On the tariff crisis

Like many othersacross the political spectrum, I’ve been alarmed at the extreme tariff policyPresident Trump announced last week, which was met by a massive drop in thestock market.  As with almost everythingelse he does, the policy was nevertheless instantly embraced with enthusiasmby his most devoted followers, whohave glibly dismissed all concerns and assured us that we are on the cusp of agolden age.  If this does not sound likethe conclusion of careful and dispassionate reasoning, that is because it isn’t.  Whatever the outcome of Trump’s policy, theflippant boosterism with which it has been put forward and defended is contraryto reason.  

Postliberalism and tariffs

It isimportant to emphasize first that the problem has nothing essentially to dowith any dogmatic opposition to tariffs as such, much less with any generalcommitment to libertarian economics.  Iam happy to acknowledge that tariffs can sometimes be a good idea, and my ownapproach to these issues is postliberal rather than libertarian or classicalliberal (or “neoliberal,” “market fundamentalist,” or any of the other epithetsbeing flung about in recent days). 

But neitherpostliberalism nor the fact that tariffs can sometimes be a good idea entailsthat they are always a good idea, orthat the particular draconian tariff regime announced last week is a goodidea.  This is not a matter that can besettled a priori by appeal toabstract principle.  It requires ajudgement of prudence that takes account of myriad concrete and contingentcircumstances.  Several thinkersrepresentative of postliberalism or allied traditions of thought have affirmedthat tariffs are of limited value and sometimes best avoided.  For example, the twentieth-century theologianJohannes Messner, a prominent exponent of Catholic Social Teaching, wrote:

[The] bilateral system [features] differential tariffagreements on the basis of reciprocity. Its various forms are based on methods of protectionism, of safeguardingthe 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 paiddearly for it by severe economic losses and chronic mass unemployment.  (SocialEthics, p. 952)

The Catholicdistributist Hilaire Belloc, while defending protectionist tariff policy,nevertheless judges that “the argument in favour of Protection applies toparticular cases only, and turns entirely upon whether an undeveloped part ofthe 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 inhis 2023 book Regime Change onTrump’s predilection for tariffs, wrote:

Tariffs, however, are generally crude instruments, often usedas much or more for domestic political advantage than true enhancements tonational competitiveness.  Wherenecessary, tariffs can prevent dumping and counteract advantages that foreignmanufacturers receive from public funding. However, they should generally be a policy of last resort, focusedespecially on protecting national manufacture of essential goods such aspharmaceuticals and basic materials. (p. 179)

In responseto Trump’s suggestion that tariffs might some day replace the income tax,postliberal journalist Sohrab Ahmari haswritten:

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 coverthe cost would discourage most nations from trading with the US in the firstplace, thus creating a drastic revenue shortfall.

In aNewsweek article thatappeared during the 2024 presidential campaign, postliberal economist PhilipPilkington, while agreeing with Trump that trade imbalances are a serious issue,doubted “whether increased tariffs and protectionism are the best way to dealwith these imbalances.”  There are, hewrote, two problems with this approach:

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

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

It is worthnoting that the contemporary writers just mentioned are known for sympathizingwith much of Trump’s agenda.  Naturally,none of this entails that a postliberal could not favor Trump’s tariffproposal, and some postliberals appear to do so.  The point is that there is nothing inpostliberalism in itself that entailseither accepting or rejecting it. 

But I’d addthis caveat.  The “order” part of apostliberal order is no less essential than the “postliberal” part.  And the trouble is that, whatever one thinksin the abstract of a policy like Trump’s, its actual execution tends to chaosrather than order.

The trouble with the Trump tariffs

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

1. Timing

The countryhas been battered by inflation for four years now.  Polls show that high prices were the primaryconcern both of Trump’s base and of the swing voters without whom he could nothave won the recent election.  Trump madethis a key campaign issue, pledging:“Starting on Day 1, we will end inflation and make America affordable again.”  Yet it is widely acknowledged, even amongdefenders of Trump’s tariffs, that they are likely to drive prices up even higher.  They have also driven the stock market downdramatically, with retirees dependent on 401(k) accounts being the hardesthit.  The result is that consumers willhave to pay even more than the high prices they are already facing, with lessmoney available to do so.

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

2. Conception

That bringsus to the second problem.  As manycritics have noted, despite the economic risks any bold tariff policy is boundto have, the new tariff regime is both draconian and poorly thought out.  Over 100 countries are targeted by thetariffs, some of which are very steep. 

