From China to Tariffs: What Howard Lutnick Would Oversee as Commerce Secretary

Howard Lutnick attends Charity Day 2024 hosted by The Cantor Fitzgerald Relief Fund at BGC Group in New York City, on Sept. 11, 2024. Rob Kim/Getty Images for The Cantor Fitzgerald Relief Fund

President-elect Donald Trump selected billionaire Howard Lutnick for the role of commerce secretary, in which he will oversee the U.S. trade representative’s office.

If confirmed, Lutnick, CEO of financial services firm Cantor Fitzgerald and co-chair of Trump’s transition team, would hold a position that has increasingly become a crucial policy role.

Gina Raimondo, the current head of the Department of Commerce, has employed President Joe Biden’s economic agenda of reviving U.S. industry. Through her oversight of the U.S. CHIPS and Science Act, Raimondo has extended billions in funding to domestic and foreign companies to enhance U.S. manufacturing.

Wilbur Ross, who served as commerce secretary in Trump’s first term, enacted the president’s trade policies, from engaging in high-stakes negotiations with China to working on trade relations with the post-Brexit UK.

Lutnick will be given a vast portfolio of 47,000 employees and various sub-agencies and bureaus that manage intellectual property rights regulations, export controls on sensitive technologies, and weather forecasting. Some of these entities include the Bureau of Economic Analysis, the Census Bureau, and the Patent and Trademark Office.

If confirmed by the Senate in January, the chairman and CEO of investment titans Cantor Fitzgerald and BGC Partners will be tasked with instituting Trump’s vision of returning jobs to the United States and championing cryptocurrency adoption.

Potentially, the first policy pitstop for Lutnick could be tariffs.

Tariffs

The president-elect proposed imposing a universal 10–20 percent tariff on all goods entering the United States and a 60–100 percent levy on Chinese imports.

American trading partners will brace for the Lutnick nomination process and his position on trade.

If Trump’s first term is an indicator, Lutnick will have access to trade weapons.

In 2018, for example, Trump tapped the department’s authority over the “Section 232” national security trade statute to impose a 10 percent tariff on imported aluminum and a 25 percent levy on imported steel. Two years later, he bolstered these tariffs to cover specific derivative products.

On the campaign trail, Lutnick has been a significant proponent of this trade policy, defending the measure as one of the secrets to American prosperity following World War II.

Tariffs, he says, are tools to level the playing field, shield U.S. companies from unfair competition, and protect American workers.

According to Lutnick, tariffs can also be a revenue generator for the federal government.

“When was America great?” Lutnick asked at Trump’s Madison Square Garden rally last month. “At the turn of the century, our economy was rocking. This is 1900, 125 years ago. We had no income tax, and all we had was tariffs.”

Before the introduction of the income tax, the U.S. relied mainly on revenues from tariffs. Even during the Great Depression, the Smoot-Hawley Act raised about 900 import tariffs by an average of 40–60 percent. Over the years, tariffs have represented a smaller share of overall federal revenues—the import tax gave the government $80 billion in fiscal year 2023.

Economists estimate that Trump’s tariff plans could create trillions of dollars in tax receipts over the next decade.

The Tax Foundation forecasts that Trump’s universal baseline tariff on imports would raise between $2 trillion and $3.3 trillion from 2025 to 2034.

Despite consternation among economists and policy analysts surrounding renewed price pressures and disruption in trade flows from the proposal, Lutnick says tariffs produce a “win-win scenario” for the economy.

“Do we make a lot of money on tariffs, or do we bring productivity here, and we drive up our workers here? It’s a win-win scenario. I like both of them,” Lutnick said on CNBC’s “Squawk Box” in October. “I think what’s going to happen is we’ll make a bunch of money on the tariffs. But mostly everybody else is going to negotiate with us, and we’re going to be more fair.”

Market watchers have been ringing inflation alarm bells.

Mark Malek, Siebert’s chief information officer, said that if Trump’s proposals were enacted, various sectors, including agriculture, consumer electronics, and machinery, would be affected.

“A universal tariff would also affect virtually all retail sectors that depend on inexpensive imports, such as clothing, electronics, and household items,” Siebert said in a note emailed to The Epoch Times. “Retailers like Walmart and Target would need to either absorb these increased costs, impacting profit margins, or raise prices, effecting, ultimately, Goods Inflation.”

However, Jeffrey Roach, chief economist at LPL Financial, notes that Trump’s first barrage of tariffs did not ignite a wave of higher prices for shoppers because wholesalers did not pass the costs onto consumers.

“During Trump’s first presidency, he granted exclusions for over 2,200 products based on businesses’ defense that the tariff causes considerable harm, or the foreign product is not available in the U.S.,” he said in a note emailed to The Epoch Times.

