Trump’s tariffs are the wrong reaction, but too many of those attacking them are unwilling to admit there are grave flaws in the international trade regime.
Trump’s tariffs are the wrong reaction, but too many of those attacking them are unwilling to admit there are grave flaws in the international trade regime.
T he dynastic rulers in the French House of Bourbon, unlike the rulers in Britain, did not cede power voluntarily; Robespierre and the Jacobins took it from them violently in the French Revolution. Something similar is happening in America today, as President Trump, in the role of Robespierre, guillotines the globalist, free-trading legacy of the long-standing “Washington consensus.” Like the House of Bourbon, many of the policymakers and advisers who hold court in the U.S. establishment did not want to cede power, or even admit there were cracks in the façade of their globalist project. So the moment of opportunity for them to recognize that there were profound, albeit fixable problems has now passed: With one fell swoop, Trump has brought an abrupt end to globalization as we have known it to date.
And yet, the prevailing reaction to Trump’s tariff revolution on “liberation day” has been a combination of mocking (he slapped tariffs on an island populated by penguins!), confusion (what the hell is he doing and why?), and disdainful rejection (Trump is a dangerous fool who is destroying America). The two main outlets for globalist experts — Foreign Policy and Foreign Affairs — both have aired responses in that vein. The former published an article about how Trump tariffs will “shatter the world economy,” another about how China is firing back, and still another essentially calling Trump an economic idiot. Commentary in Foreign Affairs decries the coming economic turbulence and laments Trump’s tariff fixation.
What is missing is any attempt to objectively assess how the Trumpian revolution came to be. Sure, Trump is a unique personality, but he couldn’t have done what he has done if the globalist system was working the way we were promised it would. This is not to defend Trump’s actions, but unless defenders of globalization, at home and abroad, recognize that they screwed up by refusing to acknowledge that there were significant challenges and a need for real reform, the West will not be able to salvage much, if anything, from the carcass of the now-deceased system.
The plain fact is that Trumpian global economics is a direct reaction to the failures of trade and globalization and an attack on those who championed the globalist order. For years, U.S. and foreign globalists stood by quietly as more and more problems from globalization emerged, especially for the United States. Anyone who pointed out these problems was ignored or mocked as a simpleton or a crude nativist. There was no attempt to have an open, honest dialogue with those who said, “Wait, the system is not working the way it’s supposed to be.” To be sure, some of those calling out problems were anti-corporate, anti-capitalist, and ultimately anti-Western idealogues, while others were dyed-in-the-wool protectionists. But many critics wanted to save globalization, not destroy it. Nonetheless, the globalist establishment treated them all the same.
U.S. allies also contributed to the revolution. They knew that Uncle Sam was the only adult in the room committed to keeping the globalist project on track. So, as in the case of the EU’s free-riding on U.S. defense spending, these nations free-rode on the U.S. commitment to free trade. Many blithely violated the spirit if not the letter of the rules under the World Trade Organization (WTO) to unfairly hurt the U.S. economy. Many refused to engage in new trade agreements, such as Biden’s Indo-Pacific Economic Framework for Prosperity, unless the United States cut its tariffs — even though, in most cases, our tariffs were already lower than theirs. And they could afford to selfishly advance their own economic and business interests knowing that America would step in and sacrifice its own interests for the good of the global order.
And finally, there was China. It was China that broke globalization, not Trump. China joined the WTO because doing so gave it access to foreign markets while stymieing those other nations’ ability to take unilateral action when it was clearly warranted. Chinese Communist Party leaders knew that the WTO would be largely incapable of doing anything to restrain China’s outrageous mercantilism. Moreover, as the global trade system led by America since the 1944 Bretton Woods agreement disintegrates, China will position itself as the new leader, and either because of spite toward America, cowardice, or narrow self-interest, many nations will probably rally around Beijing’s leadership.
Some globalists, such as left-wing economist Joseph Stiglitz, disregarded critics because they didn’t agree that globalization should produce a strong America. He and fellow travelers prioritized the global proletariat and peasantry, especially in less developed countries, over American workers.
But virtually all of the U.S. globalists who believed that globalization was good for the United States actively denied problems (other than admitting that laid-off workers might not be able to find good jobs) and condemned anyone who raised doubts. Years ago, in a roundtable meeting of D.C. trade experts convened to discuss how to defend the emerging wave of business offshoring, one expert said bluntly, “As think tanks, we should not point out any negative effects from U.S. offshoring lest it destroy Americans’ faith in free trade.” This is a key reason why pundits, journalists, think tankers, economists, and others consistently shut down any criticism, even constructive criticism. They didn’t want to scare the horses. How did that work out?
