On January 30, The Capitol Forum held a conference call with Charles Benoit, Trade Counsel at the Coalition for a Prosperous America, to discuss U.S. trade enforcement, industrial strategy, and supply chain challenges in a shifting global landscape. The full transcript, which has been modified slightly for accuracy, can be found below.
TEDDY DOWNEY: Welcome, I’m Teddy Downey, Executive Editor at The Capitol Forum. And today, we’re pleased to be joined by Charles Benoit, Trade Counsel at the Coalition for a Prosperous America. Charles is a seasoned Trade Attorney who has represented clients before federal courts, the U.S. International Trade Commission, and the USTR. He previously served as in-house trade counsel at GE and was one of three U.S. attorneys hired by the European Commission to advise on U.S. law during the Transatlantic Trade and Investment Partnership negotiations. Charles, thank you so much for doing this today.
CHARLES BENOIT: Thanks so much, Teddy. Great to be here.
TEDDY DOWNEY: And a quick format, I’ll interview Charles and then we will get to listener questions later on the call. So, Charles, I think maybe one way to set the stage here that might be great to get your perspective is what was your expectation at the start of the second Trump administration? And how have some of those expectations been met or not met after one year of trade policy? I know as someone who is very skeptical of sort of consensus and status quo policy in this country, just given the myriad of problems we have. Trade seems like an area where we could be a little bit more strategic, a little bit more focused on like pragmatic, good results for the U.S. So, I certainly approach the second Trump administration with an open mind. Although, I would love to get your perspective on expectation and results.
CHARLES BENOIT: Sure. So, I view trade to me as too much of a wishy-washy word, I think, in terms of tariff policy. And to me, tariffs can be used for three things, three broad buckets you can think of this: tariffs for revenue, tariffs for protection, and protection meaning to protect the home market and domestic capacity. And then the third is sort of tariffs for sanctions or tariffs for leverage.
I go back to the first Tariff Act of July 4th, 1789, original founders were, they said, the first sentence was what are tariffs for? Revenue and protection. So, some products, we’re going to choose this just as a revenue raising tariff. And other products, we think these are really important and we want to be self-reliant. And so, we’re going to have protective tariffs. I’m really focused on those two. I think that tariffs for sanctions gets into a whole other foreign policy dynamic. And I’ll just put that aside for now.
President Trump, I got to congratulate him on—he kind of almost seems unique. There’s almost nobody in Congress who really sees the value in tariffs for revenue. To me, they’re a very elegant tax. Tariffs are the best tax because the compliance costs are virtually nothing. So, it makes sense.
President Trump had good instincts. Even in his first term and while he was out of office, he was the only one talking about like, I think by 2022, we got, we had something like, I think we passed $200 billion in revenue on the China 301s. That’s a lot of money on the revenue side of the ledger. So, kudos to him for that.
And he’s kept it up. I wish we kind of saw the same enthusiasm for tariffs for revenue in Congress. And that’s where my biggest disappointment is—in this year on tariffs for revenue—which is they haven’t leaned in. I think they should have pushed harder in Congress, especially in the one big, beautiful bill, to codify what the President campaigned on.
So, the President campaigned on the 10 percent universal and he campaigned higher tariffs for China. And then he did that pretty quickly with his two IEPA orders, the reciprocal order, which had the 10 percent universal, and then a higher one that added a supplement to 20 percent for China.
That should have been codified in the big, beautiful bill. President Trump asked Congress to do it. He posted, I believe it was around April, no one making less than 150 grand a year should be subject to income tax. That could have easily been funded with that tariff revenue.
So, I wish he’d fought—I wish his administration had pushed harder on Congress. I’m very worried about, frankly, at this point, I expect the Supreme Court to nullify the IEPA actions in order to refund. So, that’s going to be a big blow on that front. But hopefully the administration can work with Congress to rectify it if and when that happens.
On tariff protection, I think it’s, they’ve done, I’ve always been a big fan of Section 232. So, unlike all the other trade remedy laws that the President has available to him, Section 232 is the quintessential protection in the American tradition. It’s inward looking. It says we’re not placing any kind of blame on any other country here or anything. We don’t care about what some rules say. It’s just we need to be self-reliant on this product for national security reasons. And so, it authorizes the president to adjust imports. That’s very broad language for tariff quotas, as you named it.
And they launched nine new Section 232 investigations, and each one has been getting better. So, I’m encouraged by that. Obviously, I could armchair quarterback, and I’ve got more, I think, they should do. But I’ll just point to the evolution.
In the first administration, we had the steel, aluminum and automotive 232s were the big ones. Steel and aluminum, I mean, that was 10 percent for aluminum. That’s nothing. That’s absolutely nothing. That did nothing. And then 25 percent for steel. These are really modest revenue tariffs, especially anything ad valorem, percentage based. Our rules are so weak. And then there’s all the exemptions involved. So, not much came of that. But now they’re getting a lot more serious and, I would say, multifaceted.
So, we saw with the copper 232 that came out, I mean, that was neat because we started to see an export restraint on scraps. So, they’re kind of thinking, okay. And they invoked the Defense Production Act to do that at the same time. That was a good innovation. The lumber 232, which came out subsequently, that proclamation had a lot of good stuff going for it.
So, tariffs are not one-size-fits-all. A 50 percent tariff can be quite protective on one item, like a car, but it can do absolutely nothing on syringe. The Biden administration put a 100 percent tariff on Chinese syringes in September 2024. It’s done nothing. The average unit value is $0.02. So, 100 percent tariff, you’re taking it from $0.02 to $0.04. Well, guess what? All the markup is in domestic distribution. You did nothing. So, you’ve got to be willing to think product by product. That’s the key. And they’re getting better at each one.
