WASHINGTON, March 5 (Reuters Breakingviews) - The annual winter address to Congress is usually a U.S. president’s chance to urge legislators to pass his agenda. Donald Trump, appearing before lawmakers on Tuesday for the first time, since returning to the White House, instead explained how he planned to ignore lawmaking in favor of executive action. His theory of how best to nurture an industrial renaissance is exemplified by the rare legislation that did warrant mention: $53 billion in semiconductor funding that he wants scrapped. Instead, Trump pushes tariffs as the means to force supply chains back onshore. CEOs can make plans based on settled law. They can’t depend on an agenda that’s all short-term pain without the stability to notch long-term gains.
Trump’s Republican party controls the legislature. Yet his speech mostly focused on executive action. The president said that his tariffs, wielded without congressional restraint, would “make America rich again.” He admitted that a “little disturbance” should be expected in the near-term. That’s perhaps a nod to the S&P 500 Index’s (.SPX), 6% tumble from its mid-February high as 25% tariffs on Canada and Mexico take effect.
Ideally, this pain would be the price for a more self-sufficient America, where farmers rely on local markets and manufacturers set up U.S. facilities to avoid levies. But factories require billions of dollars of spending coupled with years of careful planning, negotiations, and investor acquiescence. CEOs need to know that the conditions pushing them towards this investment won’t suddenly disappear.
Trump’s trade policy promises no such thing. It was unclear whether the latest tariffs would happen until just hours beforehand.
Commerce Secretary Howard Lutnick continues to say that they may be altered. Sure, companies will scramble to build an immediate buffer – the trade deficit in goods surged to $153 billion in January, an all-time high according to the Commerce Department. But transforming this into the confidence to make new, long-term investments seems, for now, a remote possibility.
Legislation promises more stability – not just from one president’s whims, but between administrations. The CHIPS Act, passed by members of both parties, has supported $380 billion of projects, the Semiconductor Industry Association reckons. Yet Trump is undermining that, too. Many of the staff managing the program have been fired, and funds now could be yanked away. Non-binding commitments from chipmakers like Taiwan Semiconductor Manufacturing (2330.TW), seem a meager recompense.
Despite total control, Trump might have reason to distrust the legislative process: Republicans’ majorities are slim and ideologically unwieldy. If so, though, he’s traded inertia for self-defeating chaos.
CONTEXT NEWS
U.S. President Donald Trump delivered his first address to a joint session of Congress since returning to the White House on March 4. During the speech, he threatened to impose reciprocal tariffs on trading partners starting April 2 and said that a "little disturbance" in the near-term would lead to major economic gains for U.S. industries, including automakers and agriculture.
Also on March 4, the U.S. imposed 25% tariffs on Mexican and Canadian imports, along with an additional 10% tariff on Chinese goods.
Trump threatened to repeal legislation that provides $52.7 billion in subsidies for the semiconductor industry to set up chip fabrication facilities in the United States. The law passed under his predecessor, President Joe Biden, with support from members of his Republican party.
Editing by Jonathan Guilford and Pranav Kiran
