The Trump Administration Should Articulate and Defend Its Tariff Game Plan
The team has approached its most distinctive economic policy in a way that maximizes its ability to negotiate, but not its ability to play defense.
The team has approached its most distinctive economic policy in a way that maximizes its ability to negotiate, but not its ability to play political defense.
T he year-end is a time for accounting. How did you do on your goals and resolutions? And it’s no different for the Trump administration. That’s why, before Christmas, Trump held a prime-time address to tout his administration’s accomplishments and to basically announce that we have nothing to complain about this Christmas.
A tariff set at a certain level can bring in predictable amounts of revenue. A tariff set at another level, and held there for a long time, can encourage rebalancing or decoupling, depending on the details. It would also, if paired with deregulation at home or low tariffs among nearby friends, encourage new patterns of investment, either reshoring production or friendshoring it. In other words, it would bring back manufacturing jobs. You can also announce tariffs in such a way, declaring that they will be raised high soon or in the immediate future, in order to compel trading partners to hash it out with you at the negotiating table.
When Trump announced his Liberation Day tariffs on April 2, protectionists like myself were asked (as I was on The Editors podcast): What do you think will happen, and isn’t this crazy? At the time, the Trump administration had spent a great deal of effort explaining to the public that the tariffs were aimed at balancing trade and reflected the tax rates, regulations, and other non-tariff barriers other countries had on American goods. But he also touted every other possible good that tariffs could do: We were going to get great deals, we were going to bring the jobs back home, we were going to make China a pariah.
Similar to the aftermath of the Brexit vote, the sudden offensive launched on a political orthodoxy inspired dread predictions of doom. All I could say at the time was that we had to wait and see what the final policy would look like.
Because Trump likes to negotiate and renegotiate in public and on the fly, open to whatever possibilities present themselves rather than driving them toward a specific strategic end, it seemed like the White House itself did not know what the tariffs were supposed to accomplish. My friends in prestigious media promised long, open-ended forums to many of the administration’s most respected economic advisers and thinkers, only to have them beg off. They did not know where things would end up.
Would Trump announce small deals and make quick, tiny incremental changes to global trade policy, but essentially bring all these tariffs back down to where they were when he took office? Or would they settle somewhere — high or low? Many were predicting that they might settle right at his 10 percent threshold or lower. They were wrong. They settled high.
The U.S. is running its most protectionist trade policy since the Great Depression, with an average rate of 18 percent. Tariffs of 10- percent apply to roughly 70 percent of goods imported to the U.S., with some sectors (steel, aluminum, autos, and Chinese goods) facing upward of 25 percent to well over 100 percent. Economists, perhaps too quickly, predicted major inflation caused by higher prices in inputs. But tariffs, also being a tax, have a deflationary effect as well, taking money out of the economy. China got the worst of it, facing up to 145 percent for a time. The European Union ended up accepting a deal that tripled U.S. tariffs to around 15 percent, and dropped most tariffs on U.S. industrial goods going to Europe. This radically rebalanced EU–U.S. trade more in favor of the U.S. than previously. But, at the same time, the U.S.-Sino trade war has induced China to dump into Europe. Given China’s potential for overcapacity, European economists are warning of a serious China shock coming their way.
The most important economy in the world, and the biggest rule setter, had flipped over the table, reversed the orthodoxy it had preached and promoted for decades, and . . . what are the results?
Some economists and commentators are claiming that Trump has failed because, in the months since the announcement, the U.S. has continued to lose overall manufacturing jobs. But it takes time for entrepreneurs to envision, plan, and invest in major industrial projects. More logically, the administration should be judged on a growing velocity of real investment commitments. But usually Trump exaggerates those commitments.
The administration has put its rhetorical and policy weight behind the boom in AI investment, which is transforming the tech industry from an asset-lite sector into a heavy-asset sector. The buildout is having a major run-on effect on wages, not just for data-center workers, but also for electricians and other impossible-to-outsource industries. Apple, TSMC, Micron, and Texas Instruments have laid out multi-year plans of major investments. Pharmaceuticals and biotech firms are starting to do the same. These could change if the policy encouraging them is suddenly dropped or altered.
But overall, the global economy, which was so complicated that most people thought it would be fragile in the face of this policy revolution, has proved itself highly adaptable. Real GDP grew at a 4.3 percent annual rate in Q3 2025, beating expectations. Holiday spending is running higher than last year’s in nominal terms, with Visa and Mastercard reporting modest but “real” growth. Even with deportations shrinking the labor pool, the U.S. is still adding jobs on net. Overall, U.S. equities are seriously up year to date.
There are soft spots. The current tariff policies seem to be needlessly driving up construction-cost inputs that are a part of the public’s broader affordability complaint. And the worst of all is that pollsters detect unhappiness with the economy, driven by continued frustration with cumulative inflation. Almost every adult can still remember what grocery bills were like in 2019.
But overall, the Trump administration has launched a policy revolution, completely renovating American trade policy, with much less disruption than the experts expected, despite the tariffs settling so high. It’s now time for the administration to assess what positive long-term trends these policies can sustain, and which costs are needlessly throwing sand in the gears of a remarkably resilient economy. That is, having found out that it could, with a vandal spirit, tear down the bulwark of the previous era, it’s now time to shape its replacement with more care, more strategic thinking, and to defend it on those terms to the public. If you can’t do it now, when the winds are still largely in your favor, then when?