But thereseems to be no serious rationale for many of the specific amounts decidedupon.  It appears that the administration’sbasic formula not only does not make much economic sense, but hasnot even been applied correctly by the administration itself.  The policy focuses on trade imbalances, but atrade imbalance is not by itself necessarily harmful.  For example, a very poor country is bound tobuy less from the wealthy United States than the U.S. buys from it.  But this no more entails that the U.S. isgetting “screwed” by the poor country than the fact that a rich man buys morefrom a poor shopkeeper than the latter buys from the former entails that the shopkeeperis “screwing” the rich man.  Yet tinyLesotho is being hit with a 50% tariff that will inflict vastly more economicdamage on its people than any “harm” Lesotho could ever be imagined to haveinflicted 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 smallerone.  Russia faces no new tariffs, butUkraine does.  Among others who face themare several small islands, including one we do not trade with and two that areuninhabited.  In some cases, the newtariffs conflict with existing trade agreements.

According tosome explanations of the tariffs, they are meant as a short-term negotiatingtactic.  According to others, they areintended to be permanent.  Naturally, theuncertainty 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 greatrevenue for the U.S. government, allowing it to cut taxes and thereby relieveconsumers hit with price increases.  Butthe more draconian a tariff regime is, the less trade there will be, whichentails that the revenue the U.S. might intheory 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, itdoesn’t follow that you will actually make that much more money, because manypotential buyers will simply decide not to buy.

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

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

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

Defenders ofthe 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 havebeen lost.  But this fallaciouslysupposes that because the end or goalof a tariff policy is good, it follows that the policy itself must be a goodmeans to achieve it.  This is as silly asarguing that communism must be good and achievable, because those who favor ithave the good motive of helping poor and working people.  It also fails to consider other possiblemeans 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 governmentspending 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 internationaltrade.

3. Execution

As to theexecution of the tariff policy, there are two basic problems.  The first is the intellectually and morallyunserious manner in which it has been done. Concerns like the ones I’ve set out are waved away rather thananswered.  Trump dismissesthose worried about the policy as “weak and stupid.”  The stock market dive and prospect of higherprices are dismissed as irrelevant by the same people who once pointed to thehealth of the stock market as evidence of the soundness of Trump’s policies, andto high prices as evidence of Biden’s incompetence.  Trump defenders who, twenty minutes ago, wereproclaiming that he would liberate us from hard economic times are now callingon Americans to embrace austerity.

This is agrave failure of statesmanship.  Ordinarypeople, including many working class and elderly people who voted for Trump,are watching their retirement accounts shrink and already high prices lookingto get higher, and are understandably frightened.  It is cruel to dismiss their concerns andsmugly urge them to toughen up and tighten their belts, especially after havingpromised 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 thepolicy are driven by cold ideological fanaticism rather than good sense andconcern for the common good.

And again, arational economy needs predictability, and the stability that predictabilitypresupposes.  But the manner in whichTrump’s policy is being executed, no less than its actual content, undermineseconomic stability.

The secondproblem with the execution of Trump’s tariff policy concerns its dubiouslegality.  It is Congress, rather thanthe president, that has primary authority over tariff policy, and it isimplausible to suppose that it has delegated to him authority to impose atariff policy as draconian as the one announced.  It is also risible to pretend that we facesome “emergency” that licenses such action, given that the purported emergencyis merely the continuation of an economic order that has persisted for decadesand through periods of high prosperity, including the period during his firstterm that Trump takes credit for.  Whatwe seem to have here is a textbook case of the demagogic manufacture of an“emergency” to rationalize the acquisition of extraconstitutionalpower. 

It is alsopart of an alarming trend on Trump’s part toward ever more grandiose and indeedunhinged actions and statements.  Thisbegan at least as early as his absurd insistence in 2021 that Vice President MikePence had the constitutional authority to set aside the electoral votes ofstates Trump claims were stolen from him in the 2020 election.  It includes his recent bizarre obsession withannexing Canada; his insistence that Greenland too must be taken over by theU.S., possibly even by military force; his mad scheme to take ownership of theintractable Israel-Palestine conflict and forcibly relocate millions of Gazans;and his flirtation with seeking a third term, despite this being manifestly contraryto the constitution.  These are not thesorts of moves one would expect of a wise statesman motivated by concern for thecommon good.  But they are perfectlyconsistent with what one would expect of a pridefuland vainglorious man whose cult of personalityhas blinded him to normal standards of decency and reasonableness.  Any reader of Plato and Aristotle will alsorecognize in them the marks of the sort of demagogue who tends to arise in thelate stages of a democracy. 

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