So, the lumber 232 started at just 10 percent tariff on lumber. So, that was not great. That’s not going to move the needle. But then, kudos to the Alabama delegation for coming out swinging on this, but for cabinets and vanities, we’re going to get up to a 50 percent tariff. And that is the right mentality. That’s the right approach.
So, I see consistent improvement. And I also love that I think, hopefully, this will be bigger next year, is we’re seeing the limits of ad valorem tariffs. Now, Henry Clay said with an ad valorem tariff, the overseas vendors are picking their own tax rate. It’s still true. He said that almost 200 years ago. It’s still true today.
And so, I love that in the lumber tariff, we saw an authorization for commerce to convert ad valorem tariffs to specific tariffs. So, that’s like for a syringe, instead of saying 100 percent, maybe we’ll say like 10 cents a syringe, which is actually much more, that will, you can get the outcome that is intended.
So, yeah, they’re getting better all the time. And one final thing I’ll say is we’ve had a bunch of 232s that haven’t seen action yet, but they’re clearly laying the groundwork. So, I’m encouraged on that front too.
TEDDY DOWNEY: And there’s so many directions I want to go in. I want to stay on this for one more second. Because I think you have been critical of the administration on a number of fronts. I don’t want to put you too much on the spot. But are there things that you think they could be doing better?
Obviously, tremendous strides in terms of changing the narrative. We talked a little bit before the call on how are Republicans more broadly on the Hill thinking about tariffs? But what is keeping—because I think from a pragmatic standpoint, it feels like a little bit of a letdown because these industries, you’re not seeing as much revitalization as you might hope.
And I’m curious if you agree with that, or if you’d push back on that or other things that you’re saying, hey, this is not going to be successful if, for example, you put foreign policy goals ahead of our industrial goals, like we saw with Argentina and Venezuela to some extent.
CHARLE BENOIT: Yeah, I hear you.
TEDDY DOWNEY: So, I’m curious to get your thoughts on all this. Because farmers seem pretty upset. Industrial workers don’t seem that happy. Wages really aren’t going up in the way that you might hope if this whole idea was really getting traction. So, we’ll just poke a little bit more and then get to some of the stuff that you’ve already talked about.
CHARLES BENOIT: Yeah. So, I’m not one to talk in abstraction. I always talk about, I think, in things sectorbysector, productbyproduct. So, I will give them kudos to where on automotive, like they’ve done pretty good, pretty well there. I’ve been harping on the Buick Envision. The GM outsourced the Buick Envision to China in 2015. And it’s now coming back. So, there we go. I’m looking for the Lincoln Nautilus to come back as well hopefully. GM moved Silverado production, Stellantis moved the Jeep Compass production. So, things are happening on automotive.
But now I’ll criticize them on automotive. So, what tends to happen is like, they’re very focused on vehicle assembly, which yes, like start at the top. But I really like they had a good frame that with the UK deal in May, that was the right approach. So, that was a tariff rate quota. The UK sent us about 96,000 cars in 2024. And so, in the UK trade deal, we basically capped them. And we said, okay. You can send us 100,000 cars at a 10 percent tariff and anything thereafter is a 25 percent tariff.
And so, that’s like, okay, you’ve kind of like, I mean, if we had a growing vehicle market, that would be nice. Because we’d be sure that the future investment would be local. That’s a good approach. I was disappointed and critical of the department when they kind of threw out that approach and subsequent deals. So, Japan, Korea, and Europe, instead of having the same managed trade approach as the UK, they just got unlimited vehicle imports at 15 percent. And even Ford CEO, Jim Farley said, I mean, Japan’s not moving any production here over a 15 percent tariff. He thought it needed to be closer to 40 percent. So, yeah, I was disappointed. Like we kind of got off to a good start on the deal side there and then we kind of lost that mojo. So, that was a bit of a step back.
Then agriculture is a total miss. And that’s really discouraging. There’s been no Section 232 action that I’m aware of for any agriculture. We had Florida strawberries had to file an anti-dumping petition. I mean, anytime you’ve got an agricultural group filing trying to seek relief in trade remedies—which has never really worked for them—that’s a policy failure to my mind.
So, we just need better coordination between commerce and agriculture. And the solution for agriculture is not exports. That’s the same failed policy for 75 years where every year things get worse. So, we just need to protect our home market, start with Maine blueberries, Florida strawberries, and then beef, which is the big thing. I give them credit for launching the antitrust investigation. We’ll see what happens with that. But that’s the easiest thing. We’re at like a 75 year low on the size of the herd.
So, use Section 232. We support—we’ve called for a grazing livestock Section 232, which would cover cattle and beef and sheep and lamb. And you can use that to deploy a quota, not increase prices at all. But it takes about three years to bring beef to market in terms of building up the herd.
So, just by deploying a quota system, you can give ranchers the certainty that in 2028, you’re going to have this market. In 2029, you’re going to have that market. And you can do that without increasing tariffs at all right now. So, to me, that’s a slam dunk. And I don’t know why they haven’t taken it in agriculture. That is a weak spot.
TEDDY DOWNEY: And staying on this, you mentioned antitrust as important in ag. We have seen lobbyists, Trump-aligned lobbyists, Bondi’s leadership team, really undermine Gail Slater, who was the sort of more aggressive antitrust pick to do more aggressive antitrust investigations and bring cases in ag, in a series of industries, but systematically just being undermined by the Trump orbit. For people who are more traditional Republican, hey, we need to be pro-deal. We need to be pro-market. We need to be pro-growth. And that’s coming at the expense of this.
We heard Jameson at USTR the other day say, look, strong antitrust enforcement has to be part of this whole strategy when it comes to trade, if we’re going to be successful. What’s your take on this sort of internal warfare or the struggle of ideas in the Trump administration on pro-growth, pro-transaction, pro-big business with this other competing set of values?
