On the tariff crisis

Like many others across the political spectrum, I’ve been alarmed at the extreme tariff policy President Trump announced last week, which was met by a massive drop in the stock market.  As with almost everything else he does, the policy was nevertheless instantly embraced with enthusiasm by his most devoted followers, who have glibly dismissed all concerns and assured us that we are on the cusp of a golden age.  If this does not sound like the conclusion of careful and dispassionate reasoning, that is because it isn’t.  Whatever the outcome of Trump’s policy, the flippant boosterism with which it has been put forward and defended is contrary to reason.  

Postliberalism and tariffs

It is important to emphasize first that the problem has nothing essentially to do with any dogmatic opposition to tariffs as such, much less with any general commitment to libertarian economics.  I am happy to acknowledge that tariffs can sometimes be a good idea, and my own approach to these issues is postliberal rather than libertarian or classical liberal (or “neoliberal,” “market fundamentalist,” or any of the other epithets being flung about in recent days). 

But neither postliberalism nor the fact that tariffs can sometimes be a good idea entails that they are always a good idea, or that the particular draconian tariff regime announced last week is a good idea.  This is not a matter that can be settled a priori by appeal to abstract principle.  It requires a judgement of prudence that takes account of myriad concrete and contingent circumstances.  Several thinkers representative of postliberalism or allied traditions of thought have affirmed that tariffs are of limited value and sometimes best avoided.  For example, the twentieth-century theologian Johannes Messner, a prominent exponent of Catholic Social Teaching, wrote:

[The] bilateral system [features] differential tariff agreements on the basis of reciprocity.  Its various forms are based on methods of protectionism, of safeguarding the individual national economy by measures to restrict imports.  The means employed to restrict imports [include] prohibitive tariffs… As was shown in the period between the wars… this entails a minimum of international economic cooperation, and nations have paid dearly for it by severe economic losses and chronic mass unemployment.  (Social Ethics, p. 952)

The Catholic distributist Hilaire Belloc, while defending protectionist tariff policy, nevertheless judges that “the argument in favour of Protection applies to particular cases only, and turns entirely upon whether an undeveloped part of the energies of the community can be turned into new channels or not” (Economics for Helen, p. 126).

Similarly, the contemporary postliberal political scientist Patrick Deneen, commenting in his 2023 book Regime Change on Trump’s predilection for tariffs, wrote:

Tariffs, however, are generally crude instruments, often used as much or more for domestic political advantage than true enhancements to national competitiveness.  Where necessary, tariffs can prevent dumping and counteract advantages that foreign manufacturers receive from public funding.  However, they should generally be a policy of last resort, focused especially on protecting national manufacture of essential goods such as pharmaceuticals and basic materials. (p. 179)

In response to Trump’s suggestion that tariffs might some day replace the income tax, postliberal journalist Sohrab Ahmari has written:

Replacing tax revenue with tariffs today isn’t workable, given the hugely expanded size and scope of the government.  And jacking up tariffs high enough to cover the cost would discourage most nations from trading with the US in the first place, thus creating a drastic revenue shortfall.

In a Newsweek article that appeared during the 2024 presidential campaign, postliberal economist Philip Pilkington, while agreeing with Trump that trade imbalances are a serious issue, doubted “whether increased tariffs and protectionism are the best way to deal with these imbalances.”  There are, he wrote, two problems with this approach:

The first is that it overestimates what protectionism can accomplish… Tariffs may well help protect domestic industries, but some in American policy circles seem convinced that imposing tariffs will also lead to a spontaneous regrowth of industries lost to globalization.  Many such industries are highly complex and require skills, know-how, transport infrastructure, and other inputs that take years – maybe even decades – to nurture and develop.  If the American government imposes tariffs on key sectors and American businesses have a hard time substituting the goods targeted by the tariffs, the result will simply be a sharp uptick in the price of the goods.

This leads us to the second problem.  The Trump campaign has signaled a desire to aggressively cut taxes, especially income taxes.  Such cuts would drastically boost the spending power of the average American consumer.  Yet if, at the same time, the government is restricting access to cheap foreign goods with higher tariffs, too much money will be chasing too few goods.  This is a recipe for inflation – perhaps very high inflation.

It is worth noting that the contemporary writers just mentioned are known for sympathizing with much of Trump’s agenda.  Naturally, none of this entails that a postliberal could not favor Trump’s tariff proposal, and some postliberals appear to do so.  The point is that there is nothing in postliberalism in itself that entails either accepting or rejecting it. 

But I’d add this caveat.  The “order” part of a postliberal order is no less essential than the “postliberal” part.  And the trouble is that, whatever one thinks in the abstract of a policy like Trump’s, its actual execution tends to chaos rather than order.

