it’s worth noting that this exemption primarily protects smaller American firms. Large manufacturers with tremendous economies of scale — like major car companies — often buy custom-built tooling for their factories. But smaller manufacturers disproportionately rely on the secondhand market to source the equipment for their factories.

A recent industry white paper highlighted the importance of used goods in international trade for US small businesses. In addition to protecting America’s families and small firms, tariff exemptions to the secondhand market also function to counter China — a major goal of the entire tariff agenda.

Secondhand products are inexpensive compared to those right out of the factory, so they’re often more competitive with China’s heavily subsidized industries and artificially low prices. Keeping quality goods in circulation reduces reliance on Chinese manufacturing.

The crackdown on China is long overdue. Their state-run enterprises have spent decades evading trade law to gain unfair advantages and boost their exports. Section 301 tariffs are among the tools being utilized to combat this bad behavior.

Chinese manufacturers use tricks like shipping products through some third country before repackaging, relabeling, and reshipping to America. This is done to disguise the products’ true origin.

Bipartisan recognition of the problem is long-standing. Representatives from both sides of the aisle recently flagged for Customs and Border Protection that China has been dumping partially processed solar cells in the US. The last step of production is then carried out on American soil and firms not only avoid tariffs on Chinese products but also claim tax credits reserved for domestic manufacturing.

Similarly, the Texas Attorney General is suing Chinese-linked firms, alleging their products contain toxic chemicals far in excess of safety limits, including for clothing and children’s toys. These are the kinds of violations that today’s trade policy reforms aim to counter.

Refinement of the Trump administration’s tariff strategy is a welcome development. USTR should continue with this fine-tuning by focusing tariffs on genuine trade abuses, not protectionism, or secondhand markets, or vague notions of economic autarky. Exemptions for things like coffee or secondhand products should be the rule, not the exception.

The goal here is to increase free — but also fair — trade because it delivers the greatest benefit to the US. An America First trade policy should always benefit American citizens, not harm them.

E.J. Antoni, Ph.D., is chief economist at the Heritage Foundation and a senior fellow at Unleash Prosperity.

Editor’s Note: Thanks to President Trump’s leadership and bold policies, America’s economy is back on track.

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