And then how do you see that playing out on some of these other things that you’ve already talked about where you’re like they seem to be backtracking or not going in as much of a strategic direction as they need to on some of these deals? Like, do you see that at USTR and other places as well?
CHARLES BENOIT: So, it’s a huge question. And it’s something that a lot of conservatives are struggling with, especially the golden shares, thinking of U.S. Steel and that kind of thing. And my answer is this is what you get with globalization. So, the genius of the American system, Henry Clay, was we created this giant protected home market. And we invented antitrust. And Republicans invented antitrust in particular in the 1890s. And that’s amazing, right?
So, we created this giant protected home market by 1900. We’re the factory of the world. And our businesses are so successful they do consolidate into these giant epic trusts and corporations. And then—I don’t think any other country would have done this—we decided why don’t we break them up, flip the board? And that’s wonderful. And I think that was actually one of the key things that did in the protective tariff policy was failure to adequately prosecute antitrust in the 1890s and early 20th century. And then we saw the downfall of protective tariff.
So, yeah, I say, active antitrust, and protecting the home market, they have to go together. Okay, you can’t have one with the other. I absolutely agree with Jameson. Make the point, the moment like, look at we just we’ve had two in recent years, eggs and baby formula, infant formula, right? Where we’ve got cartels, and they generate ridiculous prices and shortages. And then what do we literally have our Secretary of Agriculture going to other countries to beg them for imports? I mean, how humiliating? For eggs and baby formula, that’s a national disgrace. And you absolutely need an aggressive antitrust.
On sectoral, I’ll point to aluminum as one where you could really also level that argument. So, we’re down to four smelters operated by two companies. And the Beer Institute, they’ve got a great website called midwestpremiumexposed.org.
So, there’s just group price fixing in aluminum for primary aluminum. And we don’t have a competitive market. And so, there’s only one price for aluminum. And if you look at Century Aluminum stock price, I mean, it tells you everything you need to know. Because they’re charging the tariff even to domestic producers.
So, that’s like a huge policy failure, right? Like our domestic aluminum fabricators, our domestic automakers, are paying the 50 percent tariff. But then we go ahead and let vehicles imported from Korea or Europe at 15 percent tariff and they’re paying a fraction of the price for key metals. There’s a word for that. It’s called tariff inversion.
And the aluminum one, that’s really tough. Actually, Alcoa is one of the two companies. And they make the point that they’re not going to build a smelter without a power deal. And that’s like a pure industrial policy play, right? Like I want to protect the home market. I don’t want to be relying on aluminum imports. But if we’re just doing a 50 percent aluminum tariff and Century is not building a new smelter, and they’re just using group price fixing, I mean, that’s not a recipe for success.
They just last week did, there’s a new announcement, but it wasn’t really, under the Biden administration, Century was given $500 million to build a smelter, March 2024, to build a new smelter. They were like, great, we’re going to build a new smelter. They never did. They never picked a site. EGA, which is a company from the UAE, announced a new smelter in Oklahoma last year in May. They had a deal with Oklahoma, but it was contingent on a power deal. They still don’t have one. And then last week’s announcement was Century was going to partner with EGA that they’re going to be a minority owner on this new smelter. They still don’t have a power deal.
So, that would be another big message for the administration is to be wary of press releases, right? Be wary of press releases. Don’t not do action because you got a great press release. Trust, but verify. And lay the groundwork so that you’re going to get the investment the press release promised.
TEDDY DOWNEY: And we’ve covered meat packing and seeds as well. And you talk to some of these farmers and they’ll say, well, as much as I would love for there to be an international market—and you mentioned earlier, you can’t just totally rely on that—their problem is the input costs. They’re constantly going up. And so, subsidies and anytime you try to help the industry, the money just ends up right back in the pocket of the input providers, the fertilizer, the seed, et cetera, companies. What’s your view on that market? Do you see similar problems where you can’t solve? You have to do both. You have to do both tariffs and antitrust. Or do you have different views on that?
CHARLES BENOIT: Well, I do think agriculture is unique in the sense that we basically live in a post-scarcity world, right? There’s more food supply than there is consumption. And so, just let the chips fall where they may approach to agriculture, I just don’t think it works. Most other countries use some form of supply management across a lot of agricultural sectors. And we have, too, historically.
So, I think we should look to sugar as a playbook for a lot of other agricultural commodities. We tried. So, sugar was a protected home market with quota. And then there’s a massive trade history there. But it’s really impressive. It’s not something that our country started out with. We had no sugar originally. We didn’t get sugar until the 1830s and 40s in Louisiana. And it was protected. But then we tried free trade in sugar in the 1970s. And it was a disaster.
So, as is so often the case, and increasingly today, you just have global cartels rigging the price, rigging the game. And so, as soon as the protections for sugar were phased out and domestic production started to wind down because, well, we can’t compete – so, we’re not going to—the price of sugar in the U.S. surged. And then, oh, okay, the price surged. So, you get sugar beet farmers in the Midwest and plantations. Cane sugar starts to wind back up. And then they crash the price. And this is the same story we see all the time in agriculture, up, down, up, down. And it benefits no one. It benefits absolutely no one. It’s so harmful. And so, a lot of countries use supply management to get rid of that, as did we.
So, the experience of free trade in sugar was so bad in the 1970s that in—I believe it was like the 1981 farm bill. We just went back to supply management. We said guaranteed minimum price, and we guarantee the size of the market. And now this is like we’re down to less than—only about a quarter of the sugar we consume is imported. And it’s not just big Florida refineries benefiting. There’s a lot of sugar beet farmers as well.
So, I think it’s a great model. It’s interesting. The USDA, they’ve got a team that forecasts U.S. consumption and U.S. production, as well as in the—we’re selective. We’ve got different quota allotments for a bunch of countries. And we monitor production in those countries too. And if one country’s got a bad harvest, we’ll move quota around. And it’s a great system.