That same tendency continues today:
- The massive U.S. trade deficit? Don’t worry, it’s a sign of U.S. strength, and to the extent it’s a problem, that’s only because Americans don’t save enough.
- The loss of manufacturing? Don’t be silly, manufacturing is stronger than ever. To the extent there is job loss, it’s all due to automation. Besides, manufacturing is for losers or even worse, racists. And manufacturing is declining everywhere; the United States is the most advanced economy in the world because we have less manufacturing.
- Foreign trade barriers? Don’t worry, less developed nations need them to help their impoverished workers. America has its own barriers, some even worse than other advanced nations. In the end, everything will be fine; the World Trade Organization is working on it. And in the meantime, the U.S. economy has been growing, so globalization must be good for us.
And on and on and on. I won’t bother to rebut these points, as I have done that many times before. Suffice it to say they are all wrong or vastly overstated, and the establishment’s response to the Trump tariffs reflects this same one-sided, condescending view.
The tariffs are a tax increase? Of course they are. But that is not the main point. To address America’s national debt crisis, the United States needs not only to cut spending, including entitlements, but also to raise taxes.
The tariffs will not create jobs? Of course they will. At least have the intellectual openness to admit that some sectors and firms — particularly those that operate in globally traded markets and already produce in the United States with relatively few imported inputs — will benefit from the tariffs, even if the overall U.S. economy is likely to suffer. For example, now is the time to buy stock in American wine and whiskey makers.
These tariffs violate WTO rules? Of course they do. But, so what? The WTO is a paper tiger, especially regarding China.
America’s globalist cognoscenti is a sprawling network, but if there is a single hub that represents the globalists’ Versailles, it’s on Massachusetts Avenue in Washington, D.C., at the Peterson Institute for International Economics. They, and virtually all unbending champions of globalization, have shown no recognition — none — that last week’s tariffs will have at least some benefits or that they are a response to the failure of the establishment’s agenda.
Liberation day was a blunderbuss when a rifle was needed. It will alienate U.S. allies for many decades to come, likely leading to a permanent shift away from the United States and, in some cases, into the Chinese orbit. And it ignores the central trade, national security, and global policy interest for America and the free world, which is the need to confront Chinese techno-economic aggression. It will weaken U.S. capabilities in advanced technology industries that require global markets to survive. Other than that, Mrs. Lincoln, how was the play?
Whatever ensues, it’s important to at least understand the motivation for Trump’s action and to note that even if he had tried to take more sensible steps to address the problems with U.S. trade policy — namely, working to reduce our allies’ tariff and nontariff trade barriers while pressuring them to join an effort to limit Chinese techno-economic predation, including import bans — the globalist establishment would probably have opposed them. For underneath their current lip service to the notion that China is a problem, most influential policymakers and experts hold on to their vision of an integrated world where the United States does little to nothing to respond to China’s aggressively mercantilist campaign to dominate virtually all advanced industries. After all, doing so would violate the principle of free trade.
The U.S. policymaking establishment and America’s erstwhile “allies” never should have let things get this far, because that opened the door to the nationalist, protectionist, blue-collar-loving Trump supporters. Yet here we are: screwed.
Just as the French Revolution was not necessary, neither was this Trumpian revolution against globalization. Unlike France’s House of Bourbon, the English monarchy gradually gave up power to other aristocrats and finally to the industrial bourgeoisie. The French could have done the same. And the globalists in today’s U.S. policymaking establishment could have ceded ground as well. To prevent protectionist pressures from finally exploding, they could have supported any number of measures, such as ensuring that the value of the dollar reflected market forces, instituting a border-adjustable value-added tax, making serious efforts backed by real threats to get other nations to reduce their unfair trade barriers, and getting tough with China. But the globalists said no.
And so, after them, “the deluge.”
It took five years for the French Thermidorian Reaction to overthrow Robespierre. It could take four years to overthrow the Trumpian trade revolution. If that counterrevolution happens, it may come from either a Republican or Democratic president. But either way, those in the current globalist establishment need to stop defending the last phase of their failed project and get on board with acknowledging and fixing its problems.