What’s Behind Trump’s Obsessive Tariff Policies?
The following is an excerpt. Read more here.
Melanie Sisson, Senior Fellow, Foreign Policy, Strobe Talbott Center for Security, Strategy, and Technology, Brookings Institution
In an article on the wildfires that burned through northern California in 2022, there is a sublime quotation from climate futurist Alex Steffen about the mind’s ability to cope with radical change. Discontinuity — denial — he says, is the period during which one must adjust to the fact that “the world as we thought it was, is no longer there.” This process, he says, culminates in the crushing realization that “the experience and expertise you’ve built up over time cease to work” and that “you are unprepared for what has already happened.”
There cannot possibly be a more apt description of what the Trump administration’s approach to political economy has done to the collective state of mind of America’s national security class. For 80 years, the US has been the heavyweight in a liberal international economic order designed to stimulate growth through free trade abroad and free markets at home. Tariffs, protectionism, industrial policy, and all other such interventions were doctrinally avoided for their observably negative effects on macroeconomic indicators: GDP, stock performance, wealth generation, corporate profits, and so forth. And so Trump’s tariffs — the 10% minimum, the eschatological Liberation Day tablet, the constant will-he-or-won’t-he put them on, keep them on, take them off — have been met with no shortage of confused, disbelieving, and outraged commentary. Much of this reduces to the conclusion that Trump’s policies are too harmful to be sustained, that he will have no choice but to remove the tariffs once they begin to bite, hard and sharp, at the hand of the domestic constituency that feeds him.
But this conclusion elides the fact that the Trump administration hates the old international economic order. That Trump, and many of those around him, believe the free trade regime has leached the US of its status as an industrial powerhouse and encouraged an “addiction to cheap labor” that keeps blue collar wages low and stymies technological innovation. That the administration rejects the idea that aggregate metrics are a meaningful way to measure whether or not the economy is working. That the administration, therefore, has purposefully broken the free trade regime and has no intention of trying to rebuild it.
Read the Full Column Here
06/16/2025 | Nikolas K. Gvosdev, MacKenna Rawlins, Melanie Sisson & John Allen Gay | Inkstick
A Tale of Tariffs and the Making of the Modern Offshore Market
Imagine stepping into a future world of permanently high tariffs and governmental controls on American trade. According to supporters, these policies would create economic incentives to bring manufacturing back to the United States and restore the prosperous days of the 1950s. Opponents have argued differently and looked further back in time to draw comparisons with the 1930 Smoot-Hawley Act, whose tariffs incited a trade war that accelerated the economic collapse of the Great Depression. Which is it? There might be a third, even more interesting possibility.
Recent research on the effects of the first round of Trump tariffs from 2019 reveals significant evasion. Chinese manufacturers redirected goods through third-party countries for importation into the U.S. at more favorable tariff rates in what is called entrepôt trade. Goldman Sachs has estimated that $30-50 billion worth of Chinese trade was redirected through “bystander” or “connector” countries in this way. Possibly a further $80 billion in goods was underreported or mislabeled. So, what does a landscape of trade taxes and unintended consequences hold in store? Turn back the clock, and you’ll find that today’s tariff avoidance and evasion tactics have deep historical roots. Extensive trade regulations have long incentivized businesses to game the system and shift commerce to the offshore shadows with surprising results.
Back in time to bigger tariffs
For good reason the new protectionism has been dubbed “neomercantilism,” an echo of the economic orthodoxy of eighteenth-century Europe. At that time, high tariffs on key goods such as sugar, tobacco, wine and tea reflected a zero-sum, beggar-thy-neighbor approach to commerce and the belief in the importance of a favorable balance of trade. “Tariffs” was a beautiful word because extensive duties on trade served several functions. They provided a critical source of revenue for the emerging European nation states and were also sometimes used to protect established or emerging industries. A confusing, and occasionally corrupt, system of financial incentives to exporters, including drawbacks and bounties, combined with extensive regulation about the conditions under which trade might be conducted, sought to control the colonial circulation of goods in favor of European home countries. American readers may remember back to their history classes that these regulations were one of the things that made the Thirteen Colonies particularly cranky.
Read the Full Commentary Here
06/11/2025 | David Chan Smith | Promarket
How a Pivot on US Tariffs Could Deliver a Better Outcome on Trade
President Donald Trump’s decision to raise tariffs on friends and foes and the retaliatory actions taken by some trading partners have taken the world to the precipice of a full-blown trade war. Some tariffs are paused as Trump uses the threat of additional tariffs to extract what are being billed as new “trade deals” from countries willing to negotiate. US federal courts have also entered the mix, ruling that the president has exceeded his legal authorities to impose some of his most sweeping tariff actions. Those cases are likely headed for the US Supreme Court.
For all the economic uncertainty these on-again, off-again tariff actions have created, focusing on a series of bilateral “trade deals” is a missed opportunity to reduce global trade barriers to US exports and provide durable benefits to the US economy. Instead, the president should seek authorization from Congress to negotiate trade deals and convene countries in a Trump Round of global trade negotiations to reduce tariffs and nontariff barriers on a most-favored-nation basis. The trade negotiations would take place on a more secure legal footing, given the critical role Congress is supposed to play in trade policy under the US Constitution and the ongoing litigation. Moreover, such a new trade round could be the most effective way to address the challenges presented by China’s export of manufacturing overcapacity. Success here could be a signature achievement for Trump’s international economic diplomacy and deliver a reformed trading system that works for the US and the world.
Read the Full Article Here
06/16/2025 | Neena Shenai & Joshua P. Meltzer | The American Entreprise
Responding to Trump 2.0: A Committee to Save the Rest of the World
The US has become the disruptor of the international system. The time may have come for a “Committee to Save the Rest of the World” to coordinate a global response to the unilateralism of Trump’s second-term agenda and prevent a repeat of the turbulent 1930s. The stakes couldn’t be higher, but an important question remains: Who will rise to meet these challenges?
The opening two months of Donald Trump’s second administration have been nothing short of seismic. On Day One, he swiftly announced the United States’ withdrawal from the Paris Agreement and the World Health Organization, and ordered a review of US engagement in all international organizations including the International Monetary Fund (IMF) and World Bank. The US also opted out of attending this year’s Group of 20 (G20) meetings, slashed its commitments to international economic development and the North Atlantic Treaty Organization (NATO), and unilaterally opened talks with Russia’s Vladimir Putin to force Ukraine into a ceasefire.
Tariffs were imposed on key allies Canada and Mexico, while threats have been leveled at the European Union, South Korea, and Japan. Similar threats also are in train against the rest of the world. The Wall Street Journal’s editorial board, typically a bastion of free-market conservatism, branded it “The Dumbest Trade War in History.”
The economic fallout of Trump’s actions was immediate and profound. Trade policy uncertainty soared, dragging overall policy stability along with it. Markets recoiled — US stocks tumbled, the dollar weakened, and consumer confidence plummeted. The ripple effects are likely to be tangible: investors are adopting a cautious “wait-and-see” stance while households defer major purchases amid plunging confidence in the economic outlook. Goldman Sachs estimated that trade uncertainty alone could shave 0.3% off US economic growth this year. The fallout will ripple out globally, with nations reliant on exports to the US facing even steeper losses, Goldman said.
Economic forecasts from other investment banks similarly were downward revisions, and both the IMF and the World Bank project that a global trade war could shave as much as 7% off the world’s gross domestic product (GDP). Unthinkable just a few months ago, murmurs of a US and global recession have become serious prospects once more.
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03/18/2025 | Bert Hofman | The Hinrich Foundation
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