I love it because it’s not antagonistic, right? Like we can have another trading, like Panama or Chile or Peru, like they appreciate we’ve got this special quota allocation. We’re not in unfettered competition with the whole world, price competition with the whole world.
So, I would like to see a lot more of that, like take the sugar model and extend it to all sorts of fruits and vegetables, proteins and fats.
TEDDY DOWNEY: That’s fascinating. And actually, I would like to get to this and then I want to talk about the Supreme Court. When you suggest these and encourage USTR and Congress to take a more strategic approach to this type of thing, obviously, this is a pretty dramatic change to the status quo. And there’s so much inertia in D.C. of like, well, this is how I’ve always thought about it. I can’t possibly be creative or use my brain at all to think about things differently. That’s my cynical view of D.C. But I’m curious, how do you get people at USTR, the sort of bureaucrats there, or obviously, Jameson is going to be probably receptive to what you’re saying and thinking strategically like this, but there’s a lot of people at USTR and then the Hill as well.
CHARLES BENOIT: I think it’s helpful to talk about tangible items as opposed to talking abstraction and theory, which a lot of people just tune out or they’ve got a preconceived set. But if I challenge a question, when I meet a diehard free trader, I ask them point blank are you willing to watch the last automotive factory shut down in the United States? Australia did do this within the last decade, like the late 2010s. Their last car factory closed down. And it was over a hundred years they’ve been making cars and now they import from China and export coal. I mean, there’s the resource colony now.
So, my question is to break the paradigm, say, are you willing to watch the last car factory in America close? And I’ve never had anybody, even the most like diehard free trader, they’ll say, oh, well, no, no, I’m not willing to, no, that’s strategic or what have you. They’ll offer some answer like that. And then you say, okay, all right. So, what’s your number? Challenge them on what’s your number? Right now, about 50 percent of vehicles sold in the United States are assembled here? Are you willing to let that go to 40 percent, 30 percent, 20 percent, 10 percent? What’s your number if it’s not zero?
And the moment, and they can have, I’ve never, I haven’t thought about it, but the moment you do that, you’ve totally smashed the paradigm of unlimited price competition globally with indentured servants and state enterprises and all that. You smash that paradigm and now you’re talking about outcomes. And that’s where we just need to go to in our trade policy.
Jameson has said it, managed trade. And that’s it. We already do managed trade in sugar. We saw an automotive, a bit of that in the UK deal. We’re seeing other quota deals. I mean, Canada just did one with China. Bad move, obviously. I’m not a fan of that, but say what you will. But it’s interesting that, like they said, okay, 49,000 cars. So, that was the expectation. And okay. I mean, not great, problematic. But here we are giving all these countries unlimited auto parts and vehicle imports at a measly 15 percent tariff. I mean, it’s just like a toll.
So, yeah, managed trade is where we need to go. And when you encounter someone that goes hostile, ask them if they’ll let the last car factory close down?
TEDDY DOWNEY: And then I want to get into lobbying again here. Where are the big business lobbyists? Because I would always imagine they come in and make good points and some of them would support you. Obviously, there’s tons of companies that would benefit, our companies that would benefit. But what do you run into when you’re talking to lobbyists and trying to create coalitions? Are there people that are willing to think like this? Or are they stuck in the mud? Are they stuck in a globalization is the only way to do it, free trade, yadda, yadda, yadda stuff?
CHARLES BENOIT: No, I think that all the other supply chain realities have really hit home. So, I don’t personally meet a ton of globalization is the only way to do it. Probably I just don’t run—yeah, I don’t see a lot of that from when I talk to industry. The more common problem is they’ve been burned by bad experiences with trade remedies. So, a lot of people have no idea that tariffs can even—well, maybe not—certainly historically, throughout my career, a lot of people have no idea that tariffs even existed outside of very isolated trade actions, right? Like an anti-dumping or countervailing duty. So, those are terrible. Like they just don’t work. There’s just a pure history of failure up and down.
And so, you’ll meet somebody who’s like a purely domestic business. I’ll meet somebody that runs a domestic business suffering losses to import a product. Like there’s no reason this person should not be all for using tariffs to protect the home market, but they’ll say, oh, tariffs are a joke. They don’t work. What they actually mean is anti-dumping kind of in the duties of these narrow trade remedy orders that like slap one country. And we just have to totally have to move past that.
Unfortunately, all the presidential powers are, except for 232, are designed to punish individual countries. But if your focus is reshoring, then like attacking China is not going to do anything. It’s just going to, okay, maybe you’re successful in diverting some capacity to Vietnam or whatever, but it’s the same companies. So, that’s what I mean, the encounter right there.
TEDDY DOWNEY: I could talk for ten hours with you. So, I’m a little sad we’re only going to get an hour. But let’s go to the Supreme Court. Because I love talking about this strategically because I think it’s really the way to do it. But you have these individual events that are going to occur that are going to upend this strategy very likely in the near term.
What are you expecting out of the Supreme Court? And one of the things that I’ve been concerned about, following a potential loss by Trump at the Supreme Court, is that the NEC, the pro-growth, anti-tariff coalition or tariff skeptic coalition within the Trump administration is going to go to Trump and say, hey, we need to be about affordability. Let’s push out any tariff reaction until next year, until after the midterms so that the prices don’t come into play here.
I would love to get your thoughts on what you see happening at the Supreme Court and then what a likely reaction is out of Trump. And if you see that kind of battle going where the sort of anti-tariff folks see an opportunity to weigh in and push things out. Because I’ve just noticed that you mentioned those cabinet tariffs. Those got pushed out until next year. A couple of things have gotten pushed out to next year. And the timing seems a little bit weird. January, first quarter, whatever. I’m curious to get your thoughts on the Supreme Court and what we’ll see.
