President Donald Trump should clarify the goals of his trade agenda and align them with his broader promise to “drain the swamp” by returning power to the people.
For starters, Trump should distinguish trade agenda items that can be advanced through tariffs from trade-adjacent items that cannot.
Fortifying the United States’ defense industrial base is a critical goal but not one that tariffs can effectively advance. Major defense procurement reform is necessary to align current military capabilities with evolving risks related to drones and artificial intelligence. Rather than tariffs, Trump should harness the authority the Pentagon already has to insist that vital military goods be produced in the United States.
Tariffs will not curb economic espionage, intellectual property theft, or unlawful border crossings of people or drugs. As the U.S. Federal Reserve Bank and others have confirmed, American consumers shoulder the burden of U.S. tariffs. They should not be punished for other countries’ failings. Other points of leverage should be used, such sanctioning foreign companies benefiting from economic espionage or intellectual property theft.
Reducing U.S. trade deficits, though a worthy aim, is not achievable through tariffs either. In fact, the U.S. trade deficit rose in the face of tariffs imposed in the first Trump administration. Rather than unfair terms of trade, persistent U.S. trade deficits reflect macroeconomic factors, such as alarmingly large U.S. budget deficits. The best path to reducing the U.S. trade deficit is getting its fiscal house in order.
Tariffs will not increase U.S. manufacturing: technology, rather than trade, has been primarily responsible for the fifty-year decline in manufacturing jobs. Although U.S. manufacturing output remains near historic levels, employment has declined because machine-aided factories can operate with so few people. The most effective and equitable way to expand manufacturing is by reducing regulatory and tax burdens on U.S. employers. Tariffs hurt American consumers and export-oriented manufacturers who lose sales when U.S. trading partners impose their new tariffs in response .
Helping American workers to handle the challenges of the modern economy is another important objective that tariffs cannot achieve. A more reliable and effective safety net is essential to help workers navigate a churning labor force. Because unemployment imposes a heavy economic and psychological toll, portable health insurance and other policies are crucial in a modern economy. Supporting people as they navigate a fast-flowing river will be more successful than vainly trying to control the river through tariffs.
The same applies to helping the U.S. communities hardest hit by import competition. Although open trade generally benefits U.S. workers, consumers, and exporters, the costs of import competition can fall disproportionally on particular towns or regions. Historically, displaced workers were expected to move to where the jobs were, and towns were allowed to decline. As mill towns in New England declined, however, new jobs were created in the Sun Belt. If U.S. policymakers are serious about bringing jobs to the people and maintaining the economic viability of every U.S. town, they will need a broad suite of place-based subsidies—far beyond tariffs—to accomplish that immense goal.
Trump’s goal of more reciprocal trade relations, on the other hand, can be achieved through tariff threats and negotiations.
Although tariff levels among the United States and its major trading partners are more balanced than Trump suggests, Americans can reasonably expect more reciprocity from U.S. trading partners. The World Trade Organization (WTO) is unlikely to deliver such reciprocity, as the failed Doha negotiations revealed. Because WTO rules already lock in low U.S. tariffs, the United States has no leverage in WTO negotiations to pressure other countries to lower their tariffs. The United States should strongly support the WTO as the cornerstone of the global trading system, but tariff levels should be established on a bilateral basis rather than on a global basis.
Rather than relying on the WTO to establish tariff levels, the Trump administration should leverage the immense U.S. market to negotiate so-called Trump trade agreements (TTA) that would have three core features.
First, each country would commit to not discriminating against goods from the other country. The terms of such a commitment could be so straightforward and transparent as to fit on a postcard.
Second, attached to that simple agreement would be a transparent and balanced list of exceptions to the nondiscrimination pledge. Ideally, there would be no or few exceptions. (The U.S. list of exceptions would also provide a roadmap for draining the swamp by identifying many examples of crony capitalism.)
Third, as with actions to combat subsidized imports, U.S. workers and companies would be able to bring U.S. legal actions when harmed by other countries’ failure to comply with TTA terms.
An orderly process of negotiating TTAs and submitting them to Congress would lessen the risk of Trump’s reciprocity goals devolving into a trade war. Foreign leaders cannot ignore Trump’s tariff threats because losing access to the U.S. market would cause serious economic harm for their exporters. By the same token, they cannot appear to be kowtowing to a bullying U.S. president. Although foreign leaders will feel compelled to impose their own tariffs in response to new U.S. tariffs, leading to a tit-for-tat escalation of tariffs, those leaders would have difficulty opposing an orderly and good-faith process to secure reciprocal terms of trade.
Ideally, TTAs would lead to much lower tariff levels with few exceptions to the general rule of nondiscrimination. That move would align Trump’s trade agenda with his broader promise of shifting power away from Washington, DC. Just as Trump argued correctly that Washington regulators should not dictate the water flow–rate of showerheads in American homes, regulators also should not dictate who makes those showerheads.
By elucidating his trade goals and coordinating them with other policy goals, Trump could advance U.S. interests and achieve lasting improvements to the world trading system. His instinct to pursue trade goals by leveraging access to the U.S. market rather than appealing to adherence to WTO rules is correct. However, tariff threats need to correlate to matters that are meaningfully connected to tariffs. Otherwise, those threats risk becoming more of a destructive force than a constructive one.
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