White House Again Saved by Imports
TL/DR –
The US government has frequently relied on imported goods to alleviate domestic supply shortages and stabilize prices. In recent years, this has included suspending tariffs on Moroccan fertilizer to help farmers and consumers affected by Iran-related price hikes, importing eggs to address a supply shortage caused by avian influenza, and waiving duties on imported solar panels to mitigate energy security threats. However, these actions often conflict with the government’s stated goals of national security and supply-chain resilience, suggesting that political survival may sometimes take precedence over these objectives.
US repeatedly leans on foreign imports to keep economy running
US President Donald Trump suspended tariffs on fertilizer imported from Morocco shortly before Independence Day, a move aimed at supporting farmers and consumers worried about price increases connected to Iran. This was reported by Bloomberg News and was a response to what was declared as a “national emergency.” due to a threat to domestic supplies of the product. The Department of Agriculture estimates that the suspension of the tariffs will cut phosphate fertilizer prices by 22%, resulting in savings of more than US$1.8 billion this year for farmers, which they would presumably pass on to consumers.
More than a one-time exception
This action is not an isolated incident. It is another example of a long line of similar trade actions taken by the US. Whenever domestic supplies of key commodities are at risk, or politicians’ standing with voters is threatened, the government has repeatedly turned to imports for assistance. Besides the recent suspension of tariffs on Moroccan fertilizer, the US has a history of relying on foreign imports to stabilize the market and mitigate price increases. For instance, when avian influenza caused a dip in egg supplies, the Trump administration imported 100 million eggs to steady the market.
Historical pattern
This pattern of relying on foreign trade extends beyond the Trump administration. When a Michigan infant formula factory experienced problems that caused a significant supply chain issue, tariffs on formula were suspended, and the Biden administration waived regulatory restrictions. Biden also invoked the same “emergency” authority Trump used for the Moroccan fertilizer when he waived duties on imported solar panels to alleviate shortages that were allegedly threatening energy security. And between 2020 and 2022, the government adjusted the tariff schedule 10 times for pandemic-related reasons, each time moving towards freer trade.
Lessons learned
This behavior over the last six years across three different presidential administrations provides two key insights. Firstly, the government is quick to dismiss requests for tariff relief from businesses under the guise of larger objectives like national security and supply-chain resilience. Yet, when their own political futures are at risk due to supply shortages and high prices, tariff relief is granted and previous convictions seem to dissolve. Secondly, despite talks of “resiliency” being associated with onshoring, the government’s most common response to a supply shock has been the opposite.
Importance of economic openness
While economic openness should not be the only policy adopted by governments to react to supply shocks, it has proven to repeatedly alleviate critical bottlenecks. Even in sectors involving “non-friendly” nations, trade has shown resilience. Additionally, freer trade and economic “interdependence” have demonstrated their ability to cushion domestic shocks and keep the US economy running smoothly amidst local production deficiencies.
The Cato Institute’s perspective
Scott Lincicome, an economist specializing in domestic policy and international trade at the Cato Institute, notes that “the easiest kind of “resiliency” policy is to just stop blocking the imported things that Americans need”. He points out that even policymakers who critique globalization understand its security benefits, especially when their re-election is at stake.
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