CHARLES BENOIT: Okay. Well, so yeah, a lot there. The Supreme Court, I think that there’s two sort of tracks and I don’t know which one we’ll take. But here’s my take. I’ve found the decisions up to this point, the District Court and Court of Appeals, frankly, are pretty boring. And they’ve centered on the textual analysis basically comes down to the word tariff isn’t in the statute. Well, okay, whatever. To me, that’s like just, they don’t want to think about this problem. And so, here’s a decision.
I’m keeping my eyes on the non-delegation doctrine, which is tariffs are a tax. Yes, they’re the best tax is my position. And taxes are supposed to originate in the house. So, in our system, it’s an interesting fine line there. We’ve got this tariffs as sanctions versus tariffs as a revenue generator. And the conservative justices on nondelegation doctrine—which has historically been really kind of gutted. It’s not had much meat to it, but they’re reviving it, the conservative justices, which is not good for the administration.
There was a decision last year where, if you ever noticed in your cell phone bill, the universal service fee, which Congress said to the FCC, hey, yeah, you can assess a fee on cell phone bills to improve rural service or whatever. And I guess—and I’m not an expert in this—but I guess they kind of left it fairly broad. And in a decision, the conservative justices actually said in a dissent, that was an unconstitutional delegation of Congress’s taxing power, just the universal service fee on your cell phone bill. So, if you’re like, okay, well if they weren’t okay with that, I don’t know how they—I think it’s a tough road for them to support AIPA as not violating the nondelegation doctrine. Now, the answer would be, well, it’s foreign affairs. And foreign affairs, that gets into the president’s power.
So, maybe we’ll see. I do think that the longer the court takes, if the court wanted to get this off the docket quickly, it would be pretty easy to just write a, you know, it doesn’t say tariffs in statute decision.
So, anyway, as I said, I’m pessimistic on a good outcome. I think that the administration should spend the political capital to get the 10 percent AIPA reciprocal order legislated. I think the 20 percent plus for China should be legislated. The President campaigned on that. And that will secure the majority of the AIPA revenue.
TEDDY DOWNEY: But in terms of in the meantime—I mean, that can take a while to get something through Congress. In the meantime, I think the expectation is they’re going to go through these other powers, like you mentioned, 232 and others, to try to replicate a similar system. Is there a possibility that—obviously those powers are less flexible and take longer. But at least you could create some more certainty in the market that, hey, we’re going to start doing this with this intended outcome. If you just wait for Congress, I mean, I feel like that’s a really big risk to take, especially since you’re in an election year. This whole affordability mantra—I’m not one of these people that connects affordability to tariffs. I certainly think there are just so many trade-offs and variables in that whole ecosystem.
When you’re thinking about a market, it’s too, I think, simplistic and wrong to just completely equate them. Personally, that’s my view. But in Washington, I think that is the prevailing things, like tariffs equal prices going up. What’s your reaction to this idea that they’re going to come up with a sort of a laundry list of using the other powers to replicate a similar outcome?
CHARLES BENOIT: I’m pessimistic on it and I think it’s a bad approach. I think that all these other statutes are really designed country-by-country. So, you could do it, but I just think it’s—well, here’s one thing you can’t do with those statutes is you can’t protect all the well north of a hundred billion that’s been collected so far.
So, are they really, is this going to happen? Is the administration just going to let all that revenue they’ve been collecting for almost a year now fly out the door? The President tweeted or posted on Truth over the holidays that that would be an unmitigated disaster and we just can’t allow it to happen. Yeah, I agree. So, I just don’t see why. I mean, it can be part of a reconciliation bill. I just think that it’s Congress or bust personally.
And now, I mean, Jameson might push back. And you can actually see that. Like in the UK auto deal that I keep on bringing up, they actually did do that. So, whereas they took off the AIPA tariff that applied to the UK and they restructured the Section 232 tariff on automotive to essentially match it for the in quota. So, they took our 2.5 percent base congressional MFN tariff and then made the in quota Section 232 tariff 7.5 percent. Whereas, the UK was already doing 10.
So, yes, they can do it in many examples. But look, we’ve got entire sections of the tariff code that are outside 232, right? All of agriculture, all plastics, many others. So, yes, in theory, could you eventually piecemeal it? My gosh, what a mess. You’d have to wind up staffing USTR and Commerce probably to look at the Pentagon, the Department of War. So, I just think they have to have the fight in Congress, especially this Congress while they’ve got the parties.
TEDDY DOWNEY: And so, kind of like, all right. We lost in the Supreme Court. We need to keep this revenue. You’re basically like, hey. Let’s send a message to everyone that you’re not getting this money back reconciliation bill, have it be quick, have it be targeted. And we need to solve this. Because otherwise, the bond market will puke. Our trade partners won’t know what to do. Is the hypothesis that you could move something quickly in that respect? Because if you just think about it now, it seems very unlikely.
CHARLES BENOIT: So, I think that what a great favor President Trump did all of us is I think you’re absolutely right. That prior to this year, what I view a 25 percent tariff is like a very modest – a 25 percent tariff, I tell people it’s equivalent to like a 5 percent sales tax. If you travel to some exotic country you’ve never been to, you go to a department store, you buy a whole bunch of things off the shelf and you get to the cash register and you discover, oh, there’s a 5 percent sales tax in this country. Are you like going back and putting everything on the shelf? Are you abandoning your purchase? No, you’re just going to pay it.
So, that’s how I view these tariffs. But in Congress, everyone’s like, well, 25 percent tariff. And they would make—they’re thinking 25 percent off the retail line. That’s how people think. The iPhone. Oh, the iPhone’s going to go from $1,000 to $1,250. No, not at all. Not even in the slightest.