Between 2017 and 2019, the producer price index—a measure of prices paid by businesses for goods and services—rose by 3–5 percent annually. By comparison, the consumer price index increased by 1–3 percent in the same span.

For policymakers, tariffs can be about weighing the benefits and disadvantages, Roach said. Trade levies can create “a deadweight loss to the economy,” but they can also lead to better negotiations and reshoring of domestic production, he said.

Lutnick has said that while tariffs can make specific products not manufactured domestically more expensive, consumers will shift their buying preferences to other brands.

China

Unlike the president-elect, Lutnick has refrained from concentrating his global trade grievances on China. Instead, he has blamed China for being responsible for the fentanyl crisis in the United States.

“China is attacking America from its guts,” Lutnick said in a podcast last month.

Still, the Commerce Department, under both the Trump and Biden administrations, has been used to mitigate the flow of sensitive domestic and foreign technology to China. In recent years, Washington has installed extensive regulations to plug the stream of advanced chips and chipmaking equipment necessary to manufacture next-generation semiconductors shipped to Beijing.

Appearing before the Senate Commerce Committee in October 2023, Raimondo called reports of Chinese multinational tech titan Huawei’s chip breakthrough—the most advanced semiconductor that the country has so far produced—“incredibly disturbing.”

Commerce Secretary Gina Raimondo on Capitol Hill, on Oct. 4, 2023. Saul Loeb/AFP via Getty Images

In 2019, Huawei was placed on the Entity List, a U.S. trade-restriction directory of companies banned from buying or using U.S.-based technology.

“If you think about national security today in 2024, it’s not just tanks and missiles; it’s technology. It’s semiconductors. It’s AI. It’s drones,” Raimondo said in an interview with CBS’s “60 Minutes” this past spring.

“And the Commerce Department is at the red-hot center of technology.”

Whether the incoming administration will concentrate on artificial intelligence (AI) and chips during trade deliberations remains to be seen.

“The Trump administration will also see its trade agreement with China as unfinished business,” trade economist Rebecca Harding said in a Deutsche Bank research note.

Because China’s economic position is weaker heading into 2025, Harding believes officials might seek to establish a tighter agreement than the initial deal.

According to the October World Economic Outlook report issued by the International Monetary Fund (IMF), the world’s second-largest economy is slowing. The IMF projects that China’s growth rate will decelerate, to 4.8 percent in 2024 and 4.5 percent in 2025.

China has been flirting with bouts of deflation on both the consumer side and producer side. The nation’s manufacturing base has seesawed between expansion and contraction. Unemployment continues to be elevated.

Monetary authorities have employed stimulus measures to bolster growth prospects, mainly by cutting interest rates. Experts are skeptical that these efforts will result in positive developments for the country.

“The last challenge to the Chinese economy right now is weak consumer spending,” Ning Leng, an assistant professor at the McCourt School of Public Policy, said at a September State Department press briefing. “Chinese consumers are less willing to spend amidst a current economic slowdown.”

Looking ahead, Harding says, the incoming administration is unlikely to differ from the current one on U.S.–China relations.

“First, the second Trump presidency is much more of a known quantity than the first, and second, under the Biden administration, the U.S. has put significant pressure on the rest of the world to reduce its exposure to Chinese markets,” Harding said.

Cryptocurrency

Cryptocurrency could be one of the top economic issues for the incoming administration. The president-elect wants to turn the United States into the “crypto capital of the planet” by establishing a crypto presidential advisory council, launching a national strategic reserve, and terminating Securities and Exchange Commission head Gary Gensler.

The Commerce Department, under the current administration, has not been vocal about cryptocurrency.

In September 2022, Raimondo issued a report titled, “Responsible Advancement of U.S. Competitiveness in Digital Assets.”

The report established a framework identifying support for regulations, global relationships, public-private engagement, and sustained U.S. leadership in research and development of digital assets.

“The framework offers a path forward to promote U.S. competitiveness, responsible innovation, and leadership in digital assets,” Raimondo said in a statement.

Conditions could evolve under new leadership as Lutnick is a staunch crypto advocate.

Lutnick has been a crypto investor and policy advocate for the past few years.

He holds that bitcoin is a commodity, telling Fox Business in September that it “should be treated like gold and like oil.”

“When you truly understand Bitcoin, it’s hard to see it any other way,” Lutnick said.

Cantor Fitzgerald has managed stablecoin Tether’s U.S. Treasury portfolios since 2021. Lutnick also announced that Cantor Fitzgerald would launch a new bitcoin lending service, with his company planting $2 billion in seed financing.

Though Lutnick will not oversee crypto regulations, his job will involve advancing domestic and foreign business, which could include touting the digital assets sector. His crypto-friendly stance might help shape or influence the new administration’s economic policies.