The trouble with the Trump tariffs

There are three basic sets of problems with Trump’s tariff plan, which concern its timing, conception, and execution.  Let’s consider each in turn.

1. Timing

The country has been battered by inflation for four years now.  Polls show that high prices were the primary concern both of Trump’s base and of the swing voters without whom he could not have won the recent election.  Trump made this a key campaign issue, pledging: “Starting on Day 1, we will end inflation and make America affordable again.”  Yet it is widely acknowledged, even among defenders of Trump’s tariffs, that they are likely to drive prices up even higher.  They have also driven the stock market down dramatically, with retirees dependent on 401(k) accounts being the hardest hit.  The result is that consumers will have to pay even more than the high prices they are already facing, with less money available to do so.

Even if the tariffs were otherwise defensible, it is clear that this would not be the time to impose them.  Politically, it is likely to be a disaster for Republicans, who will surely lose control of Congress next year if prices remain high.  But more importantly, it is simply unjust to impose greater economic hardship on a public that has already had enough of it, and to whom relief was promised – especially for the sake of a radical policy that is far from sure to achieve its goal, and even lacks a well-defined goal in the first place.

2. Conception

That brings us to the second problem.  As many critics have noted, despite the economic risks any bold tariff policy is bound to have, the new tariff regime is both draconian and poorly thought out.  Over 100 countries are targeted by the tariffs, some of which are very steep. 

But there seems to be no serious rationale for many of the specific amounts decided upon.  It appears that the administration’s basic formula not only does not make much economic sense, but has not even been applied correctly by the administration itself.  The policy focuses on trade imbalances, but a trade imbalance is not by itself necessarily harmful.  For example, a very poor country is bound to buy less from the wealthy United States than the U.S. buys from it.  But this no more entails that the U.S. is getting “screwed” by the poor country than the fact that a rich man buys more from a poor shopkeeper than the latter buys from the former entails that the shopkeeper is “screwing” the rich man.  Yet tiny Lesotho is being hit with a 50% tariff that will inflict vastly more economic damage on its people than any “harm” Lesotho could ever be imagined to have inflicted on the U.S.

Furthermore, Israel agreed prior to the announcement of the plan to drop all tariffs on U.S. goods, but was hit with a new tariff anyway.  The Taliban in Afghanistan got hit with a new tariff too, but a smaller one.  Russia faces no new tariffs, but Ukraine does.  Among others who face them are several small islands, including one we do not trade with and two that are uninhabited.  In some cases, the new tariffs conflict with existing trade agreements.

According to some explanations of the tariffs, they are meant as a short-term negotiating tactic.  According to others, they are intended to be permanent.  Naturally, the uncertainty this entails makes rational economic decision-making difficult, which is one reason the stock market has taken such a big hit.  It is also said that tariffs will yield great revenue for the U.S. government, allowing it to cut taxes and thereby relieve consumers hit with price increases.  But the more draconian a tariff regime is, the less trade there will be, which entails that the revenue the U.S. might in theory enjoy from tariffs will not be what it in fact collects.  Obviously, if you charge people 10% or 25% or 50% more for what you are selling, it doesn’t follow that you will actually make that much more money, because many potential buyers will simply decide not to buy.

It is said that the tariffs will bring back lost manufacturing jobs.  But a tariff cannot by itself do that.  If an industry already exists, protectionist policies like tariffs can shield it from foreign competition.  But if the industry no longer exists, a tariff won’t necessarily bring it back to life, any more than putting a bulletproof vest on a corpse will resuscitate it.  To be sure, the tariff may be among the conditions that make it easier for the industry to revive.  But other conditions (such as the relevant infrastructure and skilled labor) need to be put in place as well, and even when this is possible it can take many years.  There is also the fact that a tariff that on the surface appears to help American manufacturers can in fact hurt them.  If the product a U.S. manufacturer makes requires components that have to be imported from outside the U.S., then a tariff on those foreign components will drive costs up.  And there may be no domestic supplier that can replace the foreign one.

Lurking in the background of any draconian tariff proposal is, of course, memory of the notorious Smoot-Hawley Tariff Act, which is widely held to have deepened the Great Depression.  (It is an example of what Messner had in mind in the quote above, when he notes the grave economic damage that protectionist policies can inflict.)  While even a policy as extreme as Trump’s need not have such a dire outcome, many economists are worried that it will at least lead to a recession.