And so, I think what Trump did by just coming out the gate with these tariffs is he actually—and the very muted reaction, which we’ve seen, all the peak globalist groups, Wall Street Journal, what have you been like—how come the world didn’t collapse? It’s like, well, actually, because these are very modest measures.
So, I think that has been very helpful in moving the needle in Congress. I think that they get that they have a bit of a revenue problem. And I still think what should have happened with the tax bill is no income tax for anyone paying under $150 and you’re tying it to the tariff revenue. And, I mean, that to me is they could seal up the midterms if they do that. So, that’s my advice is take the tariff revenue and make sure it’s all the bottom wage earners who are going to benefit.
TEDDY DOWNEY: I mean, it’s going to be fascinating to see what the Supreme Court does and what the reaction is. We’ve got some listener questions here that I want to get to. We already got to the one on SCOTUS AIPA. We’ve got two here on 232 tariffs on steel derivatives. It’s not really a question. It just says that.
CHARLES BENOIT: That’s a good one.
TEDDY DOWNEY: Maybe talk about what you see happening on that.
CHARLES BENOIT: Oh, yeah. That is such a mess. That could be—so, okay. What the question is talking about is—does it say steel?
TEDDY DOWNEY: Steel derivatives.
CHARLES BENOIT: Okay, right. So, what the administration tried to do—and I think this is a little, it’s too complicated and it doesn’t work—is we’ve got—they didn’t want—the intentions were good. We don’t want tariff inversion. So, we’ve got these 50 percent, they’re now 50 percent, tariffs on primary steel. So, Chapter 72. But we’ve got all of these things downstream and we can’t let—if we’re letting them in at a far lower tariff, that’s tariff inversion. It doesn’t work.
So, what they did was they greatly expanded the scope of the steel and aluminum 232s with what they call derivatives. In steel, that means subsequent to Chapter 72. And aluminum isn’t divided out as steel. So, it’s a little more opaque. But essentially derivative seems to mean anything that was not part of the original 2018 action, which is more limited to primary steel and some fabricated products.
So, they said for all of these downstream things will apply the 50 percent or the 20—it was 25. And then they made it 50 in June. We’ll apply that percent to the metal content. And then the non-metal content will apply whatever AIPA tariff should apply to that content.
Okay. Here’s how that works in practice. It doesn’t work. If something is, say, 50 percent metal, or let’s say 80 percent metal and 20 percent not metal, the importer is supposed to just ask the overseas fabricator, hey, what did you pay over in China? What did you pay for the metal? And the 50 percent applies to that.
I mean, this is a judgment proof entity. It violates every principle of customs law. Customs declarations are supposed to be made by somebody that we can arrest and is accountable. We’ve kind of given up on that, unfortunately, in the 21st century. But that’s how that’s supposed to work. Here there’s not even any pretense, right? Like a typical ad valorem tariff is supposed to be applied in the transaction price. And theoretically, the importer is U.S.based. And theoretically, we can subpoena, get their bank accounts and see did you really pay that amount? We can’t do any of this when we’re talking about overseas declarations.
So, it’s a complete mess. And this could be one of the good things because we have to get away from it. They have to be willing to do the work instead of just saying like, okay. One size fits all – 50 percent on primary steel and 50 percent on anything downstream. It doesn’t work. They have to just be willing to set tariffs productbyproduct. They should modify the inclusion process, which was designed to add derivative items, so that we can get product-specific tariffs throughout the supply chain, just kind of like they did with lumber. And I think they just have to do it.
Like a big embarrassment is—it’s not confirmed yet, but what looks is about to happen—is that this giant new Alaska pipeline to carry a natural gas from the top of Alaska right through the middle to the bottom is going to be made with imported Korean pipe. I mean, that’ll be really embarrassing. And that’s partly because steel pipe and tube is part of these fake tariffs right now. I call them fake. So, they’ve got to fix that. I think they will soon because it’s getting out of hand.
TEDDY DOWNEY: That’s fascinating. How do you fix that? You just come up with a more workable, reasonable tariff?
CHARLES BENOIT: Yeah. So, I mean, I could get really into the weeds. So, from March to June for Chapter 73, they didn’t do this. So, this Chapter 73 includes pipe and tube. The tariff was applied to the full value. So, just go back to what you were doing from June to March. That’s good.
And then for the subsequent chapters, you get into Chapter 84, like machines, 85 is more like electronic equipment. I think they just have to. Like with the lumber one, get into the process of saying, okay. We’re not just going to try to apply the same tariff rate across the supply chain.
And my suggestion was use the inclusion rounds to allow domestic producers to suggest both alternative tariffs for products that make sense as well as quota. Which if we’re not going to have the domestic capacity for a long time, we need more quota opportunities to phase in protection.
So, yeah, we’ll see. Like I said, I’m optimistic things will get better. And now they’ve got a new lawsuit against them on this. So, I think that they will fix it. And if the Supreme Court blows up AIPA, then they’ll really have to fix it across all actions.
TEDDY DOWNEY: I want to get to USMCA in a second. But one thing I think is interesting about taking away AIPA potentially is I think a lot of businesses, and a lot of people, that try to make sense of the Trump tariff regime get whiplash, right? It just, one day it’s on, one day it’s off. It feels like a cudgel.
CHARLES BENOIT: A hundred percent.
TEDDY DOWNEY: It feels like punishment for anything, right?
CHARLES BENOIT: It could be anything.
TEDDY DOWNEY: It could be an ad they see. Boom, you’re punished. And I think it undermines the seriousness of the strategic value of tariffs. It undermines the potential to give people, businesses, certainty to actually invest in a factory to feel like their industry actually is being protected. What is your response to that in terms of like, at least if we get rid of that, we can use tools that are a little bit more deliberate, a little bit more permanent in terms of like what the expectation is from business.
