Before President Trump's tariffs took effect this year, production at the Chicken of the Sea factory in Lyons, Georgia, was in full swing, canning enough imported tuna to build four to six months' worth of inventory in warehouses across the United States.
It was an attempt to mitigate the impact of the tariffs, and it worked — temporarily. But when the president imposed these high taxes worldwide, the cost of the fish, olive oil and steel cans the factory needed rose. Production has now declined and the factory has reduced its operating hours from five to four days per week. Chicken of the Sea has sold all of the inventory it had accumulated before the tariffs were imposed. Company executives say that has left them with few options other than raising prices unless they can secure a tariff deferral.
“It puts pressure on us and forces us to make really difficult decisions,” said Andy Mecs, the president of Chicken of the Sea International. “I think there will inevitably be some inflation if we don’t see some easing soon.”
A move by the Trump administration last month to exempt tariffs on some non-U.S.-made products such as coffee and bananas gave hope to Chicken of the Sea and other importers that pay tariffs. The company and Georgia lawmakers representing its district have argued to White House officials that there should be tariff exemptions for foreign products for which there are no American substitutes, such as the frozen tuna the company imports from Thailand, Vietnam, Ecuador and Indonesia. The type of tuna typically used for canning is caught in warm waters around the equator.
“It’s not like there’s only tuna swimming around in Ohio,” Mr. Mecs said. On tariffs, he added: “I would hope that we have peaked and are on the way down.”
Since Mr. Trump's exemptions, a wave of companies have begun seeking similar relief from officials in Washington. Companies that rely on foreign materials — from factories that import machinery to retailers that sell artificial Christmas trees — argue that tariffs on their products simply raise consumer prices and deepen Americans' dissatisfaction with the economy rather than encouraging more manufacturing in the United States.
The petitions have raised questions about the strategic direction of the president's trade policy in the coming months. Mr. Trump has spent the past year imposing, pausing and then reimposing more tariffs than the United States had seen in nearly a century.
The Supreme Court is expected to rule soon on whether many of Mr. Trump's global tariffs were lawfully imposed. Some court watchers expect the justices to strike down tariffs that Mr. Trump imposed using an emergency economic law. While the president has many other options for reimposing tariffs, some leaders hope a loss at the Supreme Court would encourage the administration to more specifically target its tariffs on essential goods rather than almost everything Americans import.
Everett Eissenstat, a partner at Squire Patton Boggs, a law and lobbying firm, said the administration appears open to discussing further exemptions for products such as raw materials and machinery that U.S. factories need.
“I think it's a natural occurrence that now that a lot of these tariffs have been put in place, there's going to be more dialogue about how they're going to be implemented,” said Mr. Eissenstat, who was an economic adviser to Mr. Trump in his first term.
The impact of tariffs on consumer prices was initially somewhat muted, but became more pronounced over time. Trump officials continue to publicly deny that tariffs are increasing prices.
But in October, researchers at the Federal Reserve Bank of St. Louis wrote that prices for durable goods affected by tariffs had “increased significantly” and concluded: “Tariff measures are already exerting measurable upward pressure on consumer prices.” High prices have hurt the president's approval ratings and helped Democrats in elections across the country last month.
Trump officials have portrayed new tariff exemptions as positive, arguing that the administration's success in reaching more than a dozen trade and investment deals with countries such as Japan, Switzerland and El Salvador has created room for such adjustments.
Kush Desai, a White House spokesman, said the exempt items “cannot, for the most part, be physically grown or extracted in the United States.”
“Comparative disadvantages can be overcome through innovation and investment, but weather conditions that prevent the cultivation of cinnamon and saffron cannot be overcome,” he added.
So far, exemptions have been offered for only a tiny portion of Mr. Trump's tariffs. An analysis by the Peterson Institute for International Economics found that the exemptions announced in November for coffee, bananas, cocoa beans, tomatoes and other products would save each American household just $35 a year, compared to an additional annual cost of $1,700 for Mr. Trump's tariffs overall.