None of this entails that there is no serious case for tariffs of any kind.  That’s not the point.  The point is that a tariff policy as ambitious and risky as Trump’s should be thought out extremely carefully, and this one is instead haphazard and reckless.  Many Trump defenders will dismiss such concerns on ad hominem grounds, as the sort of thing dogmatic free marketers would want us to believe.  This is as silly as dismissing an argument in favor of a certain tariff simply on the grounds that it was given by a socialist.  Though as it happens, socialists no less than free marketers sometimes argue against particular tariffs, as, again, some postliberals do.  As I’ve said, the advisability of any particular tariff proposal does not stand or fall with one’s general philosophical or economic point of view.  In any event, what matters is whether an argument or an objection is correct or not, not who raised it.  This should be obvious, but in our hyper-partisan era, reminders of basic points of logic are constantly necessary.

Defenders of the tariff policy also routinely appeal to what has happened to the Rust Belt, and the benefits of restoring U.S. manufacturing jobs and capacities that have been lost.  But this fallaciously supposes that because the end or goal of a tariff policy is good, it follows that the policy itself must be a good means to achieve it.  This is as silly as arguing that communism must be good and achievable, because those who favor it have the good motive of helping poor and working people.  It also fails to consider other possible means to the ends the tariff policy is said to be motivated by.  For example, Deneen suggests in Regime Change that the U.S. manufacturing base can be bolstered without heavy reliance on tariffs, by government spending to support infrastructure, research and development, and relevant education.  And in the article linked to above, Pilkington proposes, in place of tariffs, new rules governing international trade.

3. Execution

As to the execution of the tariff policy, there are two basic problems.  The first is the intellectually and morally unserious manner in which it has been done.  Concerns like the ones I’ve set out are waved away rather than answered.  Trump dismisses those worried about the policy as “weak and stupid.”  The stock market dive and prospect of higher prices are dismissed as irrelevant by the same people who once pointed to the health of the stock market as evidence of the soundness of Trump’s policies, and to high prices as evidence of Biden’s incompetence.  Trump defenders who, twenty minutes ago, were proclaiming that he would liberate us from hard economic times are now calling on Americans to embrace austerity.

This is a grave failure of statesmanship.  Ordinary people, including many working class and elderly people who voted for Trump, are watching their retirement accounts shrink and already high prices looking to get higher, and are understandably frightened.  It is cruel to dismiss their concerns and smugly urge them to toughen up and tighten their belts, especially after having promised them immediate economic relief.  On top of that, this attitude only adds to the fear of looming disaster, because it reinforces the impression that the architects and advocates of the policy are driven by cold ideological fanaticism rather than good sense and concern for the common good.

And again, a rational economy needs predictability, and the stability that predictability presupposes.  But the manner in which Trump’s policy is being executed, no less than its actual content, undermines economic stability.

The second problem with the execution of Trump’s tariff policy concerns its dubious legality.  It is Congress, rather than the president, that has primary authority over tariff policy, and it is implausible to suppose that it has delegated to him authority to impose a tariff policy as draconian as the one announced.  It is also risible to pretend that we face some “emergency” that licenses such action, given that the purported emergency is merely the continuation of an economic order that has persisted for decades and through periods of high prosperity, including the period during his first term that Trump takes credit for.  What we seem to have here is a textbook case of the demagogic manufacture of an “emergency” to rationalize the acquisition of extraconstitutional power. 

It is also part of an alarming trend on Trump’s part toward ever more grandiose and indeed unhinged actions and statements.  This began at least as early as his absurd insistence in 2021 that Vice President Mike Pence had the constitutional authority to set aside the electoral votes of states Trump claims were stolen from him in the 2020 election.  It includes his recent bizarre obsession with annexing Canada; his insistence that Greenland too must be taken over by the U.S., possibly even by military force; his mad scheme to take ownership of the intractable Israel-Palestine conflict and forcibly relocate millions of Gazans; and his flirtation with seeking a third term, despite this being manifestly contrary to the constitution.  These are not the sorts of moves one would expect of a wise statesman motivated by concern for the common good.  But they are perfectly consistent with what one would expect of a prideful and vainglorious man whose cult of personality has blinded him to normal standards of decency and reasonableness.  Any reader of Plato and Aristotle will also recognize in them the marks of the sort of demagogue who tends to arise in the late stages of a democracy. 

It is possible that Trump’s arrogance will lead him to persist with his tariff policy no matter how destructive it may end up being, under the delusion that it simply must work in the long run, no matter how long or deeply the country has to suffer.  It is also perfectly possible that his sense of what is needed for self-preservation will lead him to change course.  If it does, we can expect him and his most ardent followers to declare vindication, as they always do no matter what the outcome.  But if the market recovers and a recession is avoided, that will not magically remove the grave defects with the plan and its execution that I’ve been describing here.  If I accidentally fire a gun in your direction but miss, it doesn’t mean that I didn’t put your life at risk, much less that I did something you should thank me for.