CHARLES BENOIT: Yeah, that’s exactly right. And it’s why I’m not really a fan of tariffs as sanctions. I’m not saying it can’t ever make sense, but I generally don’t encourage it. Nobody is making investment decisions based on a tariff as a sanction. Nope. And in fact, you’re jamming it up. You’re jamming it up because everyone’s like, well, okay. Well, we’re not going to make this order now, right? We’re taking American manufacturers. Well, because this tariff will probably go away in a few weeks. I mean, you saw this with China. I mean, it’s really you’re jamming up the domestic economy. You’re not generating investment. And it detracts from the good work that Commerce is doing on a bunch of 232s and in the story they can tell.
Look, Trump is the best president on tariffs ever. He’s embraced them the most. But there’s a big argument as to why—originally, you go back to the 1890s, when the first little delegations of tariff power went to the president. I mean, this is something our parties—I mean, I’m a Republican and this has played with forever. There’s a tension. Like McKinley famously, when he was the Ways & Means Chairman, had the McKinley tariff. That tariff act had the first little bit of a delegation, very minor, to the president to adjust tariffs for trade deals.
And McKinley, despite the lobbying named after him, opposed that. He’s like, no, no, no., This is the road to hell. Because presidents, they engage with other heads of states. It’s normal. They’re going to make deals, all sorts of things going on. But he’s like, no. Tariffs are for revenue and protecting our home market. There’s nothing good will come from giving it to the president. He seems to have flipped his tune by the time he became president a decade later.
So, this is a longstanding tension. And I would love to see Congress ultimately get back into the tariff game. Because you’ve got that tension where the president, he’s inevitably spending a lot of a time talking to foreign heads of state and you’re going to wind up with deals.
I think the American Protective League had great principles on this. Their principles against reciprocity, which is you’re picking winners and losers. You’re sacrificing one set of producers for another producer’s benefit. It’s really immoral. And it’s always like the top dogs are in, right?
Like we throw up the aviation supply chain to sell Boeing’s. I mean, it’s literally selling the cow for some milk. And we were frankly still seeing that in the reciprocal deals, right? With the USTRs deal with Malaysia and Cambodia. I mean, it says right there okay. They’ll buy like whatever it is, 30 Boeing’s. I mean, okay. Yeah, 30 Boeing’s. Well, Boeing is mostly important parts and the deal also waives the reciprocal tariffs on aviation components.
So, it’s, but this is when presidents are dealmakers. I mean, they want this and it’s just an inevitable outcome, I think. And why I’d love to see Congress get back in on a product-by-product basis, legislating to give producers that true certainty.
TEDDY DOWNEY: I want to get back to that if we have a minute at the end, back to this question about how to get Congress to be strategic and educated on these issues. But first, USMCA, how do you see that playing out? You mentioned Mexico makes a lot of cars. There does seem to be a lot of looking at the tariffs as a way to just sneak things in through Mexico. Or like you said, just finding another Asian country to import from. How do you see Jameson and USCR and Trump thinking about USMCA? There seems to be a bit of a back and forth of we want to get out of it. It doesn’t work. And no, we’re committed to it. So, would love to get your take on what you see happening there and what you want to see, what you think is a good policy.
CHARLES BENOIT: So, yeah, people like USMCA, it’s a beast. There’s like already we’ve had, even under NAFTA, you’d have things like side letters. I always keep coming back to I take things sector-by-sector, product by product. And it’s not hard to do. People shouldn’t be intimidated by that. Just honestly dive in. There’s 21 sections to the tariff code. Each one has a Roman numeral. There you go. Let’s just take one section at a time and figure out what makes sense.
So, take beef for an example. We can restrain imports globally, right? So, Mexico and Canada may have unlimited market access, which they do for almost everything, right, presently. We can actually restrain that unlimited global market access while simultaneously giving Mexico and Canada their own quota, okay?
And you can take an absolutist position that, oh, Canada and Mexico has lost something. Because before they had unlimited access to our market, but now they’re put on a quota. But in fact, no. They’re winners. Because now they’ve got this thing—what’s the voyage line? It’s got this golden thing. So, they’ve got this privileged market access that they’re no longer in direct price competition with every other country in the world.
So, yeah, restrain imports globally, and then you can hand off a quota to Canada and Mexico, product-by-product, where it makes sense. And then when you’ve got the quota, I mean, there’s so many benefits to that approach, right?
So, if we capped—forget about rules. All these rules, they never work. They don’t mean anything. But if you just cap Mexico and say, you get 2 million cars to send us a year. That’s it. They’re going to have an interest in not mucking about and not sending us Chinese cars. And we don’t even have to get into all the rules and everything. It’ll just be understood. Okay, you abused your quota. Now you’re losing it. So, simple. And agriculture and all these things.
So, for me, it’s managed trade. I don’t think there’s any necessary—I don’t see any benefit to like a three-party agreement, right? And in fact, it’s already deviated from that. If you look at the USMCA text on the USTR website, you’ll see. I mean, we have different schedules of concessions, which is like for both countries, it’s all these side letters. I would say just let go of the whole concept, just managed trade sector-by-sector, productbyproduct with both countries. We can give them a bunch of quota, which will actually restrain and cap their import access to us, but simultaneously lift them up and privilege them and everyone will be happy.
TEDDY DOWNEY: This is so fascinating. I find this so compelling.
CHARLES BENOIT: Appreciate it, Teddy. Thank you.
TEDDY DOWNEY: I can’t even begin to articulate how strategic and smart this sounds. Now, another question I have, and this will be the one I leave you with. So, you have so convinced me that this is the way to analyze this. I’m going to go back to my team and say, hey, we’re just doing everything sector-by-sector, product-by-product, deal-by-deal, country-by-country.
CHARLES BENOIT: Nice.
TEDDY DOWNEY: I never learn anything. I’m learning so much the way that we’re talking. And I think about things sector-by-sector and productbyproduct, because that’s the way it makes sense to me. I don’t understand it any other way.
