Once tariffs are imposed, they’re difficult to repeal.
That was one of the takeaways from a pre-recorded interview between Beer Institute president and CEO Jim McGreevy and Wendy Cutler, vice president and managing director for Washington, D.C.-based think tank the Asia Society Policy Institute.
“It’s always easier to put tariffs on than to lift them,” Cutler said during the video, which was shown Monday during the Beer Institute’s annual membership meeting. “Because once they’re on, you have political constituencies that are going to fight hard to keep them. And it’s harder for others to convince any administration to lift them, given the political implications.”
Beverage companies continue to deal with the fallout of the tariffs on aluminum and steel imposed by then-President Donald Trump under section 232 of the Trade Expansion Act of 1962 in March 2018.
Cutler, who worked as a trade negotiator for the U.S. government for about 30 years, explained that President Joe Biden is facing “competing pressures” from various industries, whether that’s the downstream users of aluminum who are now paying higher prices for aluminum and steel or the steelworkers and steel industry that is benefiting from the tariffs.
McGreevy noted that the tariffs have amounted to an extra $850 million in costs for the beverage industry over the last 18 months. He asked Cutler what arguments beer industry stakeholders should be making to the Biden administration about the effects of the tariffs on downstream users. Cutler said the industry should stress how many workers are being affected by the increased costs that the industry is now being forced to pay.
“That’s what the Biden administration is really focused on as it pursues a worker-centric trade policy,” Cutler said. “How does this hurt the American worker? And frankly, does the average American consumer pay more for the products that they’re using, including beer?”
Even with the competing interests, talks are ongoing between the U.S. and Europe, with a deadline set for a month from now, Cutler said. She added that if those negotiations succeed, they could lay the foundation for agreements with other countries to phase out, lift or replace the tariffs with non-restrictive quotas.
“I think there is a real political will on the part of the United States and Europe to find a solution here so they can put these issues behind them and really work on matters of common interest, including technology, dealing with non-market economies and other challenges, like climate change, that the world is facing,” she said.
McGreevy asked if the tariffs could be a hedge against China, which he said has been “seen as a bad actor” when it comes to trade. Cutler responded that the issue with China is “overcapacity,” from “making too much of the stuff” without “the domestic demand within their own borders.”
“In any event, these tariffs were initially put in to deal with China, to deal with the excess capacity problem, and if you had to judge the tariffs based on that objective, I would give it an F for failure,” she said. “It hasn’t dealt with the China problem.”
Cutler added that in her view, Trump’s use of Section 232 to impose the tariffs was “inappropriate for the case at hand,” “bad policy” and ultimately ineffective.
“He used a statute which allowed the executive branch maximum discretion and it was based on national security grounds,” she said. “And then he imposed tariffs against our allies and partners. So this wasn’t how the statute was intended to be used.”
Cutler noted that President Biden has allocated a lot of resources toward rebuilding relations with U.S. allies that she said were damaged under the Trump presidency. Smoothing over those fractured relationships has proven difficult as some allies harbor distrust and are also questioning where the U.S. will be politically in three-and-a-half years.