Ed Gresser, a former U.S. trade official and director of trade at the Progressive Policy Institute, called the exemptions “a cosmetic gesture.”
Mr. Trump previously called himself the “president of affordability” and praised his efforts to lower prices. But in a Cabinet meeting on Tuesday, he downplayed the cost of living issue, saying affordability “doesn’t mean anything to anyone”. He called the issue a “false narrative” created by Democrats.
Elsewhere, the president reiterated his belief in the benefits of import taxation. “Tariffs have made our country rich, strong, powerful and safe,” Trump wrote on November 29th.
While the government has laid the groundwork for further exemptions from the “reciprocal” tariffs it has imposed on other countries, it is also steadily expanding other tariffs, such as levies on steel and aluminum, which are found in a variety of imported goods, including balance beams and condensed milk cans. And it is still considering new tariffs on semiconductors and electronics, critical minerals, medical devices and other products.
Kelly Ann Shaw, a partner at Akin Gump and a White House official in the first Trump administration, said that “some degree of tariff recalibration was always part of the plan.” However, she cautioned that these smaller adjustments should not be confused with “a pivot.”
Given the strength of the stock market and economic growth numbers, as well as billions in promised foreign investment, the Trump administration has “good reason” to believe its economic policies are working and little reason to change them, Ms. Shaw said.
“From their perspective, they defied all orthodoxy and landed the plane,” she said.
The Cost of Ignoring Comparative Advantage
When Trump officials first imposed sweeping tariffs around the world this year, they insisted there would be no exceptions and no exclusions. It was an attempt to avoid a flood of requests from companies to share the taxes.
During Trump's first term, companies applied for hundreds of thousands of tariff exemptions with the help of high-priced Washington law firms. Especially initially, the process was often criticized as opaque, unfair and chaotic, even though it represented a vital lifeline for some companies.
Mr Trump's second term saw lucrative tariff exemptions granted to some influential companies and industries. But most companies have been forced to pay them regardless of whether the product they import can be made in the United States or not.
While the idea of using tariffs to protect strategic production is gaining growing support, many economists and business leaders have condemned the imposition of tariffs on products that Americans cannot or do not want to produce themselves. They say there is a high cost to ignoring the law of comparative advantage – an economic principle that says some countries are better suited to producing certain products than others, and that everyone can be better off if nations specialize in what they are good at and trade for the rest.
Mac Harman, the founder of Balsam Brands, which sells Christmas decorations, said he understands the Trump administration's push to manufacture strategic goods such as minerals or syringes in the United States. However, he questioned tariffs on artificial trees with stringed lights, which he said were never made in America.
For as long as pre-lit trees have existed, they have been manufactured overseas, first in Thailand and then in China, he said. American workers simply didn't want to do the work, he said.
“The U.S. is really developed, so we should do advanced manufacturing,” he said.
Like other companies struggling with double-digit tariffs, Mr. Harman has made difficult decisions this year. The company raised prices by more than 10 percent on average, laid off 10 percent of its workforce, suspended office lunches and canceled expansion plans. Orders for certain high-duty goods such as snow globes and fancy lights have been discontinued.
Like Chicken of the Sea, Balsam Brands had been stockpiling inventory before the levies took effect – a trick the companies probably won't be able to repeat next year.
The company is still feeling the effects. Higher prices and fewer products on shelves mean the company's sales will rise 8 percent in the United States this year, compared with double-digit growth in France, Germany, Australia, Canada and Britain, Harman said.
Mr. Harman said Washington officials he spoke with had concerns about consumer sentiment and whether affordability would become a political issue during the holidays. He expressed hope that a Supreme Court ruling against the president's tariffs could provide an opportunity to replace broad-based tariffs with more targeted levies.
“I think there are really good reasons for it,” he said of imposing tariffs. “I just don’t think it should be non-strategic goods that were never made in the United States, like Christmas trees.”