There is a way to pivot away from the model of corporate free trade that dominated bipartisan economic policy for the past four decades and destroyed America’s factory economy and millions of good blue-collar jobs. But it takes a subtle blend of industrial policies and well-targeted tariffs. The guy who was well on the way to accomplishing that was named Joe Biden. (See this excellent piece by Lori Wallach for the details.)
But Donald Trump, out of hatred for both Biden and activist government and a vague conspiratorial sense that other nations are ripping America off, is destroying the necessary complements of a more coherently assertive trade policy. At this writing, just a few hours before Trump unveils his “Liberation Day” tariff program at a Rose Garden ceremony prudently timed just after stock markets close, his economic advisers are all over the place on how to proceed, and nobody knows the specifics.
Trump in recent days has vowed to impose 25 percent tariffs on all imported cars, which would damage Detroit as well as foreign exporters, since so many American cars are made with foreign components. He has threatened 25 percent tariffs on all goods from Canada and Mexico, even though both are part of a North American free-trade area. He’s even talked about a tariff on fentanyl.
For months, Trump has also been proposing a policy of what he calls “reciprocal tariffs.” The idea is that nations that have chronic trade surpluses with the United States should face higher tariffs, as a long-term strategy leading to balanced trade accounts.
This idea isn’t crazy. What is crazy is the premise that it could be accomplished in one stroke. A serious policy of reciprocal tariffs would require months if not years of diplomacy to negotiate country-by-country agreements. It would basically return to bilateral negotiation what the GATT and then the World Trade Organization have failed to accomplish multilaterally.
So far, Trump’s on-again, off-again tariffs have been the opposite of careful diplomacy. And as other countries have made clear, if Trump follows through on his threats this afternoon, retaliatory tariffs are ready to go, which will be bad for prosperity everywhere.
And, as one source points out, the bigger problem with so-called reciprocal tariffs is that even if we reach agreement with China or South Korea to trade zero tariffs for zero tariffs, and they have industrial policies and we don’t, it still screws the American economy. Trump, characteristically, seems not to have thought any of this through.
On Monday and Tuesday, the stock market, an indicator of investor confidence or anxiety, actually rose slightly. This was the result of high-level administration leaks to Wall Street players that today’s announcement won’t be as damaging as you might think and will finally clarify U.S. policy. But today the market is down again, probably because of the wildly different stories out there from Trump’s own economic advisers.
White House trade czar Peter Navarro says the new tariffs would raise $600 billion annually, the largest tax increase since World War II. This would presumably offset other Trump tax cuts, but at massive economic costs.
Treasury Secretary Scott Bessent, more of a dove on the issue, has told lawmakers that the tariffs would be capped and could be negotiated downward. Commerce Secretary Howard Lutnick has been trying to reassure Wall Street, but others in the administration find the loudmouth Lutnick irritating, blame him for reinforcing Trump’s tariff obsession, and are setting him up to be the scapegoat. Politico has made a big deal of this (“Trump World Turns on Lutnick”), but its story, widely picked up elsewhere, is based on just two anonymous sources with their own axes to grind.
On Capitol Hill, Trump faces a kind of no-confidence vote today in the form of a privileged resolution in the Senate reversing the emergency declaration that underpins the Canada tariffs. This isn’t going anywhere because the House won’t take it up, but several Republicans could cross the aisle and support the resolution, putting the Republican-led Senate on record that the tariffs are bad for America. This is driving Trump crazy, as he posted late in the night on Truth Social, accusing four Republicans, Sens. Mitch McConnell and Rand Paul of Kentucky, Susan Collins of Maine, and Lisa Murkowski of Alaska, of “weakness” and of “suffering from Trump Derangement Syndrome.”
What is clear is that Trump has yet to find his way to a coherent tariff policy. It would take a small miracle if the 4 p.m. announcement is a comprehensive policy that doesn’t crash the economy.