CHARLES BENOIT: It’s the way we did tariffs for 5,000 years.
TEDDY DOWNEY: It’s the way that anyone thinks about how to make stuff, right? They don’t think about countrybycountry. Let me make something with this. I mean, I find that insane.
CHARLES BENOIT: This is all an artifice of globalization that we do tariffs countrybycountry. It was totally outside of the American tradition from 1789 to the early 20th century. It all fell apart in 1934. There was a handful, like the Philippines, Cuba. And there were some attempts. And for quota allocation, it makes sense. It’s like, okay. Maybe we do want some. We’re going to give Mexico some shrimp quota, but we don’t want to give China the shrimp quota.
But no, that’s a subset. You first think of things productbyproduct. And then you can have some deals. But if you look at any tariff schedule going back 5,000 years, it’s not a list of countries, which is what the whole GATT system is. It’s a list of products.
TEDDY DOWNEY: Yeah. And you can’t be strategic. What if you need it for national security? You wouldn’t do it by this. You’re not doing that by country. You’re doing it by product. So, I find it great. I’ve got one last question.
CHARLES BENOIT: I just want to say one thing. Tell me if I’m losing you because I make this point. So, as an old school protectionist, protection is not protecting one company. It’s protecting the home market. But my view, like take something like vanilla, which we mostly get from Madagascar, as does the whole world. And you’re like, where’s the harm in this?
So, when you’re thinking country-by-country, you break it, right? Like on Liberation Day, that was one of the points of embarrassment is that Madagascar got hit with some of the highest tariffs. It’s like what are we doing here? It’s totally backwards.
But my point of view is like, if someone in Florida is like, hey, I think I can make vanilla on a cost competitive basis with Madagascar. I can’t buy the whole market, but I could supply 20 percent of the market. I would encourage that person, if I was Ways and Means Chairman, to come before Congress and make your pitch. Yeah, okay. We’ll talk about quota. I don’t need a product to be—I’m about domestic investment, domestic capacity. I think that makes the world richer. So, there’s no product that’s off limits.
And the traditional American protection is you would just go and plead your case to Congress and we elect our Congress. And they’re the ones that balance consumer interests. They’ll know. You look at the aluminum tariffs in the 1920s, they’re like there’s a big global cartel going on. So, you can address everything. And it’s the people we vote for making these decisions. And I think that’s a great system.
TEDDY DOWNEY: I make the case—and I talked to both Republicans and Democrats about this type of stuff. And the Republicans intuitively get that like, hey, you’re cutting off opportunity for entrepreneurship in this country. And at least they pay homage to that as a good goal. They ignore it a lot of the time when you’re trying to talk about it related to trade. But that doesn’t even come up on the radar screen of a lot of Democrats. Which is why I find it so frustrating to talk to them about trade. They don’t care. Honestly, they just don’t care. It’s like, what? Like, oh, yeah. So, what? Oh, we don’t have anyone making vanilla? Great, great. Like, I don’t want anyone making vanilla here. So, that’s just a pet peeve of mine in terms of like, trying to have a conversation with people about that.
We’ve got one last question and then I promise I’ll let you go. Protections for critical minerals and rare earths. If price floors aren’t viable because they are a budget liability and need congressional approval, what are the best equivalent tariff tools to support domestic prices for small minerals with limited domestic production? Tariff rate quotas?
CHARLES BENOIT: Yeah, absolutely. Actually, minerals are like a slam dunk one. Because, unlike USDA which doesn’t want you to know how import reliant we are, USGS does great work. And every year, well, monthly even, but then every year they’ve got this annual report and they list our net import reliance for every mineral.
So, for critical minerals, that’s the easiest one. I absolutely think quotas are the way to go. And copper’s an interesting one, right? We do mine copper. So, that’s a perfect example for a tariff rate quota.
And then aluminum, I think we have to have a hard decision. I mean, we’re so far from any kind of competitive market in primary aluminum. Like we’re so far from that, right? There’s just one price. We’ve got four smelters, two companies. And now even this potential fifth smelter will still be partly owned by one of the two.
So, we’re so far from a functioning competitive market and primary aluminum that—and this has been the case for aluminum for a hundred years, by the way. We’ve never had a functioning primary market. Well, it was in the 1940s, like early 1940s, we were at the same spot we are now. It was just a handful of smelters, very import reliant. And so, the government actually started building up its own smelters. And after the war, I think like 1950, 51, they sold them off and we got Kaiser Aluminum, Reynolds Aluminum.
So, sometimes it’s going to be beyond that. And I give a lot of credit to the administration. They’re taking a stake in a new zinc smelter. So, Rare Earths, they’re doing things. Absolutely. I think they should talk about it a lot more. They should market it, hype this up.
I mean, I’m a big fan as well of I think there’s great marketing coming out from HHS and Secretary Kennedy. I love it all. I love all that. And I would love to see more of that from other parts of the administration talking about the good industrial policy things they’re doing.
TEDDY DOWNEY: Well, I know this has been one of the best calls I’ve ever done.
CHARLES BENOIT: Thank you, Teddy.
TEDDY DOWNEY: I’ve learned so much. I cannot appreciate what you’ve said here more. Good luck with getting people to think strategically on the Hill. You have your work cut out for you, Charles.
CHARLES BENOIT: I do.
TEDDY DOWNEY: You’re doing God’s work here. It seems so important, so crucial, if we’re going to have a more sustainable, sensible economy here. And thank you so much for taking the time to talk to us.
CHARLES BENOIT: Absolutely, Teddy. I had a lot of fun. Any time. Thank you so much for the conference.
TEDDY DOWNEY: Thank you. And this concludes the call, everyone. Thanks for joining us. Bye-bye.
CHARLES BENOIT: Bye.
